BEIJING – China’s world-beating electric vehicle (EV) industry, at the heart of growing trade tensions with the United States and Europe, is set to receive a big boost from the government’s latest effort to accelerate growth.

That is one takeaway from what Beijing has revealed about its plan for incentives that will encourage Chinese businesses and households to adopt cleaner technologies. It is widely expected to be one of 2024’s main stimulus programmes, although question marks remain – including how much the government will spend.

Four months after President Xi Jinping flagged a proposal to help households and businesses upgrade old machinery, details are still trickling out. At a briefing earlier in April, officials from multiple departments announced the fullest version so far, and promised more to come.

Trade-ins have the potential to speed up growth, currently forecast to fall a bit short of China’s target of about 5 per cent. They can also make it less lopsided by encouraging purchases at home to balance an export drive. This could ease some of the global concern about overcapacity in China’s factories.

Local governments will be in charge of many practicalities. The city of Suzhou, in China’s wealthy Jiangsu province, already began, announcing subsidies worth 100 million yuan (S$19.2 million) for cars – up to 6,000 yuan per buyer – and 20 million yuan for appliances, or a maximum 1,500 yuan for each machine, starting April 20.

Here is what Beijing has announced and what investors are waiting to find out:

1. What is China’s trade-in plan?

The sweeping programme aims to upgrade China’s stock of industrial and household equipment – taking older machines that use more energy or emit more pollution out of service, and giving a lift to consumer spending and business investment along the way.

It covers everything from heavy industries, such like petrochemicals and steel, and installing new lifts in apartment buildings to incentives for consumers to scrap their old washing machines and buy new ones that use less water.

China’s top economic planning agency says investment on equipment upgrades in key industries was 4.9 trillion yuan in 2023, and the goal is a 25 per cent increase by 2027.

2. How much will China’s latest stimulus plan cost?

Beijing has not specified how much cash it is ready to provide, although officials have described some of the financing tools.

On the household side, auto trade-ins look set to be the focus of fiscal support from the central government. Subsidies will be offered to consumers who buy new EVs or other energy-conserving cars. The local authorities will share some of the costs.

For appliance upgrades, regional governments – at least the ones that are not too deep in debt trouble – are expected to shoulder all the burden, signalling it is a lower priority for Beijing.

For industry, there will be a mix of subsidies, government investment in new equipment, tax breaks for cleaner producers and discounted loans to help firms upgrade.

There are sticks as well as carrots. New environmental standards for machinery “will force companies to get rid of some old equipment”, said Mr Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Bank, calling that “the most distinctive feature” of the plan.

3. How will the programme help speed up China’s growth?

Much of the spending may fall within existing budget proposals and its impact is likely built into the official growth target, said Mr Ding. He does not think it will lead to additional fiscal stimulus, although it “will provide the government with more channels to fully spend” money already set aside.

As for the extra consumer and business spending it will trigger, that is hard to specify without the financing details, said Pantheon Economics economist Duncan Wrigley. For now, he is estimating a total of around 0.7 percentage point of China’s gross domestic product.

In March, Goldman Sachs economists estimated a 0.6 percentage point lift to GDP in 2024, with more than two-thirds coming from extra household spending, mostly on cars. This figure came before the State Council, China’s Cabinet, released details.

The immediate GDP boost is not the only objective, Mr Wrigley said, contrasting the current programme with the emergency stimulus that China rolled out after the global financial crisis.

“The programme sets targets for 2027, implying medium-term growth support for domestic demand to offset the drag from the slowly adjusting property market,” he said.

4. Will it help rebalance the economy?

President Xi has called for a focus on advanced industries, and China’s EV success is a symbol of that government-guided effort. But China is accused by the United States and Europe of flooding global markets with cheap goods and not doing enough to encourage local demand.

The trade-in plan, by helping Chinese buyers, could go some way towards addressing that criticism.

For carmakers, which face likely countermeasures in the European Union in 2024, it offers a hedge against a potential slowdown in exports. More broadly, the way support is allocated between households and industry – which is not entirely clear yet – will reveal whether the programme can help offset an over-reliance on investment versus consumption to drive economic growth.

Another charge against Beijing is that international firms suffer discrimination in Chinese markets. At the April 11 briefing, a Ministry of Commerce official emphasised that foreign and domestic companies will get equal treatment under the trade-in plan.

5. What will happen to the old stuff?

The programme includes investment in recycling networks, with 2,000 stations to be added across China in 2024, and logistical systems. E-commerce firms and appliance producers, for example, will be encouraged to collect old machines at the doorstep.

As at 2023, China had 336 million cars and more than three billion fridges, washing machines and air-conditioners, according to Beijing. Recycling even a small share would be a challenge.

“China has repeatedly fallen short of its own car and appliance recycling targets,” said Mr Wrigley. “Many supposedly recycled cars end up back on the road, despite being a safety hazard and highly polluting.” BLOOMBERG