China's Ministry of Finance issued a notice on “Certain Measures to Support Large-Scale Equipment Upgrades and Replacement of Consumer Goods” by the National Development Reform Commission and the Ministry of Finance. Proposed the coordination of around RMB 300 billion (below) in ultra-long term special government debt financing, and strongly supported large-scale equipment upgrades and the replacement of old consumer goods. This indicates a further decline in positive fiscal policy, which the Bank expects could drag down GDP growth by around 0.3 percentage points. There are two notable changes in the fiscal code, namely an increase in the central fiscal commitment ratio compared to previous similar support measures, and the second is that the ultra-long term special government debt not only supports investment (equipment upgrades), but also supports consumption (consumer goods for old), and a focus on policy improvement in cars and appliances Effects.

The company said its policies focused on cars and appliances to boost the effects. In terms of specific measures, I think there are a few points of concern. One broadened the scope of policy support to include equipment upgrades such as energy power, old elevators, and energy-saving carbon reduction and safety transformations in key industries, adding “Support for Legacy Operating Vessels, Old Operated Cargo Recycling Updates”. The second is to lower the threshold for the declaration of ultra-long term special government debt funds, no longer set the “total project investment of less than $0.1 billion” requirement, and support equipment updates for SMEs. Three is to increase the support force, improve the standards for updating subsidies for agricultural machinery, new energy buses, etc., increase the financial interest rate for equipment renewal loans, bank loan principal for business entities that meet the “conditions”, increase the central fiscal rate from 1 percentage point to 1.5 percentage points, interest rate for 2 years, interest rate Total size 20 billion yuan”. The bank calculates the principal amount of loans subject to fiscal interest at approximately $666.7 billion.

For car scrappage updates, Certain Measures increased the subsidy standard and increased the subsidy standard for scrapping old cars and buying new energy passenger cars from $0.01 million to $0.02 million in the April “Implementation Rules for the Replacement of Old Cars and the Purchase of New Energy Passenger Cars” from $0.01 million to $0.02 million. It rose from $7,000 to $0.015 million. While the “Annual Waste Vehicle Recycling Volume” is “3.78 million vehicles” in the General Financial Prefinancing Target for Cars 2024, the CCP assumes that the additional subsidy amount for Certain Measures represents a 10% vehicle price ratio, simply calculated on the basis of flexibility, or could generate an additional volume of 0.378 million vehicles, accounting for approximately 1.5% of passenger vehicle sales in 2023 and approximately 0.2% of zero in 2023.

Regarding the replacement of old appliances, the “Certain Measures” propose: “To replace the old consumer with a new subsidy for the purchase of 8 types of household appliances such as refrigerators, washing machines, televisions, air conditioners, computers, water heaters, household stoves, hoods, etc., of energy efficiency or water efficiency standards of level 2 and above. The subsidy standard is 15% of the sales price of the product, and an additional subsidy of 5% of the sales price for products of level 1 and above energy or water efficiency standards. This subsidy is higher than the 10% standard for replacing old appliances with new ones in 2009. Based on a subsidy ratio of 15% and flexibility, the bank could increase household appliance sales by 15%, to about 0.3% of zero in 2023.