Customers check out new-energy vehicles at a large shopping mall in Jinhua, East China's Zhejiang Province on February 23, 2025. According to data from the National Development and Reform Commission, China issued 150 billion yuan ($20.7billion) in ultra-long-term special government bonds in 2024 to support trade-in programs for consumer goods, boosting sales of more than 1.3 trillion yuan. Photo: VCG

In China's latest effort to boost domestic consumption, three government departments announced a plan to provide subsidies on qualified personal consumer loans with a maximum of 3,000 yuan ($417.5) per person. 

The plan aims to reduce the cost of consumer credit for residents, help unleash their consumption potential, and promote faster and better economic development.

The provisions outlined in a statement by the Ministry of Finance, will be implemented from September 1 to August 31, 2026. During this period, individuals may receive interest subsidies on portions of personal consumption loans, excluding credit card business, issued by the lending institutions — provided the funds are actually used for consumption and the transactions can be verified through a loan disbursement account.

Also, on Tuesday, the Ministry of Finance, together with other eight government agencies unveiled a subsidy policy action plan to offer loan interest subsidy to eight categories of eligible service sector businesses. The action plan targets service sector businesses in the categories of catering and accommodation, health care, elderly care, childcare, housekeeping, culture and entertainment, tourism and sports, according to the ministry.

To qualify for the subsidy, loans must be extended between March 16 and December 31 of this year -- and loans must be used for improving consumption infrastructure or service supply capacity.

Under the plan, borrowers may receive interest rebates of 1 percentage point annually for no more than one year, with the central government covering 90 percent of the payment and provincial authorities responsible for the remaining 10 percent. The maximum loan amount eligible for subsidies is 1 million yuan ($140,000).

The two programs are part of China's broader efforts to stimulate services consumption and cultivate new growth levers.

Consumption is now a vital driving force for China's economic growth. Despite this year's rebound in China's consumer market, the recovery remains fragile amid still-soft demand and low prices, the new subsidy plans --an innovative policy signal—are designed to help boost market confidence and expectations, and promotes high-quality economic development, according to an analyst.

The new policies drew an instant response from major banks in China such as China Construction Bank, Bank of China, Bank of Communications and Agricultural Bank of China, as they have announced new measures to ensure the implementation of the personal consumption loan interest subsidy policy. On Wednesday, the Bank of China announced that it will subsidize eligible personal consumer loans starting September 1 of this year.

Liao Min, Vice Minister of Finance, told a press briefing on Wednesday that the measures represent "another innovative experiment in coordinated fiscal and financial support for driving domestic consumption." He said the subsidies can be combined with existing consumer goods trade-in program for home appliances and cars.

Banking regulators will oversee the programs to protect borrowers and ensure the subsidies reach their intended goals, Liao said. Targeted sectors include health care, tourism, culture and sports—important scenario China wants to transform into new growth engines.

Song Xiangqing, vice president of the China Commerce Economy Association, called the package a "precision tool" for stimulating the economy. "By lowering financing costs for service providers, the policy can accelerate domestic consumption by delivering better consumer experiences," he told the Global Times.

"Such moves can been seen as targeted macroeconomic lever set to turbocharge industry upgrades and consumption," Song said, adding that the targeted loan interest subsidy for service-sector firms is expected to act as an "accelerator" for boosting their quality and efficiency—spurring service upgrades, sharpening industry competitiveness, and enhancing consumer experiences.

The subsidy plans announced on Tuesday will reduce service sector financing costs, unlocks consumer spending, and propels a broad-based, upward economic growth, Dong Ximiao, chief research fellow at Merchants Union Consumer Finance Co, told the Global Times on Wednesday.

"For consumption, loan subsidies can reduce residents' borrowing costs, stimulate them to increase consumption expenditure, help expand overall demand and stabilize prices; for the service industry, it can reduce financing costs, stabilize cash flow turnover, support employment stability and industrial recovery, and create a ripple effect that drives the growth," Dong said.

The Chinese government has been focusing on promoting domestic consumption this year. 

Aside from the consumer goods trade-in program that started in 2024, China made public a plan involving special initiatives to increase consumption, which aims to stimulate domestic demand across the board, and increase residents' spending power by raising earnings and reducing financial burdens, Xinhua News Agency reported.

In the first half year, the total retail sales of consumer goods increased by 5 percent year on year, the retail sales of services went up by 5.3 percent year on year, 0.3 percentage points faster than that of the first quarter, providing strong support for economic recovery. 

The ongoing fiscal stimulus is expected to drive consumption growth in the second half of the year, Wang Bo, deputy director of the department of trade in services and commercial services at the Ministry of Commerce, said on Wednesday.


Global Times