China’s Trade-In Policy Drives $28.7 Billion in Spending
China’s flagship consumer goods trade-in program has benefited more than 31 million consumers and generated 207.03 billion yuan (approximately $28.7 billion) in sales within the first two months of 2026, according to data from the Ministry of Commerce reported by Economic Information Daily. The policy, now in its second full year, continues to serve as a cornerstone of Beijing’s strategy to stimulate domestic demand amid persistent economic headwinds.
Policy Framework and Expansion
The trade-in program operates under the “two new” framework — large-scale equipment renewal and consumer goods trade-in — established by the State Council in March 2024. On December 29, 2025, the National Development and Reform Commission (NDRC) and Ministry of Finance jointly issued Document No. 1745 [2025], setting the legal framework for the 2026 iteration, as published on the central government’s official portal.
For 2026, the policy expanded its coverage to include smart home products, “AI+” next-generation smart terminals, consumer medical devices, and 10 new categories such as clothes dryers, dishwashers, robotic vacuum cleaners, embodied intelligent robots, and electric wheelchairs. The central government allocated an initial 62.5 billion yuan in national subsidy funds at the start of the year, distributed to local commerce departments under a 9:1 central-local cost-sharing mechanism.
Measurable Impact on Consumption
As of February 23, 2026, the program had driven 207.03 billion yuan in sales across automobiles, home appliances, digital products, and smart devices. This builds on the 2025 program, which generated 2.61 trillion yuan in related goods sales and benefited 366 million consumers, with auto sales reaching 34.4 million units and home appliance and telecommunications equipment sales each exceeding 1 trillion yuan.
According to People Daily, the policy is reshaping consumer behavior. Professor Zang Xuheng of Shandong University’s School of Economics described the trade-in program as “an important economic policy implemented by China to promote consumption upgrading and green development.” He noted that the policy converts the vast stock of existing consumer goods and the country’s strong production capacity into actual consumer demand.
Shift Toward Smart and Green Products
A notable trend emerging from the policy is the acceleration of consumer preferences toward intelligent and environmentally friendly products. Fu Yifu, a special researcher at Suning Bank, told Economic Information Daily that “policy dividends are precisely flowing to areas representing future consumption trends, effectively guiding the shift in consumer preferences from ‘basic ownership’ to ‘quality upgrading.’”
Data from the 2026 Spring Festival holiday supports this assessment: smart glasses sales surged 47.3% year-on-year, embodied intelligent robots grew 32.7%, water-saving sanitary products rose 23.2%, and organic food increased 26.5%. These figures suggest the policy is successfully channeling demand toward higher-value, greener product categories.
Provincial Implementation and Innovation
Local governments have supplemented national subsidies with their own initiatives. Jiangsu pioneered local autonomous category subsidies, while Shanghai, Hubei, and Chongqing began implementing their own programs from May 1. Shaanxi offers up to 20,000 yuan for scrapping old cars in favor of new energy vehicles. Qinghai’s triple-stack model — combining government subsidies, platform discounts, and merchant concessions — saw 202,900 participants apply for 180 million yuan in subsidies, driving 2.082 billion yuan in consumption.
Challenges and Structural Concerns
Despite its measurable success, the program faces several challenges. Professor Zang warned that “some localities have seen price inflation to fraudulently claim subsidies and malicious subsidy arbitrage, which need to be seriously addressed and strictly regulated.” Additional issues include slow disbursement of subsidy funds in certain regions and不规范 allocation and use of subsidy funds.
Broader structural questions also persist. China’s GDP grew 5% in Q1 2026, the highest in five consecutive quarters, but resident per capita consumption expenditure grew only 2.6% in real terms — significantly below the 4.0% growth in per capita disposable income, indicating continued precautionary saving behavior. Sarah Tan, an economist at Moody’s Analytics, observed that “China’s 5% year-on-year growth in the first quarter provides a comforting headline number, but upon closer inspection, this remains an economy struggling to find a stable footing.”
External analysts have also raised concerns that subsidies may merely pull forward future demand rather than create sustainable consumption growth. The BBC noted that after previous subsidy rounds, Q1 2026 domestic auto sales fell 20.3% year-on-year, suggesting a potential demand vacuum once stimulus measures subside.
Outlook
As 2026 marks the first year of China’s 15th Five-Year Plan period, the government has prioritized a strong start, with significant fiscal spending concentrated in the first quarter. The trade-in policy is funded through ultra-long-term special government bonds, with a record 4% deficit ratio supporting expanded government expenditure. Whether the program can generate lasting consumption habits — or merely concentrate future demand into the present — remains an open question as Beijing balances short-term stimulus with the need for deeper structural reforms to address income distribution and household wealth concerns.