State Council takes stock of consumption, industrial upgrading subsidy programs

On Friday, Premier Li Qiang chaired a State Council executive meeting, which took stock of China’s industrial equipment upgrade and consumer goods trade-in programs.

Some context: Beijing has earmarked RMB 300 billion for consumer goods and RMB 200 billion for industrial equipment subsidies – the so-called “two new” initiatives – this year.

• These subsidies have been critical in stabilizing consumer and business demand.

But Li sees areas for improvement, including by:

• Cracking down on fraud and misuse of subsidies to ensure funds are spent effectively
• Expanding fiscal and financial support and improving the investment environment in consumption-related sectors

Get smart: We don't expect any major policy changes in the near term.

• The State Council review serves as an initial assessment, kicking off a broader process that will likely shape 2026 policy.
• The focus now is on improving effectiveness – chiefly through clamping down on fraud – rather than expanding support.

Get smarter: Subsidy-driven demand for goods will soften in H2 2025, as the front-loading effects of the programs fade.

• What’s more, tighter rationing of subsidies – amid concerns about curbing fraud and overspending – will further restrain spending.

What to watch: As policymakers look toward 2026, we expect indirect signals in November confirming a renewal of the programs.

• The exact scale of the renewed package will likely emerge in late December or early January.