China’s subsidies offer short-term boost to retail spending

The insight: Subsidies spurred Chinese consumers to spend—selectively—at the start of the year.

• The Ministry of Commerce received 10.79 million subsidy applications for electronic devices between January 20 and January 23 after the government expanded the program to include mobile phones, tablets, and smartwatches.
• Smartphone and tablet sales in Shanghai surged by 90% YoY and 200% YoY, respectively, in the first three weeks of the year, per data from appliance retailer Suning.com reported by the South China Morning Post.
• Electric vehicle (EV) makers Geely, Xpeng, and BYD reported stronger sales in January—typically a slower month for auto demand—after Beijing renewed a program that offers up to RMB 20,000 ($2,791) to consumers trading in their vehicles for new electric or fuel-efficient cars.

A band-aid fix: Beijing’s subsidy program encouraged shoppers to buy electronics, appliances, and other big-ticket items, but it has otherwise had a muted effect on consumer confidence and discretionary spending trends.