*China will allocate about CNY300 billion from special bond sales to this policy;
*Car trade-in subsidies will double;
*China also offers subsidies for replacing outdated trucks and ships.
Guangzhou (JLC), July 26, 2024 – China has strengthened the policy to support large-scale equipment upgrades and consumer goods trade-ins by arranging a large amount of funds for it, according to a notice jointly released by the National Development and Reform Commission (NDRC) and the Ministry of Finance on July 25.
About CNY300 billion, raised through the sales of the ultra-long special treasury bonds, will be earmarked for the upgrade and trade-in programs, the document says.
The government said earlier this year that it would issue a total of CNY1 trillion of ultra-long special treasury bonds in 2024.
As of July 24, the Ministry of Finance has issued CNY418 billion of such bonds, China Central Television (CCTV) reported on Wednesday.
The latest policy – an upgraded version based on the Action Plan to Promote Large-scale Equipment Upgrades and Trade-ins of Consumer Goods released by the State Council in March this year – details a range of supportive measures covering more industries, with more subsidies to be put in place.
The document also specifies a wide range of subsidies for those will replace their outdated trucks, ships, city buses and agricultural machinery.
For consumer goods, the government has also raised the subsidy levels for big ticket items including new energy cars and home appliances.
Car trade-in subsides will double
The government will double the subsidy for a consumer who will scrap an outdated car and buy a new energy car under certain conditions, with the subsidy rising to up to CNY20,000, versus CNY10,000 previously.
For those who will scrap an outdated car and later buy a new internal combustion engine (ICE) car with a displacement of 2.0L or below, they are eligible for a subsidy of up to CNY15,000, compared to only CNY7,000 previously.
The move is expected to drive up new energy cars sales further in the second half of this year. Domestic sales of new energy cars surged 35.1% year on year to 4.34 million units in the first half of the year, according to data from the China Association of Automobile Manufacturers (CAAM).
Strong incentives for replacing trucks
The government will support the replacement of outdated trucks that are equivalent or below the National III standards (old emission standards broadly equivalent to Euro III).
At the same time, it encourages them to be replaced by “low-emission” trucks, a term generally refers to trucks powered by natural gas (CNG or LNG), hydrogen fuel cells or power batteries.
The government will offer CNY30,000-80,000 to a consumer who is to participate in the truck upgrade project, depending on different scenarios.
However, the document does not clearly define what the “certain conditions” really are. The market may need to wait until the authorities reveal more information or come up with a guidance catalogue of what models are included in the program.
Despite a lack of clarity, the subsidy program is still expected to drive up sales of LNG-powered heavy-duty trucks and new energy trucks, which will further dampen China’s diesel demand as a result.
Subsidies for replacing, building and scrapping ships
China will support the replacement of outdated or less energy-efficient ships with those using clean energy or new energy, the document says.
For those vessels operating in the inland rivers, China will speed up the exit of the passenger vessels of over 10 years old and the cargo vessels of over 15 years old.
For those vessels operating in the coastal areas, the government will accelerate the exit of the passenger vessels of over 15 years old and the cargo vessels of over 20 years old, the document says.
The government will offer a subsidy of CNY1,500-3,200/gross ton to those who will scrap an outdated ship and replace it with a new one that runs on clean fuels.
For building a new ship, the government will provide a subsidy of CNY1,000-2,200/gross ton to those who will build a new ship that runs on new energy or clean energy, depending on the type of the new ship.
