Finance
China’s plan to boost consumption by encouraging trade-ins has yet to show results
A banner plays up China’s trade-in policy at a home goods expo in Qingdao, Shandong province, China, on June 1, 2024.
Nurphoto | Nurphoto | Getty Images
BEIJING — China’s plan to boost consumption by encouraging trade-ins has yet to show significant results, several businesses told CNBC.
China in July announced allocation of 300 billion yuan ($41.5 billion) in ultra-long special government bonds to expand its existing trade-in and equipment upgrade policy, in its bid to boost consumption.
Half that amount is aimed at subsidizing trade-ins of cars, home appliances and other bigger-ticket consumer goods, while the rest is for supporting upgrades of large equipment such as elevators. Local governments can use the ultra-long government bonds to subsidize certain purchases by consumers and businesses.
While the targeted move to boost consumption surprised analysts, the measures still require China’s cautious consumer to spend some money up front and have a used product to trade in.
“We are not aware of companies that have seen this translate, since the promulgation of the measures, into concrete incentives on the ground in China,” Jens Eskelund, president of the EU Chamber of Commerce in China, told reporters earlier this week.
“Our encouragement would be that now we focus on execution [for] visible, measurable results,” he said.
The chamber’s analysis found that the central government policy’s total budgeted amount is about 210 yuan ($29.50) per capita. Given that “only a portion of [it] will reach household consumers, it is unlikely that this scheme alone will significantly increase domestic consumption,” organization said in a report published Wednesday.
Analysts are not overly optimistic about the extent to which the trade-in program could support retail sales.
UBS Investment Bank Chief China Economist Tao Wang said in July that the new trade-in program could support the equivalent of about 0.3% of retail sales in 2023.
China’s retail sales for August are due Saturday morning. Retail sales in June rose by 2%, the slowest since the Covid-19 pandemic, while July sales growth saw a modest improvement at 2.7%.
New energy vehicle sales, however, surged by nearly 37% in July despite a drop in overall passenger car sales, according to industry data.
The trade-in policy more than doubled existing subsidies for new energy and traditional fuel-powered vehicle purchases to 20,000 yuan and 15,000 yuan per car, respectively.
Waiting for elevator modernization
In March and April, China had already started to roll out policy broadly supporting equipment upgrades and consumer product trade-ins. Around the measures announced in late July, officials noted 800,000 elevators in China had been used for more than 15 years, and 170,000 of those had been in service for more than 20 years.
Two major foreign elevator companies told CNBC in August they had yet to see specific new orders under the new program for equipment upgrades.
“We are still at the very early stage on this whole program right now,” said Sally Loh, president of China operations for U.S. elevator company Otis. Businesses know about the overall monetary amount, she said, but “as to how much is being allocated to elevators, this hasn’t really been clarified.”
“We do see that definitely there is a lot of interest by the local government to make sure this kind of funding from the central government is being effectively deployed to the residential buildings that most need this replacement,” she said, noting the announced funding “really helps to resolve some of the financing issues that we saw were a big concern for our customers.”
Otis’ new equipment sales fell by double digits in China during the second quarter, according to an earnings release. It did not break out revenue by region.
Finnish elevator Kone said its Greater China revenue fell by more than 15% in the first six months of 2024 year on year to 1.28 billion euros ($1.41 billion), dragged down by the property slump. That was still more than 20% of Kone’s total revenue in the first half.
“Definitely we’re excited about the opportunity. We’ve been excited about it for a long time,” said Ilkka Hara, CFO of Kone. “This is more of a catalyst that will enable many to make the choice.”
“I definitely see opportunity in the future,” he said. “How quickly it materializes, that’s hard to say.”
Hara pointed out that new elevators can save more energy versus older models, and said Kone plans to grow its elevator service business in addition to unit sales.
Secondhand market outlook
Central government policies can take time to get implemented locally. Several major cities and provinces have only in the last few weeks announced details on how the trade-in program would work for residents.
For ATRenew, which operates stores for processing secondhand goods, the ultra-long government bonds program to support trade-ins does not have a short-term impact, said Rex Chen, the company’s CFO.
But he told CNBC the policy supports the longer-term development of the secondhand goods market, and he hopes there will be more government support for building trade-in kiosks in neighborhood communities.
ATRenew focuses on pricing and resale of selected secondhand products — the company claims it became Apple’s global trade-in partner last year.
In specific categories and regions — such as mobile phones and laptops in parts of Guangdong province — trade-in volume did rise this summer, Chen said.
Trade-in orders coming from e-commerce platform JD.com have risen by more than 50% year on year since the new policy was released, according to ATRenew, which did not specify the time frame.
— CNBC’s Sonia Heng contributed to this report.
Finance
Buffett denies social media rumors after Trump shares wild claim that investor backs president crashing market
Warren Buffett went on the record Friday to deny social media posts after President Donald Trump shared on Truth Social a fan video that claimed the president is tanking the stock market on purpose with the endorsement of the legendary investor.
Trump on Friday shared an outlandish social media video that defends his recent policy decisions by arguing he is deliberately taking down the market as a strategic play to force lower interest and mortgage rates.
“Trump is crashing the stock market by 20% this month, but he’s doing it on purpose,” alleged the video, which Trump posted on his Truth Social account.
The video’s narrator then falsely states, “And this is why Warren Buffett just said, ‘Trump is making the best economic moves he’s seen in over 50 years.'”
The president shared a link to an X post from the account @AmericaPapaBear, a self-described “Trumper to the end.” The X post itself appears to be a repost of a weeks-old TikTok video from user @wnnsa11. The video has been shared more than 2,000 times on Truth Social and nearly 10,000 times on X.
Buffett, 94, didn’t single out any specific posts, but his conglomerate Berkshire Hathaway outright rejected all comments claimed to be made by him.
“There are reports currently circulating on social media (including Twitter, Facebook and Tik Tok) regarding comments allegedly made by Warren E. Buffett. All such reports are false,” the company said in a statement Friday.
CNBC’s Becky Quick spoke to Buffett Friday about this statement and he said he wanted to knock down misinformation in an age where false rumors can be blasted around instantaneously. Buffett told Quick that he won’t make any commentary related to the markets, the economy or tariffs between now and Berkshire’s annual meeting on May 3.
‘A tax on goods’
While Buffett hasn’t spoken about this week’s imposition of sweeping tariffs from the Trump administration, his view on such things has pretty much always been negative. Just in March, the Berkshire CEO and chairman called tariffs “an act of war, to some degree.”
“Over time, they are a tax on goods. I mean, the tooth fairy doesn’t pay ’em!” Buffett said in the news interview with a laugh. “And then what? You always have to ask that question in economics. You always say, ‘And then what?'”
During Trump’s first term, Buffett opined at length in 2018 and 2019 about the trade conflicts that erupted, warning that the Republican’s aggressive moves could cause negative consequences globally.
“If we actually have a trade war, it will be bad for the whole world … everything intersects in the world,” Buffett said in a CNBC interview in 2019. “A world that adjusts to something very close to free trade … more people will live better than in a world with significant tariffs and shifting tariffs over time.”
Buffett has been in a defensive mode over the past year as he rapidly dumped stocks and raised a record amount of cash exceeding $300 billion. His conglomerate has a big U.S. focus and has large businesses in insurance, railroads, manufacturing, energy and retail.
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