Discussion: Explanation of China's new policy intended to reduce greenhouse gas emissions
In a bid to reduce inventories, improve productivity, and enhance market competitiveness, China has announced two new policy measures: a comprehensive equipment modernization and a trade-in program for consumer goods. The government aims to promote advanced, high-quality, and intelligent equipment, as well as drive development through higher standards in technology, energy consumption, and emissions.
The equipment modernization initiative will receive support from ultra-long special treasury bonds totalling 300 billion yuan (US$41 billion) in 2025. On the other hand, the trade-in program will see the government issue subsidies to consumers and businesses, with up to 500 yuan (US$70) available for the purchase of new digital products from 2025.
The trade-in scheme, first announced in 2023 and becoming an "action plan" in 2024, has shown significant results. In 2024, it boosted sales of cars, with new energy vehicles accounting for more than 60% of the new vehicles bought under the initiative. The categories of eligible trade-in goods have also expanded, with mobile phones and fridges now included in the list.
Electric vehicles (EVs) remain on the list of eligible trade-in goods, and buyers can receive substantial subsidies. For EVs and plug-in hybrids, the subsidy amounts to up to 20,000 yuan (US$2,730), while for petrol cars with an engine smaller than two litres, the subsidy is 15,000 yuan (US$2,073). Buyer rebates for vehicles, including EVs and more efficient petrol cars, remain at the same level as in the second half of 2024.
The policy has had a positive impact on the environment as well. In 2024, it saved about 28m tonnes of standard coal and reduced carbon dioxide emissions by about 73m tonnes. The policy is also designed to boost domestic demand and lower emissions by upgrading equipment and trading in consumer goods.
To further support the recycling and treatment of waste electrical and electronic products, around 7.5 billion yuan (US$1 billion) has been allocated. Additionally, other financial and tax support is given to recyclers to increase recycling. A state-owned recycling company, China Resources Recycling Group, was established in 2024 to handle scrap steel, EV batteries, and decommissioned renewable energy equipment.
The "two new" policy has accelerated the rising share of new energy vehicles in Chinese car sales, according to an analysis by Goldman Sachs. Products certified with the "highest energy-efficiency level" made up more than 90% of sales by revenue under the home appliance trade-in scheme.
In conclusion, China's "two new" policy is a significant step towards modernizing equipment, promoting the trade-in of consumer goods, and reducing emissions. The policy is expected to continue driving development in these areas, boosting domestic demand, and promoting the use of energy-efficient and new energy vehicles.
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