In China, consumers went on a massive shopping spree ahead of the Lunar New Year, even though the subsidy level was the same as last year and are expecting an even bigger handout shortly.
In China, the government handout given to boost consumption seems to have delivered the exact results expected as consumers have stocked up on home appliances and electronics. Consumers had gone on a massive shopping spree ahead of the Lunar New Year, even though the subsidy level was the same as last year and are expecting an even bigger handout shortly.
Suning.com, one of mainland China’s largest home-appliance chains, released data which shows that when compared to last year, the sale of smartphones has seen a 90% surge since January 20, 2025, and the sale of tablets was up by 200%. While there is some uncertainty surrounding the retail shopping fever continuing after the holidays, there is no doubt that this increase in sales is part of the government’s initiative to improve economic growth.
On January 8, 2025, the government announced that the trade-in scheme under which consumers who buy home appliances, electric vehicles or electronic gadgets are eligible for a 2,000-yuan (US$279) rebate would be extended.
The scheme was set to end on December 31, and while some shoppers had rushed to scoop up these handouts, others had put their purchases on hold as they anticipated the government would offer an even bigger handout the following year. Despite best efforts, China was not able to meet the 5% GDP target, recording an increase of 4.8% in the final quarter. In order to undo this downturn in spending, Shanghai announced that another round of consumption vouchers would be issued.
This announcement came as a result of retail sales dropping 1.79 trillion yuan (US$246 billion) in 2024, particularly as a result of the household sales of everyday goods and services falling. Many Chinese cities reported a similar decrease, with Beijing reporting a 2.7% decrease in retail shopping. This was the only time since 1978 that Shanghai reported a fall in retail shopping other than the 2022 Covid lockdown-induced fall, where a 9.1% drop was recorded. It was due to the declining shopping rate in China’s most developed cities like Beijing and Shanghai that the government decided to extend the subsidies.
According to Chinese media outlet Caixin, China’s household increased to 55%, which was the highest since 1952. However, this was not the case across the country, as different cities fared slightly better, with retail sales growing by 3.4% nationwide. This is the effort of the local governments which had also offered incentives to boost consumption, in addition to the 300 billion yuan for the consumer-subsidy programme the central government had allotted last year.
China’s commercial and financial hub, Shanghai, announced yet another extension just before the Lunar New Year but kept the cash return unchanged. With the central and local governments rolling out more opportunities, customers eventually realised that these rebates were attractive enough and thronged to the stores over the long holiday.
However, middle-class consumers are still weary of spending more due to their doubts regarding income increase. Despite the government’s best efforts to push spending, consumer behaviour still indicated deflationary tendencies. 2025 bears some hope for Beijing, as proactive fiscal policies and distribution of retail vouchers by local governments is likely to push the economy into a recovery phase. The turnaround is predicted to be mild, as more time is required for economic fundamentals to stabilise and for consumers to become confident about spending more.
As much as the government tries to ease the consumer psyche, international tensions are bound to cast a cloud of doubt on their consumption patterns. With the upcoming tariffs announced by US President Donald Trump, drastic changes in income and expenditure are unlikely for China.
