Describing my grandfather as frugal is an understatement. Over the years, I have watched him patch and mend, prolonging the life of everything from leaky kettles to threadbare armchairs. My attempts to convince him to part with aging household items were always met with the same stubborn reply: “It still works.”
But recently, even my grandfather found himself nudged toward change. His old air-conditioner, long past its prime, began to falter in the sticky summer heat. That, combined with a government-backed subsidy program encouraging the trade-in of outdated household appliances, tipped the scales.
Under the latest national policy, consumers can get up to a 20% discount on new appliances, with subsidies capped at 2000 yuan (about US$275) per item.
My grandfather spent days comparing brands and specifications, as if choosing a new air-conditioner was a decision of immense consequence. At last, he settled on a bestselling Xiaomi model.
A retired civil servant, my grandfather was not alone in deciding to upgrade his appliances. Since the policy’s introduction last year, the market for modernised household appliances has surged, with everything from air-conditioners to refrigerators flying off store shelves.
According to China’s Ministry of Commerce, sales of subsidised consumer goods hit a staggering 1.3 trillion yuan (US$180.85 billion) in 2024. This uptick in consumer activity was further fuelled by an 81 billion yuan allocation for consumer goods trade-ins, announced by the Ministry of Finance, which promises to extend the program’s scope in 2025 and further lift consumer confidence.
Those stimulus measures are part of China’s broader campaign to rejuvenate economic growth in face of such challenges as weak consumption and complex external uncertainties.
Central to this drive is revitalising domestic consumption, which is necessary for promoting industrial upgrades and boosting the private sector. China’s central government has prioritised this task in this year’s work report, and pledged to issue ultra-long special treasury bonds of 300 billion yuan to support consumer goods trade-in programs.
In recent years, consumption has become a pivotal force in China’s economic growth. Last year, consumption spending accounted for 44.5% of economic growth, lifting GDP by 2.2 percentage points. Although the demand for traditional goods and services remains robust, there is a growing interest in tourism, digital, green and health-related products and services.
Technological innovation has become increasingly important to meeting new demand trends. The 2024 Global Innovation Index, released by the World Intellectual Property Organisation, showed China moving up one spot to 11th in the rankings, marking the country as one of the fastest-growing economies in terms of technological advancement over the past decade.
For example, Chinese companies like Xiaomi, Midea and Haier are transforming everyday household appliances by harnessing the power of state-of-the-art technologies, like AI and the Internet of Things.
Take the smart air-conditioners, which are already very popular among Chinese households. These devices automatically adjust temperature settings based on environmental conditions and user preferences, optimising energy consumption. They also come equipped with features such as remote control, self-cleaning systems and air quality monitoring, all designed to enhance user convenience while reducing environmental impact.
This shift toward high-tech, energy-efficient appliances mirrors China’s broader economic transformation. The private sector, which includes a host of innovation champions, has become a key driver of economic change, now contributing more than 50% of the country’s tax revenue, 60% of GDP and 80% of urban employment.
At a recent high-level government symposium, Chinese President Xi Jinping reaffirmed the state’s commitment to supporting private enterprises in terms of improving financing conditions, streamlining administrative processes, and fostering greater innovation. These efforts aim to create an environment where businesses can thrive and lead the charge in technological breakthroughs and industrial upgrades.
Amid a global trade landscape marked by rising protectionism, these measures can help boost confidence in the private sector for long-term investment as the state is committed to creating a supportive framework for sustained growth.
As these policies take root, China’s economy is gradually transitioning toward an innovation-driven and high-quality growth model. This evolution is in a way analogous to my grandfather’s decision to upgrade his air-conditioner. Just as the new, energy-efficient appliance keeps his home more comfortable at a lower cost, more targeted policies will be rolled out to ensure that China’s economy stays well-equipped and positioned to adapt to the ever-changing global economic landscape.
The views expressed are solely those of the author and may or may not reflect those of Pearls and Irritations.
