Technological innovation and policy synergy boost consumption growth

Recent efforts in China to integrate technological innovation with service consumption are influencing how consumers engage with everyday products, especially home appliances and smart home improvements. These changes are fueled by targeted government policies and subsidies designed to make upgrades more affordable, stimulating both the purchase of innovative products and economic growth.

In Shanghai, a resident surnamed Zou recently signed a home renovation contract for 140,000 yuan (around $19,713), saving over 20,000 yuan through a combination of government and seasonal discounts. Many home improvement markets now offer 15 to 20 percent subsidies on items such as home appliances and renovation materials, including cabinets and bathtubs.

The home appliance trade-in service is another example of service innovation powered by government policy. In communities such as Songjiang District in Shanghai, residents benefit from one-stop trade-in services for outdated home appliances, ensuring the installation of energy-efficient replacements that fit seamlessly into their homes.

The initiatives seen in Shanghai are supported by a broader national policy introduced in March to encourage equipment renewal and consumer goods trade-in. The policy outlines 20 key tasks across multiple sectors, including expanding the recycling of used goods, improving standards, and increasing fiscal support to drive sustainable consumption. By 2027, the plan aims to double the recycling volume of scrapped vehicles and increase the trade-in of used household appliances by 30 percent compared to 2023 levels.

Following this national initiative, regions such as Hubei, Chongqing and Shenzhen have expanded the categories of eligible products for subsidies, covering items like dishwashers, air purifiers and unmanned aerial vehicles.

Digital and green trends drive consumption growth

Technological innovation is a crucial driver of these initiatives. Advances in financial technology and the Internet of Things (IoT) are enhancing service quality nationwide. According to the latest data from the Ministry of Commerce (MOFCOM), products labeled with top-level energy efficiency now account for more than 90 percent of sales revenues, reflecting consumers' preference for environmentally friendly and high-tech solutions.

There is also a surge in consumption driven by digital, green and health-related products, noted the MOFCOM. The production of new energy vehicles, for example, saw a 51.5 percent year-on-year increase in September, according to the China Passenger Car Association.

"The deep integration of the digital economy with the real economy is crucial for driving new development opportunities," said Huang Zhuo, deputy dean at Peking University, during the parallel forum on "Scientific and Technological Innovation Empowering High-Quality Development" on Friday at the 2024 Financial Street Forum.

"Technological innovation is the security guarantee for high-quality development, and improving the resilience and security level of the industrial chain and supply chain depends on scientific and technological innovation," Huang said.

"Through the process of promoting industrial innovation, substantial financial investment and resources are essential," he added.

Policies boost consumer engagement, economic growth

China's extensive policies aim to stimulate consumption through measures such as subsidies, tax incentives and recycling initiatives. Following the introduction of the action plan to implement the equipment and consumer goods renewal program in March, the government further boosted the initiative in July with an additional 300 billion yuan via ultra-long special treasury bonds.

Since August, China's trade-in program has generated over 69 billion yuan ($9.7 billion) in sales revenues, benefiting more than 10 million consumers, MOFCOM data showed. The central government alone has provided over 13 billion yuan in subsidies to support these efforts.

The initiatives have also unleashed new market demand, with more than 1.4 million applications for automobile scrapping and renewal subsidies, according to Vice Minister of Commerce Sheng Qiuping.

To maximize the impact of these initiatives, Li Ziwen, an expert in industrial and technological economics from the National Development and Reform Commission, stressed the importance of making policy benefits accessible to the public.

"Effective communication, both online and offline, will help ensure consumers are fully aware of available subsidies and how to access them," said Li. "Clear, accessible information on subsidy conditions and procedures is crucial for engaging the public and allow consumers to benefit from policies more effectively."

(Cover image designed by Yin Yating)