Shanghai’s New Stimulus for Equipment Renewal & Consumer Trade-in to Boost Economy and Confidence Growth
This article was originally published in Italian in Panorama on 6th November 2024.
Please note that this is a courtesy translation of the Italian language article originally published in the Panorama Magazine Issue at:
https://www.panorama.it/economia/shanghai-nuovi-incentivi-per-stimolare-leconomia-e-la-crescita-della-fiducia
1. Introduction
The global economic landscape has been facing numerous challenges, including supply chain disruptions and fluctuating consumer confidence. In response to these external pressures, Shanghai, known as a leading economic hub in China, its policymakers have recognized the importance of fostering a resilient and dynamic internal market, has recently unveiled a series of new incentives aimed at encouraging equipment renewal, promoting consumer goods trade-ins, and ultimately pushing forward consumption growth. These measures are expected to stimulate market vitality, drive industrial upgrading, and enhance the overall economic resilience of the city. By focusing on equipment renewal and trade-ins for consumer goods, the city aims to spur innovation and technological advancement while also addressing consumer confidence concerns.
2. Key Components of the Large-scale Equipment Renewal and Trade-in Policy
To implement the requirements of the State Council's Action Plan for Promoting Large-scale Equipment Renewal and Trade-in of Consumer Goods (Guo Fa [2024] No. 7) which issued by China's State Council on March 13, 2024, the Shanghai Municipal People's Government released the "Shanghai Action Plan for Promoting Large-scale Equipment Update and Consumer Goods Exchange for New (2024-2027)"(“Action Plan”) on April 30, 2024. The main goal of the Action Plan is to strive to be at the forefront of China by 2027 by strengthening standard guidance and policy guarantees, promoting equipment renewal in ten fields such as industry, energy, construction, and transportation, and the trade-in of four categories of consumer goods such as automobiles, home appliances, and home decoration.
According to the Action Plan, actions in four aspects will be carried out in Shanghai: equipment update, consumer goods trade-in, recycling and utilization, and strengthening of policy support in 10 fields such as industrial, energy, construction, transportation, medical and so on of equipment renewal and four types of consumer goods (automobiles, home appliances, home decoration and electric bikes) trade-in, promoting the high-end, intelligent, green development and transformation of the industry, improving the safety and intelligence level of urban infrastructure, and promoting more high-quality durable consumer goods into the lives of residents.
The main content of this Action Plan includes:
Promoting equipment upgrade: Encouraging enterprises to adopt new technologies and processes, focusing on green and low-carbon, safe production, digitalization, and intelligentization, to update and replace existing equipment, switch to new products that are more environmentally friendly, smart and efficient and improve production efficiency and product quality.
Implementing trade-in of consumer goods: Introducing trade-in subsidy policies in the fields of automobiles, home appliances, home improvement consumer goods and electric bicycles to encourage consumers to recycle old consumer goods in exchange for new products and reduce resource waste, promoting the transformation of consumption structure to green, intelligent and high-end.
Improving the recycling system: improving the recycling network of waste products and equipment, supporting the circulation and trading of second-hand goods, improving the recycling rate of resources, and maximizing the use of resources and reduce resource waste.
Strengthening policy support: Providing financial subsidies, tax incentives and other policy support, certain financial subsidies or tax breaks to consumers and enterprises participating in the trade-in to reduce the cost of enterprises and consumers to update equipment and consumer goods. At the same time, formulating and improving relevant standards, strengthening market supervision, and ensuring product quality and transaction safety in the trade-in process.
At present, in order to refine and clarify the specific tasks and related supporting policies in various fields, the departments of economy & information technology, culture, tourism, commerce and finance have issued relevant support policies in the fields of industry, cultural tourism, and consumer goods. Special action plans in other areas are also being formulated by relevant departments, and we will continue to pay attention to them.
These initiatives not only present immense opportunities for local businesses but also for European companies operating in China. The focus on equipment renewal and consumer trade-ins aligns perfectly with the strengths and expertise of many European companies, which often specialize in advanced manufacturing, technology, and sustainable solutions. By participating in the program, European firms can showcase their innovation and expertise, while also benefiting from the increased demand and visibility generated by the stimulus measures.
3. Key Points of the Consumption Stimulus Package
For the supporting policies which are already published, in the industrial field, seven departments including the Shanghai Municipal Commission of Economy and Information Technology issued the "Shanghai Special Action to Promote the Large-scale Equipment Renewal and Expansion of Innovative Products in the Industrial Field" on May 31, 2024, proposing advanced equipment renewal actions in key areas and other measures. In the field of culture and tourism, the Shanghai Municipal Bureau of Culture and Tourism and other departments issued the “Shanghai Municipality to promote the renewal of equipment in the field of culture and tourism action plan (2024-2027)” on July 3, 2024, which put forward the key task of completing the cumulative investment of RMB 2 billion in the renewal of cultural and tourism equipment by 2027 . It also proposes to encourage tourism, cultural and creative special funds to increase support for projects involving equipment renewal.
On September 3rd, 2024, Shanghai Municipal Development & Reform Commission further issued the Shanghai's Implementation Plan on Further Intensifying Efforts to Promote Trade-in of Consumer Goods in order to strengthen efforts to stimulate the vitality of consumption and further promote high-quality economic and social development. This Implementation Plan is based on the actual situation of Shanghai, in accordance with the overall idea of "increasing the scale, raising standards, expanding the scope, and optimizing the process", focusing on supporting the scrapping and renewal of automobiles, the replacement and renewal of passenger cars for individual consumers, the trade-in of household appliances and electric bicycles, the local transformation of old houses, kitchens and bathrooms, and the purchase of items and materials used in the renovation of homes for the elderly, so as to promote smart home consumption.
In addition to above plan, the Shanghai Municipal Government deliberated and approved the “Issuance Plan for Service Consumption Vouchers in Shanghai” before the Chinese Golden Week, and decided to issue "Happy · Shanghai" service consumption vouchers for four areas: catering, accommodation, film, and sports. This round of service consumption vouchers invested RMB 500 million from Shanghai financial funds, and according to the proportion of consumption in various fields and the needs of citizens, the distribution of consumption voucher funds is: RMB 360 million for catering, RMB 90 million for accommodation, RMB 30 million for movies, and RMB 20 million for sports. The above vouchers were taken up immediately after they were issued.
Facts have proved that the policies have a good effect in promoting consumption. The consumer market in Shanghai was active during the National Day Golden Week (September 30 to October 6), Shanghai's online and offline consumption reached RMB 67.6 billion, an increase of 3.2%. The total offline passenger flow of 36 key business districts reached 34.49 million, a year-on-year increase of 9.8%, and the passenger flow of 25 business districts increased, and the passenger flow of 16 business districts such as Huaihai Middle Road, Zhenru and North Bund increased by more than 10% year-on-year. The offline consumption of tourists from other provinces to Shanghai was 15.1 billion yuan, an increase of 5.2% year-on-year during the 2023’s golden week. The number of transactions consumed was RMB 42.931 million, an increase of 10.7% compared with 2023’s golden week.
The trade-in policy for household appliances has a significant effect, and the average daily sales of subsidies for eight categories of household appliances in the country are RMB 54.07 million, an increase of 140.0% from before the holiday. The average daily sales of subsidies for home furnishing, home decoration and elderly products in the city were RMB 23.14 million, an increase of 228.7% from before the holiday. Since the vouchers were issued, the booking volume, passenger flow and unit price of catering enterprises have increased significantly. During Golden Week, Shanghai's offline catering consumption was 8 billion yuan, a double-digit year-on-year increase.
For European companies operating in China, this stimulus package presents a unique opportunity to expand their footprint and tap into new markets. By leveraging the incentives provided by the program, European businesses can strengthen their presence in China's growing economy, enhance their product offerings, improve their distribution networks, and strengthen their relationships with local consumers. Additionally, in participating in the program, European firms can demonstrate their commitment to the Chinese market, enhance their reputation as innovative and sustainable businesses, and build stronger relationships with local partners and stakeholders.
4. Conclusion
Overall, Shanghai’s proactive approach to economic stimulation through targeted incentives demonstrates its commitment to fostering a robust and forward-looking economy, which represents a significant step towards fostering economic growth and promoting sustainable development.
By focusing on equipment renewal and the trade-in of consumer goods, the city not only aims to amplify local consumption but also to drive technological advancement and sustainability. These measures not only benefit businesses and consumers but also contribute to the overall economic prosperity and environmental sustainability of the city. As these measures unfold, all eyes will be on Shanghai to gauge the effectiveness of these initiatives and the potential for broader national implementation.
By: Attorney Carlo Diego D’Andrea, Vice President of the European Union Chamber of Commerce in China
