(ECNS) -- China has introduced a series of measures aimed at spurring consumer spending and improving living standards, including the country's first nationwide interest subsidy program for personal and service-sector loans.
On Tuesday, China announced interest subsidies for qualifying personal consumption and service-sector business loans. The move is part of a broader push to boost consumer spending and foster new drivers of economic growth.
This is the first time since the founding of the People's Republic of China that such large-scale, universal, and direct cash subsidies have been distributed to the public. The initial budget for 2025 is about 90 billion yuan.
In addition, tuition fees for senior kindergarten classes were waived, which is expected to benefit about 12 million children in the fall semester this year, reducing household expenses by 20 billion yuan.
According to the policy, the subsidy covers consumption under 50,000 yuan, as well as loans of 50,000 yuan or more for key sectors including car purchases, elderly care and childbirth, education and training, cultural tourism, home renovation, electronic products, and healthcare. The annual subsidy rate is 1 percentage point.
If an individual borrows 200,000 yuan to buy home renovation and household appliances at an annual interest rate of 3%, the total interest for a year would be 6,000 yuan. After applying the subsidy, the borrower could save up to 2,000 yuan in interest.
The most noteworthy aspect of this policy is its shift in focus.
Unlike previous subsidy policies that primarily supported the investment and supply side, this new policy targets demand, directly benefiting consumers by reducing the cost of personal loans. The subsidy will be deducted directly by the lending institution when collecting loan interest.
Although 1% discount may seem small, it could unlock trillions of yuan in consumer spending. In other words, 1 yuan in subsidy funds could potentially leverage 100 yuan in loans for household consumption in the consumer sector.
This small leverage for big impact, achieved through a combination of public funds and financial tools, is precisely how policymakers intend to channel more credit to consumption, reduce borrowing costs for individuals and businesses, and stimulate economic circulation.
Dong Ximiao, chief researcher at Merchants Union Consumer Finance Company Limited, told China News Network that this is an innovative move sending a clear policy signal, which helps boost market confidence and expectations.
Dong said the subsidies would boost household consumption and living standards while lowering financing costs for providers to sustain operations and improve service quality.
He noted that the policy, combined with existing measures such as national subsidies for trade-in of consumer goods and relending programs for service consumption and elderly care, will create a synergistic effect, making efforts to boost consumption and improve livelihoods more powerful and effective.
(By Gong Weiwei)
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