Zhao Wei is the Chief Economist of Guojin Securities and a member of the Board of Directors of the China Chief Economist Forum
summary
Recently, the "trade-in" policy in the fields of equipment, automobiles, and housing has continued to land. What's new in the new round of "trade-in"? This article is systematically sorted out for reference.
A different kind of "trade-in"
1. Equipment renewal: The central bank has set up a 500 billion yuan re-loan, and the central government has provided direct investment, capital, interest discounts and other support
The central bank's 500 billion yuan re-loan for scientific and technological innovation and technological transformation has been implemented, and the proportion of support for the loan principal is 60%. The re-lending for scientific and technological innovation and re-lending for equipment renovation and re-financing, which were established in April and September 2022, will support the loan principal by 60% and 100% respectively, and the two types of reloans will drive credit by 576 billion yuan and 157 billion yuan respectively according to the usage quota. At present, if the 500 billion yuan of scientific and technological innovation and technological transformation re-loans are used up, at least more than 830 billion yuan of related credit will be pulled.
The central government can support the renewal of equipment through investment in the central budget, transfer payments, special subsidies, etc. In the 2022 central budget investment, the items that may involve equipment renewal expenditures include education, basic research and other expenditures of nearly 90 billion yuan; Nearly 94 billion yuan of transfer payments were in line with green environmental protection and digital intelligence-related expenditures; In terms of special subsidies, the purchase subsidy for agricultural machinery in the past five years is about 17.9 billion yuan. The above-mentioned funds can be used to support equipment renewal by means of direct investment, capital, and interest discounts.
Supporting policies for local equipment renewal have also been introduced. Shandong and Zhejiang respectively set the scale of equipment investment in industry, agriculture, construction and other fields in 2027 to increase by more than 28% and 30% compared with 2023, which is higher than the national target growth rate of 25%; Jiangsu Province and Beijing have introduced a loan financial discount policy, among which Jiangsu has given a 1 percentage point discount to the provincial finance for the purchase and renovation of manufacturing-related equipment projects, and the first batch of 30 billion yuan has been discounted.
2. "Trade-in" of automobiles: Focus on supporting the replacement of new energy passenger vehicles, and the central and local governments will jointly subsidize the intensity or hit a new high in recent years
This round of "trade-in" is jointly supported by the central and local finances, and the support may hit a new high in recent years. The "trade-in" of cars in 2022-2023 will mainly be subsidized by local finance, and the subsidies for car purchase and replacement will range from thousands of yuan to 10,000 yuan, with larger subsidies in Beijing, Shanghai and other places. Compared with the past, this round of automobile "trade-in" subsidies of 10,000 yuan and 7,000 yuan respectively for new energy and fuel vehicles that meet the policy standards across the country, which are jointly spent by the central and local governments. According to the local financial strength, the central government subsidizes the "old for new" cars in the eastern, central and western regions by 50%, 60% and 70% respectively.
From 2009 to 2010, the national level also implemented the "trade-in" subsidy policy for automobiles. In 2010, the national car "trade-in" subsidy was increased from 3,000-6,000 yuan/vehicle in 2009 to 5,000-18,000 yuan/vehicle; At that time, the "trade-in" subsidy for automobiles focused on the scrapping and renewal of heavy-duty trucks, large buses and cars with a displacement of 1.35 liters and above, compared with the "trade-in" of this round of automobiles, which focused on supporting new energy passenger cars and fuel passenger cars with a displacement of less than 2L.
If the total subsidy of the current round of "trade-in" policy is 500-90 billion yuan, it may drive the growth rate of automobile sales to 10%-30%. In recent years, the replacement rate of passenger cars has been around 30%, assuming that the replacement rate will remain at 30% in 2024, the total subsidy for passenger car sales will increase by 10%-30% during the current round of "trade-in" period, corresponding to a total subsidy of 500-70 billion yuan; Assuming that the policy promotes the replacement rate of passenger cars to increase to 40% in 2024, the sales of passenger cars will increase by 10%-30% during the period, corresponding to a total subsidy of 60 billion to 90 billion yuan.
3. "Trade-in" of residential buildings: Pilot "trade-in" of residential buildings in many places, and rental housing loan support programs may provide financial support
Since the beginning of the year, real estate investment has continued to be sluggish, the policy of stabilizing real estate has yet to be effective, and the financing of real estate enterprises has continued to be sluggish, and the high inventory of residential properties may be the "blocking point" of stabilizing real estate. In March 2024, the inventory-to-sales ratio of generalized residential buildings remained at the historical quantile of 62% for 24 months. In this context, the "overall study of policy measures to digest the stock of real estate and optimize the increment of housing" emphasized at the Politburo meeting in April may mean that the follow-up real estate policy may be strengthened in both "digesting the stock" and "optimizing the increment".
At present, the pilot housing in many places is "exchanging the old for the new" to help the real estate "destock". For example, Zhengzhou plans to complete the "trade-in" of 10,000 second-hand housing units in 2024, adopting two methods: acquisition by state-owned affordable housing operating companies and market-oriented transactions; Among them, through the Zhengzhou Urban Development Group, second-hand houses are acquired for affordable housing and talent housing, and 5,000 sets are planned to be completed throughout the year. The transformation of urban villages and the construction of the affordable housing system may also be an important starting point for the "trade-in" and "destocking" of real estate.
Rental housing loan support programs, PSLs, special bonds, etc. may provide financial support for housing "trade-in". The sources of funding for housing "trade-in" may include rental housing loan support programs that support housing rental operators in pilot cities to acquire housing stock; PSL to support the "three major projects" and special bonds for urban village renovation projects; At the same time, trillions of ultra-long-term special treasury bonds are invested in the medium, and the integrated development of urban and rural areas may also support the "old for new" real estate.
Risk Warning
The economic recovery is less than expected, and the effect of policy implementation is less than expected.
The main body of the report
A different kind of "trade-in"
This round of large-scale equipment renewal and trade-in of consumer goods is guided by the top-level system and coordinated by multiple departments. Under the guidance of the "Action Plan for Promoting Large-scale Equipment Renewal and Trade-in of Consumer Goods", the central bank, the Ministry of Industry and Information Technology, the Municipal Supervision Bureau, and the Ministry of Housing and Urban-Rural Development have made specific arrangements; At the local level, the "trade-in" policy in areas such as equipment investment, automobile consumption, and housing replacement has also continued to be implemented. How is the trade-in in area different from the past? This article is systematically sorted out for reference.
1. Equipment renewal: The central bank has set up a 500 billion yuan re-loan, which can be supported by direct investment, capital and interest discounts
In this round of equipment renewal policy deployment, the central bank's 500 billion yuan of scientific and technological innovation and technological transformation re-lending has been implemented, and if it is fully used, it may at least drive more than 830 billion yuan of equipment renewal related loans. In April and September 2022, the People's Bank of China (PBOC) set up reloans for scientific and technological innovation and reloans for equipment renovation and refinancing, with the two types of reloans supporting the principal of loans at 60% and 100% respectively. The re-lending of scientific and technological innovation and the re-lending of equipment renovation and transformation all adopt the direct mechanism of "borrowing first and then lending", in which 21 financial institutions first make loans to projects in the supported fields and then apply for re-lending quotas.
From the perspective of usage, the use progress of scientific and technological innovation reloans and equipment renovation reloans in April and September 2022 was 86% and 85% respectively, driving credit of 576 billion yuan and 157 billion yuan respectively. At present, the central bank has set up a 500 billion yuan re-loan for scientific and technological innovation and technological transformation, and the proportion of support for the loan principal is 60%, if a variety of policies are coordinated, the 500 billion yuan re-loan is fully used, or at least more than 830 billion yuan of related credit scale.
Fiscal policy can use direct investment, capital injection, loan interest discounts and other ways to stimulate the demand for equipment renewal. Among them, the central government can support the renewal of equipment through investment in the central budget, transfer payments, special subsidy funds, etc. According to the data of the 2022 financial final accounts, among the central budget investments, the items that may involve expenditures related to equipment renewal include education, basic research, public health system, energy construction, etc., nearly 90 billion yuan; In terms of transfer payments, nearly 94 billion yuan was spent on scientific and technological development funds, energy conservation and emission reduction subsidy funds, and special funds for clean energy development, which were in line with the current round of equipment renewal, green environmental protection, and digital intelligence; In terms of special subsidies, the purchase subsidy for agricultural machinery in the past five years is about 17.9 billion yuan.
At the local level, supporting policies for equipment renewal have also been introduced. Shandong and Zhejiang respectively set the scale of equipment investment in industry, agriculture, construction and other fields in 2027 to increase by more than 28% and 30% compared with 2023, which is higher than the national target growth rate of 25%; Jiangsu Province and Beijing have introduced a loan financial discount policy, of which Jiangsu has given a 1 percentage point discount to the provincial finance for the purchase and renovation of manufacturing-related equipment projects, and the first batch of 30 billion yuan has been discounted; Yunnan's 2.5% discount on the central bank's equipment renovation and re-lending in ten key areas such as education and industrial digital transformation; Heilongjiang directly provides financial support for enterprise R&D investment, provincial key R&D projects and provincial major scientific and technological achievements transformation projects, and the latter can provide up to 10 million yuan for a single project.
Second, the "old for new" automobiles: focus on supporting the replacement of new energy passenger vehicles, and the joint subsidy of the central and local governments may hit a new high in recent years
The current round of "trade-in" of automobiles is jointly subsidized by the central and local governments, and the intensity may hit a new high in more than ten years. The "trade-in" of cars in 2022-2023 will mainly be subsidized by the local government, and the subsidy for the purchase and replacement of cars that meet the requirements ranges from thousands of yuan to 10,000 yuan, among which Beijing, Shanghai and other places have a large subsidy. Compared with the past, this round of automobile "trade-in" subsidizes 10,000 yuan and 7,000 yuan respectively for new energy and fuel vehicles that meet the national "trade-in" policy standards, which are jointly paid by the central government and local support. According to the local financial strength, the central government subsidizes the "old for new" cars in the eastern, central and western regions by 50%, 60% and 70% respectively.
Different from the past, this round of "trade-in" focuses on supporting new energy passenger vehicles. From 2009 to 2010, the national level also implemented the "trade-in" subsidy policy for automobiles, and all of them were supported by the central government. In 2010, the national automobile "trade-in" policy was further improved, and the subsidy was increased from 3,000-6,000 yuan/vehicle in 2009 to 5,000-18,000 yuan/vehicle. Unlike the current round of "trade-in" of automobiles, which focuses on supporting new energy passenger cars and fuel passenger cars with a displacement of less than 2L, the "trade-in" policy subsidy for automobiles at that time focused on the scrapping and renewal of heavy-duty trucks, large buses and cars with a displacement of 1.35 liters and above; in 2010, only 46% of the financial subsidies for "trade-in" of automobiles were scrapped and renewed.
Based on the replacement rate of passenger cars in the past, if the total subsidy of this round of "trade-in" policy is 50 billion to 90 billion yuan, it may drive the growth rate of automobile sales to 10%-30%. The 2021-2022 passenger car data shows that the retail replacement rate is around 30%, assuming that the passenger car replacement rate will remain at the level of 30% in 2024, and the sales of passenger cars will increase by 10%-30% during the current round of "trade-in" policy, corresponding to a total subsidy of 500-70 billion yuan; If it is assumed that the policy will promote the replacement rate of passenger cars to increase by 10 percentage points to 40% in 2024, the total subsidy for passenger car sales will increase by 10%-30% during the implementation of the policy, corresponding to a total subsidy of 60 billion to 90 billion yuan. ①
(1) The total subsidy calculation of the two scenarios does not take into account the replacement of passenger cars that do not meet the requirements of the subsidy policy, or overestimates the total subsidy strength.
3. Housing "trade-in": Housing "trade-in" has been implemented in many places, and rental housing loan support programs may provide support
Since the beginning of the year, real estate investment has continued to be sluggish, and the policy of stabilizing real estate has yet to be effective. In March 2024, the inventory-to-sales ratio of generalized residential buildings remained at the historical quantile of 62% for 24 months. The "overall study of policy measures to digest the stock of real estate and optimize the increment of housing" emphasized at the Politburo meeting in April may mean that the follow-up real estate policy may be strengthened in both "digesting the stock" and "optimizing the increment". (For details, see "Stabilizing Real Estate, the Current "Blocking Point"?) "Policy "Implementation", Real Estate "New Exploration")
At present, many places are piloting the implementation of "trade-in" housing to help real estate "destocking". Local governments to help real estate "trade-in" may promote "digestion of stock". Taking Zhengzhou as an example, Zhengzhou plans to complete 10,000 sets of second-hand housing in 2024, "selling the old and buying the new, and exchanging the old for the new", and adopt two methods: acquisition by state-owned affordable housing operating companies and market-oriented transactions. Among them, through Zhengzhou Urban Development Group Co., Ltd., the acquisition of second-hand housing for use as affordable housing and talent housing plans to complete 5,000 units throughout the year. At the same time, the "three major projects" may also be an important starting point for real estate "trade-in", the resettlement of housing tickets in urban villages, and the acquisition of stock housing in the construction of affordable housing system may partially promote the "trade-in" of real estate, and then realize destocking. Taking Guangzhou as an example, the resettlement of housing tickets for its urban village reconstruction project may reduce the demand for resettlement of relocated land, save resettlement costs, and help Guangzhou destock new houses.
Rental housing loan support programs, PSLs, special bonds, ultra-long-term special treasury bonds, etc. may provide financial support for residential "trade-in". According to the different modes of "digesting the stock" of real estate, the source of funds for "trade-in" of real estate may include the rental housing loan support program that supports commercial banks to acquire housing stock for housing rental operators in pilot cities; PSL focusing on supporting the "three major projects" and special bonds invested in urban village reconstruction projects; At the same time, trillions of ultra-long-term special treasury bonds are invested in medium-term areas, including urban-rural integration development, high-quality population development, or urban village renovation projects, projects to meet residents' high-quality housing needs, etc., which may also support the "digestion of stock" and "trade-in" of real estate.
After research, we found that:
(1) The recent "trade-in" includes equipment investment, automobiles, housing and other fields.
In terms of equipment renewal, the central bank's 500 billion yuan of scientific and technological innovation and technological transformation re-lending has been implemented, and the proportion of support for the loan principal is 60%, and if it is used up, it will at least pull more than 830 billion yuan of related credit. The central government can support the renewal of equipment through investment in the central budget, transfer payments, special subsidies, etc. Supporting policies for local equipment renewal have also been introduced, and Jiangsu Province and Beijing have introduced local loan financial discount policies.
(2) The "trade-in" of automobiles is jointly supported by the central and local finances, and the support may reach a new high. From 2009 to 2010, the national level also implemented the "trade-in" subsidy for cars; At that time, the "trade-in" subsidy focused on the scrapping and renewal of heavy-duty trucks, large buses and cars with a displacement of 1.35 liters and above, while the "trade-in" of this round of automobiles focused on supporting new energy passenger vehicles and fuel passenger vehicles with a displacement of less than 2L. If the total subsidy in this round is 500-90 billion yuan, it may drive the growth rate of automobile sales to 10%-30%.
(3) At present, the pilot housing in many places is "exchanging the old for the new" to help the real estate "destocking". For example, Zhengzhou plans to complete the "trade-in" of 10,000 second-hand housing units in 2024. The transformation of urban villages and the construction of affordable housing system may also be an important starting point for real estate to "trade in the old for the new" and realize "destocking". The sources of funding may include rental housing loan support programs to support housing rental operators in pilot cities to acquire housing stock; PSL to support the "three major projects" and special bonds for the transformation of urban villages.
Risk Warning
1. The economic recovery is less than expected. Changes in the overseas situation have increased the drag on exports, and real estate has weakened more than expected.
2. The effect of policy implementation is not as expected. Debt suppression, project quality and other drags down the implementation of policies, and funds are stranded in the financial system.