As the Chinese government implements a subsidies policy to boost domestic consumption, reports have emerged that the subsidies have been exhausted earlier than expected, leading to a halt in payments. Initially, the government had announced the implementation nationwide until the end of the year, but confusion has arisen in various regions because of budget exhaustion and system maintenance, halting the application for subsidies. The Chinese government and industry have noted that payments are expected to resume this month, confirming the subsidies' effect on stimulating consumption.
According to local media in China on the 18th, Chongqing City has completely exhausted its budget for subsidies for home appliances, amounting to about 1.2 billion yuan (about 229 billion won), resulting in a total halt of subsidies for the home appliance sector since the 5th. The smartphone and digital device sector has put a daily limit on payments.
On shopping platforms such as JD.com, messages such as 'Event upgrade in progress' or 'Unavailable due to fund exhaustion' are displayed, leaving consumers unable to apply for subsidies. Similar occurrences have also been reported in Jiangsu Province, Guangdong Province, Hubei Province, and Liaoning Province.
This subsidies policy is part of 'exchange with new products for old ones,' in which the government directly provides cash subsidies for sectors such as home appliances, digital devices, and automobiles as a large-scale economic stimulus. According to the National Development and Reform Commission of China and the Ministry of Finance, the total budget for subsidies this year is about 300 billion yuan (about 57 trillion won).
However, by the end of May, it had already been estimated that over half, which is 150 billion yuan (about 28 trillion won), had been exhausted. Particularly, it is predicted that an additional 50 billion yuan (about 9.5 trillion won) will be consumed due to the large-scale online shopping event '618', resulting in about 70% of the total budget being exhausted by June.
The background of the halt in subsidy payments is reported to be influenced not only by budget exhaustion but also by system maintenance measures. Guangdong Province introduced a new system that mandates registration of product serial numbers and certification for the collection of used products to receive subsidies. Jiangsu Province is implementing a 'daily limit system' in which subsidies are provided only within a limited daily budget (6.7 million yuan) and is partially transitioning from online applications to offline applications.
This is seen as a measure to prevent improper benefits. There have been numerous cases in China where subsidies were fraudulently applied for or already received subsidies were duplicated. Recently, there have been illegal transactions where people who were not university students were allowed to receive subsidies intended for university students, generating financial profit. It has been reported that university students were making hundreds of yuan by reselling smartphones with national subsidies.
The Chinese home appliance industry expects that subsidies will resume this month. Wu Xianjian, deputy secretary-general of the China Household Electrical Appliances Association (CHEAA), said, 'The first tranche of funds has mostly been exhausted and the allocation process for the second tranche is currently underway,' adding, 'Payments will resume in most regions by June.' He explained that the current halt in payments is a temporary adjustment that occurred during the process of system correction and budget redistribution.
Chinese media interpreted the early exhaustion of subsidies as an indication that the effect of stimulating consumption is being realized. The Securities Daily stated, 'The rapid exhaustion of national subsidies means that consumer potential is being fully unleashed and consumer sentiment is reviving,' and added, 'National subsidies have a significant effect on increasing consumption volume and elevating the consumption level.'
The Chinese government assessed that the provision of subsidies is having a tangible effect on boosting domestic demand. According to China's National Bureau of Statistics, as of April, sales of items eligible for subsidies significantly increased. Compared to the same period last year, sales of home and audiovisual devices increased by 38.8%, communication devices such as smartphones by 19.9%, cultural and office supplies by 33.5%, and furniture by 26.9%, respectively. These factors are cited as major contributors to raising the overall retail sales growth rate.