Subsidies spur spending in China's 618 shopping fiesta but momentum could fade
BEIJING: China's 618 mid-year shopping festival closed on Wednesday (June 18), following more than a month of promotional events beginning in mid-May, with major e-commerce giants boasting about strong sales in home appliances and electronics during this period.
Yet much of 2025's surge in demand came not from renewed consumer confidence, which has in recent years been shaken by a sluggish economy, a weak job market and a property downturn.
Instead, it came from the government-funded goods trade-in programme and national subsidies, raising questions about how sustainable the consumer spending rebound is.
Policy support is clearly the core driver in 2025's 618 shopping festival, as reflected in sales data, said Xu Tianchen, senior economist at the Economist Intelligence Unit (EIU).
'Every category targeted by subsidies – except cars – posted over 20 per cent sales growth from January to May, while non-subsidised categories, such as apparel and food and beverage, saw much slower growth,' said Xu, referencing data released by China's National Bureau of Statistics on June 16.
Smartphones, washing machines and air-conditioners are among the consumer goods that have seen strong sales, as they are covered under a central policy that gives consumers up to 2,000 yuan (S$358) in discounts per item.
Started in early 2024, the initiative was expanded in 2025 to cover a wider range of products and is slated to run throughout the year.
To further entice customers to buy, e-commerce platforms stacked discounts on top of the government subsidies. Some products ended up 40 per cent to 50 per cent cheaper than their original price tag, while other high-priced products came with a hefty discount.
For instance, a Chinese consumer could buy an Apple iPhone 16 Pro, which was included in the national subsidy programme for the first time in 2025, for 2,500 yuan off its original price on e-commerce platforms after subsidies and discounts.
The policy-fuelled spending spree comes at a time when Beijing is seeking to expand domestic consumption as its top economic priority in 2025, as the nation braces itself for a prolonged trade war with the United States.
To finance the subsidy programme, Beijing doubled the amount of ultra-long special sovereign bonds to 300 billion yuan in 2025, compared with the year before.
A live-stream host selling products online at JD Mall in Beijing on June 18. - Photo: ST
MingYii Lai, a strategy consultant at Shanghai-based market research firm Daxue Consulting, said the 618 sales spike is not a reflection of organic optimism among consumers.
She noted there are many examples on Chinese social media showing how people are rushing to buy electrical appliances before home renovations are even finished, or that consumers are reluctant to purchase without subsidies or heavy discounts.
'These show that purchases were supported by the sentiment to exploit subsidies rather than discretionary spending,' she said.
At around 2pm on June 18, a newly opened JD Mall in Beijing's Shuangjing district was lively with a steady flow of shoppers out to get a good deal on appliances and electronics, in which the mall specialises.
Others were drawn to the air-conditioned mall to seek respite from the summer heat or for the 618 festival's fringe activities aimed at increasing footfall, such as a meet-and-greet session with Chinese pop singer Huang Ying, in the mall's atrium.
Shopper Li Qiang, 30, who was out shopping for a robot vacuum cleaner, told The Straits Times that he had just days ago traded in his old Xiaomi smartphone for a OnePlus smartphone, a Chinese sister brand to Oppo.
'The original price was 4,500 yuan, but there were so many discounts you could stack on, I can't even remember exactly how much I paid. I just know that it's the cheapest to buy now,' said the Hebei native, who works for a logistics company in Beijing.
'Honestly, I'm not too worried about spending money because the fact that our government can still give out subsidies even when the US-China trade war is going on shows that our country is strong.'
A washing machine promoter, Li Mingzhou, 35, at Chinese home appliance brand Casarte, said he had a busy morning, having sold about 30 units since the store opened.
He hoped to clock another 30 to 40 deals later that day, as he expected the crowd to thin out in the days ahead after the promotion period ends.
'There are also rumours that the government may stop the subsidies soon as the funds are drying up, so in the last few days, people were rushing in to buy the appliances they need,' he said.
In the past two weeks, there have been reports of local governments in Chongqing city and Henan province suspending the subsidies temporarily because of insufficient funds.
Other provinces such as Jiangsu and Guangdong have started imposing a daily quota on the number of such subsidies distributed.
To calm the online chatter, Chinese state media on June 18 reported that just over half of the total of the 300 billion yuan has been distributed and that the central government will issue the rest of its funds in an orderly manner and will guide local governments to use the funds at a stable pace.
Originally a single-day celebration to mark the founding of e-commerce company JD.com on June 18, 1998, the 618 festival has now been expanded to include all e-commerce platforms and has seen increasingly longer promotional periods.
It is now one of China's biggest consumption events alongside Singles' Day on Nov 11.
JD.com, now China's largest retailer, said that the number of customers placing orders across its online, offline and food delivery platforms for the 618 festival surpassed 2.2 billion, which is more than double the previous year.
Another e-commerce giant, Alibaba, said 453 brands on its Tmall platform exceeded 100 million yuan in sales value, a 24 per cent increase from the year before.
Both companies have not disclosed overall sales figures in recent years.
Analysts said while the consumption figures for 2025's 618 festival look positive, the momentum might not be sustainable and Beijing will need to come up with more endurable measures to ensure economic recovery for the longer haul.
A note from Japanese investment bank Nomura on June 16 said that while retail sales performed well above market expectations in May, it expects the boost from the trade-in programme to fade in the second half of the year.
EIU's Xu said the Chinese government, if it intends to continue with the subsidy scheme, should consider broadening the scope of the support beyond durable goods.
This could come in the form of more universal consumption vouchers, covering anything from food and tourism to clothes and massages, which would be 'more market-driven and flexible'.
Said Xu: 'Services spending occurs at a much higher frequency – you don't buy a car every year but most people dine out every few days – and frontloading of consumption is less of a problem.' - The Straits Times/ANN
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