China boosts new round of consumption by promoting circular economy

The circular economy has become a hot topic these days in China as the country is poised to further boost consumption this year through extensive equipment upgrades and consumer goods trade-ins.

Since the Central Commission for Financial and Economic Affairs (CCFEA) held a meeting in February to stress promoting equipment renewal and trade-in of consumer goods, the country has made intensive arrangements with nine central government departments including the Commerce Ministry jointly publishing a notice on improving China's recycling system in late February and the State Council, the country's Cabinet, making detailed arrangements in March for its implementation.

The State Council said that the authorities will intensify fiscal and financial policy support, make full use of standards including energy consumption, emissions and emerging technologies to promote the upgrade of equipment in sectors such as construction, transportation, agriculture, education and healthcare, and facilitate trade-ins of cars and home appliances.

Experts say industrial equipment and durable consumer goods in China have vast space to be replaced and recent initiatives by the government could not only stimulate consumption but improve resource allocation, contributing to the green and sustainable development of industrial structures.

Stimulate a new round of consumption 

Data from the Commerce Ministry shows that by the end of 2023, the number of civilian automobiles in China had reached 336 million and the number of major household appliances such as refrigerators, washing machines and air conditioners exceeded three billion.

"The replacement of automobiles and home appliances can create a trillion-yuan market space,” said Zheng Zhajie, head of the National Development and Reform Commission, at a press conference during the second session of the 14th National People's Congress.

Besides, there is a great demand for equipment renewal. According to Zheng, equipment investment in China's industrial, agricultural and other key areas is about 4.9 trillion yuan ($681.3 billion) in 2023, and with the promotion of high-quality development, equipment renewal demand will continue to expand. He estimated that updating the equipment would create a huge market with an annual scale of more than 5 trillion yuan (about $695 billion).

"Equipment and consumer goods upgrades will inevitably increase the demand for production equipment and home appliances, which will help expand consumption and accelerate the economic cycle," Sheng Chaoxun, director of the Strategic Policy Office of the China Academy of Macroeconomic Research told China Media Group (CMG).

He added that the recent action plan to promote new-for-old activities could also drive China's high-quality development with technological progress and industrial upgrading. 

"The recent actions are adapted to the trend of high-end, intelligent, green and digital development of the manufacturing industry. Promoting equipment renewal will inevitably lead to the upgrading of the industrial chain, including the improvement of the quality of end products," Sheng said, adding "The initiatives will also expand the market space so that a variety of new technologies will emerge. The move will become an incubator, accelerator, and amplifier of new quality productive forces."

Accelerating China's green development

China, in September 2020, promised to achieve "peak carbon" emissions by 2030 and become "carbon neutral" by 2060. To achieve that, the country has taken numerous measures including optimizing the industrial structure, improving the low-carbon energy system, developing green buildings and low-carbon transportation as well as establishing a national carbon emission trading market. 

"The recent new-for-old initiatives are very conducive to the circular economy and low-carbon green development," said Xu Junxiang, President of China National Resources Recycling Association. He explained that through dismantling old automobiles and household appliances, some raw materials can be reused, which is very helpful in promoting the recycling of the industries.

According to an industrial report, the total amount of wasted household appliances recycled in China reached 4.5 million tonnes in 2023, and every ton of recycled household appliances can reduce greenhouse gas emissions such as carbon dioxide by about 4.7 tonnes. However, at present, only about 20 percent of wasted household appliances are recycled through formal channels.

Moreover, data from the China Association of Circular Economy shows that there are over two billion wasted mobile phones in China and recycling companies can extract 200 grams of gold from one tonne of wasted mobile phones and other renewable materials.

However, promoting large-scale equipment renewal and trade-in of consumer goods faces multiple challenges as it has to integrate upstream and downstream resources, smooth the production, supply and marketing system, and coordinate online platforms and offline enterprises.

Sheng analyzed that to make the new-for-old plan work, the government must encourage and guide enterprises to take part, letting the market play the principal role, and the main function of government is to set standards and rules, especially setting up technical standards for energy consumption, emissions, environmental protection, safety, quality, etc.