subsidy boom, from cars to home decoration

last month, a friend of xiaoba saw that the housing prices in hangzhou were falling, so he bought an old, dilapidated, and small apartment in the city center. in early september, when he was about to make a big move, his comrade suddenly brought good news:

starting from september 12, hangzhou will subsidize materials for renovation of old houses and kitchen and bathroom renovation, such as floor tiles, floors, cabinet doors, ceilings and other 16 categories, basically including all hard decoration parts. if you find a decoration company, you will be quoted the price on the contract, and if you purchase it yourself, you will be calculated according to the actual amount. the decoration subsidy is uniformly 20%, with a maximum of 20,000 yuan per person per house (saving a three-fold screen mobile phone).

a closer look at the documents shows that the rules for subsidies are quite strict. for example, the purchase of materials must take place after august 22, and a renovation code must be applied for. the contract, invoice and applicant must be consistent, and the auditors will conduct on-site audits one by one.

from the consumer vouchers under the "4 trillion stimulus policy" to the current large-scale home improvement subsidies, hangzhou has been constantly exploring ways to promote consumption. a colleague in shanghai said that subsidies related to the renovation of old houses had already appeared in shanghai last week. the government gave a 15% subsidy for "three major" (home appliances, home furnishings, and home improvement) products and products suitable for the elderly, with a maximum of 2,000 yuan per item.

shanghai vigorously promotes the "old for new" policy for consumer goods, and consumers learn about air conditioning product information

subsidy policies like those in hangzhou and shanghai are neither the end nor the beginning. from mid-august to now, a wave of subsidies for "trading old for new" has swept across the country.

leading the way are cars.

on august 16, the ministry of commerce and seven other departments issued an announcement.the second round of car trade-in was launched, with subsidies more than twice as strong as the first round:after the car is scrapped, the subsidy for buying a new energy car and a fuel car will be increased to 20,000 yuan and 15,000 yuan respectively. the government has also put a lot of effort into setting the rules, which is very considerate. for example, if you get the subsidy in the first round and replace it (after april 24), the government will still make up the difference according to the new standards.

next is subsidies for electrical and electronic products.

at the end of august, beijing unitedjd.comthe subsidy is a first. in addition to washing machines, refrigerators and other common subsidy categories, laptops are also included. xiaoba contacted several game groups, and some "wool parties" even taught how to use software to modify the beijing ip, and you can get a gaming laptop with an rtx4070 graphics card for more than 5,000 yuan.

subsequently, yunnan, zhejiang, henan, hunan and other places expanded from counties to cities and then to provinces, and cooperated with e-commerce platforms such as tmall and payment platforms such as cloud quickpass to carry out the "old for new" subsidy activities in full swing. basically,the maximum subsidy per person per item is 2,000 yuan, and the maximum subsidy amount ranges from 15,000 yuan to 20,000 yuan. goods with first-level energy consumption enjoy a 20% subsidy, and second-level energy consumption goods enjoy a 15% subsidy.

in fact, consumer subsidies have been implemented since the beginning of the chinese new year, and now they have been upgraded to a "super-large cup". from the end of august to now, some cities that took the lead in implementing the "old for new" subsidy have been practicing it for nearly 20 days. many people are concerned about how the subsidy will be implemented and how it will work.

yunnan province launched the home appliance consumption subsidy on august 28. although there is no specific data yet, it was quite lively offline. kunbai home appliances is a local department store in yunnan. from the scene, it was full of banners with the words "trade old for new, the state will provide a maximum subsidy of 2,000 yuan", which looked like the decorations during the chinese new year.

according to manager zhang of kunbai home appliances marketing department, in the past two weeks,the sales of the four local stores in kunming have increased exponentially.consumers don’t have to worry about the offline scam of first raising prices and then offering discounts. the prices of the products participating in the event are transparent and can be compared through multiple channels.

however, from an actual operational perspective, especially for new building materials and home decoration subsidies, there are always many loopholes due to the huge one-time subsidy amount and complex operation and review. unlike home appliances that can be collected with just one click through cloud quick pass or taobao, there are always many loopholes.

home appliance stores "trade-in" activities

another colleague of xiaoba is also renovating her house recently. she found a decoration company and spent a total of 120,000 yuan on the hard decoration. she was ecstatic when she heard that there were large subsidies for building materials consumption. as a result, the decoration company immediately poured cold water on her: the quotations were all exclusive of tax, and 16 percentage points of tax needed to be added to the invoice, which means a subsidy of 19,200 yuan. after this deduction, only 800 yuan of subsidy was left.

a senior project manager who has been in the industry for 10 years explained helplessly that decoration is also a miserable industry with low profits. the budgets reported by small and medium-sized decoration companies are basically tax-free. if they want to issue invoices, they generally have to pay 16 points, because the upstream building materials companies charge 16 points for invoicing. even some small and irregular decoration companies often transfer money via wechat, and customers rarely use invoices.

behind the consumption subsidies

it may be difficult to see the whole picture from a slice of the market, so we still have to combine it with the latest economic data analysis.

on september 14, the consumption data for august was released, with overall retail sales up 2.1%. basic living and upgraded goods sold well. household appliances and imaging equipment increased by 3.4% year-on-year, up 2.5% in the first eight months; communication equipment increased by 14.8%, up 11.8% in the first eight months. the online retail sales of physical goods reached 800 billion yuan, up 8.1%.

judging from the data alone, this year's "old for new" exchange of household appliances has more or less been correlated with consumption growth.

one industry that has yet to see the effects of subsidies is the automotive industry.

data shows that automobile consumption in august fell 7.3% year-on-year, and fell 2.4% in the first eight months. in terms of sales, the passenger car market has been declining for five consecutive months, the top ten joint venture brands have all declined, and small fuel vehicles have fallen by 12.2%. in the past two years, the fuel vehicle market has been shrinking, and the new energy vehicle market has been constantly launching new products, losing money in price wars, and the market is obviously oversupplied. in addition, summer is also the off-season for the industry, which has led to the dilemma in the past few months.

the first round of “old for new” subsidies in the automotive industry started at the beginning of the year, but it did not seem to cause much waves.

xue qinghe, president of zhibenshe, explained: "the logic of the consumption subsidy policy is that the government transfers resources to the market and allows the market to allocate them more efficiently. however, the efficiency of the consumption subsidy policy is closely related to the strength, scope and degree of restriction of the actual policy. usually,the intensity is lower than expected, the smaller the scope, the more restrictions, and the worse the effect.especially with the current overcapacity in automobile production, weak consumer expectations, insufficient subsidies for replacing cars, and weaker-than-expected subsidies for old-for-new cars.”

this explains why, on august 16, the state directly doubled the subsidy amount, and "old users" could also enjoy it, which aroused considerable enthusiasm.

trade-in subsidies in the automotive industry

as of august 22, the national car trade-in platform had received more than 680,000 applications for car scrapping and renewal subsidies. nine days later, the number increased by 120,000.by yesterday, september 14, this number exceeded one million.

this is certainly good news, but the real effects will only be seen in the next four months.

the most noteworthy are the subsidies for building materials, home furnishings and home decoration, which are also the most powerful of all subsidies since september.

combined with the data for august, sales of furniture and building materials fell by 3.7% and 6.7% year-on-year respectively. compared with the data for the first eight months (1.3% and -2% respectively), the decline has tended to widen.

since the beginning of this year, the real estate industry has continued to "fly low". from january to july, the area of ​​new residential construction decreased by 23.6% year-on-year, the area of ​​completed housing decreased by 21.8% year-on-year, and the area of ​​new home sales decreased by 18.6% year-on-year. in the past four years, the proportion of fine-decorated houses has declined, and the scale of new sales has decreased by 80%, which has greatly affected upstream and downstream industries.

the ceramic industry (ceramic tiles, toilets, etc.) is the industry most closely related to new home decoration. in the first half of this year, foshan, which is famous for its ceramics,the revenue of its leading ceramic enterprises generally declined by more than 10%, and the profit declined by more than 50%.small and medium-sized enterprises are facing an even more bleak business situation.

at the same time, according to the financial reports of various companies in the first half of the year, companies in many sub-sectors related to the high-end housing market, such as customized doors, coatings, lighting, kitchen appliances, and decoration platforms, have experienced losses or profit declines to varying degrees.

in response to this situation, building materials and the "three major" companies have set their sights on the existing housing market and started exploring low-cost renovation plans. many hardware and suspended ceiling companies that only sell a single product category and sell in the offline market have integrated their marketing and even transformed into the whole-house decoration market. this has to some extent prevented the building materials industry from suffering too much in the first half of the year.

huatai securitiesit is believed that the entire industry is currently in an awkward stage of alternation between old and new demands:the incremental market peak fell rapidly, while the short-term demand for stock replacement was slowly released.

so how big is china's entire stock renovation market? data shows that in first- and second-tier cities, 3.5% of stock houses are renovated every year, with 385,000 units in shanghai alone. according to industry estimates, in 2024, the demand for renovation building materials will be about 2.6 trillion yuan, of which the demand for stock renovation building materials is expected to account for 50%.

demand exceeding 50% means a turning point in the existing heavy equipment market.

as early as june 2023, professor wu xiaobo proposed that the key to stimulating consumption lies in rekindling the enthusiasm of new middle-class families for consumption upgrades, which requires efforts at the "consumption joints".

the so-called joints must meet the needs of a 3 trillion market size, with the stimulation of manufacturing as the core. there are only "three" industries that meet the conditions - home furnishings, home appliances, and home decoration. it is also recommended that the central government arrange 1 trillion yuan in fiscal expenditures as soon as possible to accurately subsidize new middle-class families, and the situation may be resolved.

consumers who purchase furniture products

in the following year, consumer subsidies started with home appliances, and now it is finally the turn of building materials and home decoration. for the industries involved, it is late, but in fact it is not too late. it is a good time to receive a good subsidy.

more consumer subsidies are on the way

in summary, this round of "old for new" policy is mainly to stimulate equipment replacement, reduce inventory and capacity, boost consumption and stimulate the economy through subsidies. at the same time, green home appliance upgrades and subsidies for new energy vehicles are trying to promote the transformation of old and new kinetic energy and upgrade the industrial structure.

it is time to re-examine and adjust the relationship between investment and consumption.

in the past, the investment of the state and enterprises has brought success to key industries and created a large number of jobs.but it is also often a manifestation of the will of power, and large-scale investment has more room for rent-seeking. at the same time, strong investment and weak consumption will inevitably lead to overcapacity.

therefore, going all out to promote consumption and clearing production capacity will remain the main economic tone for the second half of the year and even for many years to come. by the end of the year, there is a high probability that more stimulus policies will be introduced.

xue qinghe believes that the essence of insufficient consumption is that the income of ordinary families is insufficient to meet their expectations. only policies that exceed expectations can reverse market expectations. therefore, he suggests that fiscal and monetary policies need to implement more active counter-cyclical adjustment policies. the central bank needs to significantly cut interest rates.in particular, lowering the interest rates on existing mortgages will reduce the debt burden of households.

the best way to stimulate consumption is to distribute cash to residents without distinction, with a scale of approximately 2 trillion yuan, and to provide specific subsidies to low-income families, unemployed families, and rental families.the reason is that the marginal propensity to consume of ordinary households is high.the distribution of cash can be easily converted into purchasing power, which can quickly drive consumption recovery.

more consumption subsidies are on the way.

author of this article | xu tao | responsibilityeditor | he mengfei

editor-in-chief | he mengfei | image source |VCG