China's consumer goods trade-in programme aligns economic objectives with energy goals

A key initiative under this policy direction is the “consumer goods trade-in programme”. It aims to revitalise domestic consumption while encouraging the uptake of more efficient appliances.

This chapter introduces the programme, outlines its design, and explores its role in driving replacement of outdated home appliances, particularly room air conditioners (RACs), which contribute significantly to the rising electricity use during the summer period.

The consumer goods trade-in programme

Boosting domestic demand has been a central priority on the Chinese government’s agenda. In the 2025 Government Work Report – China’s top annual policy blueprint – “boosting consumption” is listed as the government’s top policy priority for this year.

On one hand, the government is aiming to expand domestic household spending as a part of a broader strategy to drive economic growth. On the other hand, the heightened focus on domestic consumption is a strategic response to growing uncertainties in international trade and weakening external demand.

In July 2023, China’s top macro-economic planner, the National Development and Reform Commission (NDRC), published a high-level document aiming to “recover and expand consumption”. The “trade-in” of home appliances is highlighted as a part of the measures.

Later that year, during China’s annual Central Economic Work Conference, which sets top government priorities for its economic agenda, the meeting discussed what is known as the “Two New” policy – “large-scale equipment upgrades and consumer goods trade-in”.

As a part of the “Two New” policy, the consumer goods trade-in programme offers subsidies to individuals who replace old devices with new and compliant ones. Eligible items include vehicles, home appliances, electronics, home renovation products and e-bikes.

In July 2024, the NDRC announced a plan to allocate 150 billion CNY ($ 20.9 billion USD) in ultra-long special treasury bonds to support the trade-in of consumer goods. This amount is set to double to 300 billion CNY ($ 41.8 billion USD) in 2025.

Compared to the last round of trade-in initiatives carried out by the Chinese government in 2009-2010, the current programme features significantly higher subsidy amounts and is expected to generate a greater sales boost.

Beyond consumption: trade-in programme targets at efficiency improvement

Beyond the primary aim of stimulating household spending and balancing economic growth, the consumer goods trade-in programme also pursues non-economic objectives including enhancing energy efficiency and advancing circular economy, and reducing energy consumption and carbon emissions intensity.

This focus is reflected in how subsidies are structured: support is limited to products with at least Grade 2 energy or water efficiency. Consumers receive a subsidy covering 15% of the retail price for Grade 2 models and 20% for top-tier Grade 1, helping to offset the cost gap between less and more efficient appliances.

For room air conditioners (RACs), for example, Grade 1 models offer 16–30% higher cooling efficiency than Grade 3 – the second most popular category – and around 50% more than Grade 5, the least efficient models still available on the market.

Among all appliances categories, RACs impose the greatest challenge to the electricity system, driven by sharp increases in summer cooling demand. The government also places particular emphasis on RACs, allowing subsidies for up to three units per consumer under the 2025 policy, compared to a limit of one for other appliances.

Early successes of the trade-in programme

From January to May 2025 consumers traded-in 77.6 million home appliances of all kinds through the national programme, according to data released by China’s Ministry of Commerce (MOFCOM). Some local governments have also reported impressive results. For example, Chongqing reported a 179.6% increase in sales of energy efficiency Grade 1 RACs from September to December 2024, following the launch of the programme.

In 2024, the typical peak sales period from May to July did not see strong performance. Prolonged rainfall in southern China during May and June reduced cooling needs, while subdued consumer confidence further dampened sales during what is traditionally the RAC industry’s high season.

Notably, China’s domestic RAC market experienced a marked rebound following the implementation of the consumer goods trade-in programme in late July 2024. By August, it had returned to positive year-on-year growth. This upward trend carried into the first half of 2025, with sales outperforming previous years, which can be seen as an early indication of policy effectiveness in stimulating household spending.

To meet the rising interest, Chinese RAC manufacturers have rolled out new, more energy efficient RAC models since 2024.