Beijing’s interest-payment rebate program designed to support consumer goods trade-in program

Sales growth of big-ticket consumer products is likely to slow as the initial sugar hit from Beijing’s trade-in program fades.

• But officials think they've found a way to keep the good times rolling.

Quick recap: In March 2024, Beijing launched a trade-in program for white goods, furniture, and cars – and later expanded it to cover a broader range of consumer products.

• Subsequent government subsidy injections into the program led to a surge in sales starting in September 2024.

The catch: The program generates sales by bringing forward future demand.

• As it stands, the initiative requires ever larger inducements to pull purchases from even further ahead.

Beijing's pivot: Rather than doubling down on subsidies, authorities are betting a new interest-payment rebate program will keep demand buoyant.

On August 12, the finance ministry (MoF) announced that it will provide a one percentage point (ppt) rebate on consumer loan interest payments from September 1.

• That’s a sizeable cut for borrowers.
• The central bank (PBoC) typically cuts interest rates in increments of no more than 20 basis points.

The logic: Instead of raiding tomorrow’s demand, MoF is adding a secondary, credit-side incentive to widen participation.

• Some households that don't have enough upfront cash to participate in the program might now be tempted to borrow to finance a heavily subsidized purchase.

Our take: The loan program will provide some limited support for big-ticket purchases in the coming months – but once the initial wave of willing borrowers has tapped the program, demand will flatten again.

• That means Beijing will have to expand the rebate, roll out fresh subsidies, or pivot to more fundamental income-support measures if it wants to keep big-ticket spending momentum alive.