How to promote ＂trade-in＂ of consumer goods

　　Reporter: Su Jian

　　Published in China Newsweek magazine, No.1132, March 18th, 2024.

　　On March 1st, Premier Li Qiang of the State Council presided over the the State Council executive meeting, which discussed and adopted the Action Plan for Promoting Large-scale Equipment Renewal and Trade-in of Consumer Goods. The meeting pointed out that "promoting a new round of large-scale equipment renewal and trade-in of consumer goods is a major decision made by the CPC Central Committee focusing on the overall situation of China’s high-quality development".

　　In 2023, China’s exports denominated in US dollars decreased by 4.6% year-on-year, which was the first year-on-year negative growth since 2016; Domestically, due to the downturn in the real estate market, the growth rate of investment has also declined. The decision of "trade-in" of consumer goods is put forward in the current complicated domestic and international environment, hoping to play a role in "stabilizing and expanding traditional consumption".

　　The meeting pointed out that this round of "trade-in" should "combine the differentiated needs of upgrading various types of equipment and consumer goods, and increase fiscal, taxation, financial and other policy support". In terms of related fields, "actively carry out the trade-in of consumer goods such as automobiles and household appliances, forming the scale effect of upgrading". It can be seen that this round of "trade-in" is more focused on bulk consumption represented by durable goods. Different from the consumption stimulus policies such as automobile tax reduction and exemption since the epidemic, the meeting clearly pointed out that it is necessary to form a "scale effect of upgrading", indicating that the strength of the policy is unprecedented and the goal to be achieved is clear.

　　Similar to the "home appliances going to the countryside" that began at the end of 2008, this round of "trade-in" is partly due to the decline of external demand, which is intended to expand the domestic demand market and stabilize economic growth. The difference is that, first, the demand is different. If "home appliances going to the countryside" is to meet the rigid demand of residents’ life, then this round of "trade-in" is to meet the improvement demand, and further improve the standard and improve the quality of life of residents on the premise that the basic living materials of residents are met; Second, the target groups are different. "Home appliances going to the countryside" is more about filling the gap of rural household appliances, that is, it is aimed at the problem of insufficient supply of rural household appliances, but this problem does not exist in this round of "trade-in". At present, even rural families have already achieved the popularization of household appliances, and the target groups of this round are mainly the owners of existing durable consumer goods such as cars and household appliances.

　　In view of the characteristics of this round of "trade-in", it can be promoted from the following aspects:

　　First, introduce a relative "elimination" model. This round of "trade-in" is aimed at improving demand, and consumers have greater selectivity than just needed. In the face of the downward pressure of economy, most consumers have the psychology of delaying consumption in the face of improving consumption of durable goods with large expenditure. To ensure that the policy achieves the "scale effect of upgrading", it is necessary to increase policy support for some commodities. For automobile consumption, we can give more subsidies and tax incentives to certain types of vehicles, such as new energy vehicles, and promote the popularization and improvement of other supporting facilities needed for this type of vehicles. For consumer goods such as household appliances, the relative "elimination" mode can be introduced through the formulation of corresponding exchange rules, so as to promote trade-in and reduce delayed consumption. For example, through the formulation of exchange standards, the circulation value of old household appliances can be clarified, and then the relative elimination cost of old household appliances can be clarified, so as to promote residents to deal with the consumption of old household appliances as soon as possible and reduce the delayed consumption of household appliances.

　　Second, set standards as soon as possible. "Trade-in" first needs to set the standard of "exchange" to meet the needs of different groups, and the standard can be set from different dimensions. From the dimension of consumer goods, it is necessary to set the standard of "old" exchange for "new"; Different subsidies, discounts and exchange standards can also be set for "new", even if the preferential strength is not great, it will have the effect of forcing manufacturers to upgrade their products.

　　The purpose of "trade-in" is to improve the quality of life of residents, but it does not mean wasting. Therefore, in the process of "trade-in", we should really consider the rights and interests of consumers and the allocation benefits of resources.

　　First, strengthen the recycling of durable goods and develop circular economy. Exchange is divided into two parts: recovery and reuse. The "recycling" part is to exchange the old for the new, which mainly involves the formulation of standards and the operation and maintenance of platform accounts, and the "reuse" part is to further improve social utility through the differentiation of improvement needs. In view of different personal preferences and consumption levels, the performance of some replaced old consumer goods may still be better than that of new consumer goods with relatively low prices. In this way, through reasonable points exchange and the construction of second-hand platforms, both parties can obtain satisfactory results and further improve the effectiveness of both parties. The significance of building the "exchange and recycling" platform lies in improving the liquidity of durable goods such as household appliances, speeding up the process of eliminating and upgrading household appliances, promoting the consumption of durable goods, and improving the quality of life of floating population and renters. The circulation of second-hand household appliances is especially beneficial to the development of the housing rental market and promotes the flow of talents.

　　Second, we should respect the property rights of residents’ private property. Household appliances and automobiles are the private property of residents, and they are generally "big items" in household durable goods, with high value, accounting for a relatively large proportion of residents’ property. We should earnestly consider the rights and interests and economic situation of existing consumer goods owners, resolutely put an end to the practice of forcing household durable goods to be scrapped by means of laws and administrative orders, and effectively protect the property rights of residents. "Trade-in" should be implemented on the basis of residents’ willingness. The design and implementation of policies should ensure the realization of "Pareto improvement", that is, the welfare of some people can be improved without harming the welfare of others.

　　(The author is a professor at Peking University Institute of Economics and director of the National Economic Research Center)

　　China Newsweek No.10, 2024

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