Domestic Demand as Industrial Strategy: China's 2025 Consumer Goods Trade-in Policy, with Policy Implications for South Korea

At the Central Economic Work Conference held in December 2024, the Chinese leadership identified the expansion of domestic demand as the top economic policy priority for 2025. For the first time, it mentioned the expanded and reinforced Two New (大规模设备更新和消费品以旧换新, lit. Large-Scale Equipment Renewal and Consumer Goods Trade-in) policy. The Two New policy appropriately has dual aspects, corresponding to production/investment and consumption: large-scale equipment renewal (production/investment) and consumer goods trade-in (以旧换新, lit. the replacement of old products with new ones), which represents the demand (consumption) side. First, large scale equipment renewal is a measure designed to encourage firms to replace or upgrade their facilities with equipment that is more technologically advanced, energy-efficient, and safe. This is supported through investment subsidies, interest subsidies on loans, and other mechanisms, with the aim of enhancing productivity by expanding investment in more efficient manufacturing infrastructure. Second, the consumer goods trade-in policy is meant to stimulate consumption by providing subsidies to individual consumers who purchase consumer goods that meet government-designated standards. This measure seeks to unlock consumption potential and promote household spending.