As China embarks on a new chapter in 2025, its economic policy is shifting to address the lingering effects of the pandemic and sluggish consumer spending. The government’s recent introduction of an extensive consumer stimulus program aims to invigorate the economy, particularly by focusing on specific sectors, such as home appliances. While direct cash handouts to consumers are off the table, the emphasis on subsidizing home appliance purchases signals a strategic approach to stimulate domestic demand and support key manufacturers.
In this new scheme, the Chinese government has expanded its trade-in program, adding essential household appliances like microwaves, water purifiers, dishwashers, and rice cookers to an existing list of subsidized items. This initiative not only supports consumer spending but also seeks to enhance the sales of leading home appliance manufacturers. Analysts believe that companies such as Midea, Gree, and Haier, which rank as the top three air conditioner producers by revenue in China, stand to benefit significantly from these policy adjustments.
Market analysts are optimistic; Morningstar’s Jeff Zhang has increased revenue forecasts for Midea, Gree, and Haier by 2-5% for the years 2025 to 2028, citing elevated expectations of sales growth. Zhang also revised the price targets for these stocks, indicating a bullish sentiment surrounding their future performance. For instance, Midea’s Hong Kong-listed shares saw an impressive increase of nearly 38% last year and are projected to climb another 26% according to Morningstar’s targets.
As the consumer stimulus program unfolds, e-commerce platforms are poised to play a critical role in shaping shopping behaviors. JD.com has emerged as a frontrunner, bolstered by its established capacity to capitalize on the burgeoning demand for covered appliances amid the new subsidies. Citi analysts highlighted JD.com’s robust supply chain and its preparedness to respond to increased demand for these products.
In contrast, Alibaba remains a strong contender in the e-commerce space due to its Tmall platform, which showcases products from significant brands and enables smaller merchants to reach customers via Taobao. The consensus is that the e-commerce giants are well-positioned to leverage the government’s initiatives, albeit with varying degrees of advantage. While JD.com is favored, Alibaba is also expected to benefit owing to its established market presence and relationships with major suppliers.
Even with the potential upside, there are inherent risks associated with China’s economic landscape that investors must consider. Analysts at Citi have advised caution, pointing out factors such as price wars and the feeble state of the real estate market, which could adversely affect stock prices. Additionally, recent data shows a 3.3% decline in home appliance prices year-over-year, suggesting a continued lack of robust consumer demand.
The upcoming release of retail sales and full-year GDP figures will further inform the market about the health of China’s economy. With consumers remaining conservative amidst economic uncertainty, it remains to be seen how effective the new measures will be in stimulating spending and improving overall economic sentiment.
As the Spring Festival approaches, the government has earmarked a substantial 81 billion yuan (approximately $11 billion) to facilitate these trade-in subsidies. The full-year subsidy details are expected to be solidified during the annual parliamentary meeting in March, which may provide additional clarity for consumers and businesses alike. Industry stakeholders are hopeful that these measures will provide the necessary impetus to revitalize consumer spending.
While the newly implemented consumer stimulus program is designed to offer a lifeline to both consumers and manufacturers, it operates amid a fragile economic backdrop. The combined support from government initiatives and the proactive stance of major e-commerce platforms like JD.com and Alibaba could foster increased sales in the home appliance sector. However, the sustainability of this growth remains to be assessed in the coming months, particularly as market dynamics evolve and new data comes to light. Investors and consumers will need to watch closely as China’s economic trajectory in 2025 unfolds, potentially leading to a reformation in consumer habits for years to come.