China’s electronics subsidies are its latest attempt to spur spending

The news: China is expanding its national trade-in program to include consumer electronics such as smartphones, tablets, and smartwatches—a move that may boost sales in the near-term but is unlikely to drive long-term economic recovery.

A bigger problem to solve: Beijing has been noticeably reluctant to deliver the widespread stimulus measures necessary to buoy consumer confidence and unlock spending. Its most direct scheme so far involves subsidies for home appliances and cars, which have helped lift sales in those categories.

But given that those goods—alongside consumer electronics—tend to be one-off purchases, the trade-in program as it currently stands is unlikely to foster a broader retail recovery, particularly in light of the country’s property crisis, unemployment problem, and potential trade war with the US.

Demand for discretionary goods such as apparel and beauty remains subdued: Sales in the two categories fell 4.5% YoY and 26.5% YoY, respectively, in November, per the National Bureau of Statistics of China.

Even in sectors where demand is recovering, such as travel, Chinese consumers are being more measured with their spending.

• Duty-free sales in Hainan province, a popular destination for luxury shopping, fell 29.3% YoY in 2024, per Reuters.
• Similarly, retail sales in Hong Kong fell 7.3% YoY in November, the ninth-straight month of declines, despite a 5.3% YoY increase in the number of visitors from mainland China.

Our take: The latest round of subsidies will benefit local smartphone manufacturers like Xiaomi and Huawei, but few others.

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