Subsidy for Buying Phones: Chinese Netizens Say, "I Don’t Lack Hundreds, I Lack Thousands"

The image shows an Apple iPhone. (Getty Images)

[People News] On Wednesday, the Chinese government announced plans to expand its consumer goods trade-in program this year, encouraging citizens to increase spending and boost consumption. Amidst a persistently declining economy, how do Chinese citizens view these subsidy policies?

According to a report by Radio Free Asia, China's top economic planning body, the National Development and Reform Commission (NDRC), announced on January 8 that by 2025, the government will expand the scope of its trade-in subsidies for appliances to include more products such as microwave ovens, water purifiers, dishwashers, and rice cookers. For vehicle purchases, subsidies will extend from National Emission Standard III vehicles to National IV vehicles, along with broader subsidies for replacing agricultural machinery.

While the government announced an expansion of the trade-in policy for consumer goods this year, the market does not seem impressed by these measures.

Netizens: “Am I lacking those few hundred yuan?”

According to the official notice, consumers purchasing new phones, tablets, or smartwatches priced at 6,000 yuan or less will be eligible for a 15% subsidy. However, the maximum subsidy per item is capped at 500 yuan, and the annual subsidy limit per person is 1,500 yuan.

Netizens calculated that only phones priced at 3,333 yuan or less would qualify for the full 500 yuan subsidy. For flagship phones priced over 6,000 yuan, the subsidy would account for just 8% of the price, which is less than typical store discounts. On the topic “Government-funded subsidies—will you seize the opportunity to upgrade your phone?” posted by Sanlian Life Weekly, most netizens responded with “No.” Others joked, “Do I lack a few hundred yuan? What I lack is a few thousand!”

Overseas economic commentator Cai Shenkun told Radio Free Asia: “A simple trade-in program cannot effectively boost domestic demand. Only those who want to upgrade or have the financial means will participate. For those who can’t afford it, they still won’t. So, the trade-in policy primarily targets consumers with a certain level of purchasing power—a group that actually numbers less than 100 million in China.”

Chinese entrepreneur Hu Liren, based in the U.S., believes this policy might have short-term effects but declining marginal returns over time: “The lifespan of home appliances is typically around 15 years. While there may be a surge in demand as people gradually replace old appliances, this kind of tactic can’t be sustained for long. If people don’t have money, they simply can’t keep upgrading.”

Many analysts suggest that expanding car subsidies to National IV vehicles could spark a wave of car replacements. According to official Chinese data from 2019, there were 43.19 million National III vehicles in use, while National IV vehicles accounted for double that number at 96.39 million.

However, data from the Ministry of Commerce revealed by Li Gang, director of the Department of Market Operation and Consumption Promotion, indicates that in 2024, China scrapped and replaced 2.9 million vehicles and upgraded 3.7 million, for a total of 6.6 million—just 15% of all National III vehicles.

Professor Xie Tian from the University of South Carolina’s Aiken Business School analyzed the move, stating that it reflects the government’s urgency to transition the auto industry toward "new productive quality." However, he expressed skepticism about its market impact: “First, although electric vehicle adoption is growing rapidly, it still accounts for only a small share of the market. Moreover, the quality of most Chinese electric vehicles remains substandard, and demand for cars among Chinese citizens isn’t that high. Pushing for vehicle upgrades excessively will only lead to greater waste.”

Why Not Issue Consumption Vouchers?

According to Xie Tian, the trade-in policy still dictates which products consumers can purchase, but these products may not necessarily meet household needs. He argues that the policy is not genuinely aimed at benefiting the public:
“On the surface, it appears to encourage people to buy new appliances with discounts, giving them a sense of getting a deal. In reality, it’s designed to protect certain industries, especially state-owned enterprises, and to ensure revenue for the government and associated institutions, rather than truly benefiting the public.”

Hu Liren added that even for subsidies aimed at supporting producers, not all companies can benefit:
“If you don’t have good relations with the government, you won’t make it onto the approved trade-in list and won’t get this boost. And how do you build good relations with the government? The so-called ‘good relations’ essentially mean bribery.”

Since 2024, both domestic and international economists have argued that if the Chinese government wants to stimulate consumption, the best way would be to issue consumption vouchers, giving people cash to spend. However, why has the Chinese government not adopted this approach?

Cai Shenkun believes the answer to this question is disheartening: “First, China’s current fiscal situation likely cannot bear the consequences of distributing money nationwide. Second, the Chinese government seems to play favorites—it is willing to raise salaries for civil servants but unwilling to make an effort to distribute money to ordinary people. However, the civil servant population is relatively small and has limited ability to drive overall consumption.”

Xie Tian argues that issuing consumption vouchers still imposes restrictions, directing spending to specific purposes, and is less effective than directly giving cash. He cited the U.S. policy during the pandemic as an example:
“By directly giving money to low- and middle-income families, the economy quickly rebounded. Of course, this approach has side effects like inflation, but that’s a separate issue.”

Hu Liren, however, suggests that both domestic and international economists’ suggestions rely on standard financial and economic logic to solve China’s economic problems. He argues that these recommendations overlook a critical aspect:
“The relationship between the Chinese government and the people is one of confrontation. This fundamental antagonism means the government will never act in the public’s interest to address economic problems.”

He gave examples to illustrate: “When has the Chinese government ever distributed money to the public? Never. During the Great Famine? No. During the chaos of the Cultural Revolution? No. During the pandemic, when governments worldwide were giving money to their citizens, Shanghai residents received little more than radishes and greens during a three-month lockdown. The Chinese government’s goal has always been to exploit the people, so they will never provide meaningful economic assistance.”

As of this Wednesday, social media platforms were filled with sarcastic commentary about the new policies.

One netizen remarked: “They think that by buying a new outfit and having a meal, people’s lives will improve and the economy will thrive. Let the music play and keep dancing.”