The government will sell ultra-long special sovereign bonds worth 62.5 billion yuan to local governments in 2026 to meet consumption demands during peak seasons.
- Authorities will also guide local governments to use the subsidies in a balanced and orderly manner and to pace implementation appropriately, according to a statement from the National Development and Reform Commission.
- The move comes as China seeks to boost domestic demand, making it a top economic priority for 2026.
China on Tuesday announced the first batch of 62.5 billion yuan ($8.92 billion) in subsidies to support the trade-in of consumer goods for 2026.
The National Development and Reform Commission (NDRC) said in a statement that the government will sell ultra-long special sovereign bonds to local governments in 2026 to support consumer programs and meet consumption demands during peak seasons such as New Year's Day and the Spring Festival.
The NDRC authorities will also guide local governments to use the subsidies in a balanced and orderly manner, pace implementation appropriately, and strengthen fund supervision throughout the entire chain to maximize the policy's impact, it added.
Bolstering Domestic Demand
China is looking to boost domestic demand and has made it a top economic priority for 2026.
According to an earlier report from Bloomberg, the Politburo, the Communist Party’s decision-making arm led by President Xi Jinping, noted that domestic demand must be a primary driver for a strong market in its December meeting.
The move to boost domestic demand comes amid an economic slowdown over the past year, driven by weakening domestic demand, declining investment, sluggish industrial output, and deflationary pressures. Chinese households have also cut back on their spending due to a soft labor market and pressures in the real estate industry. The U.S. tariffs have also prompted the country’s senior leaders to increase China’s self-reliance in multiple industries.
Future Outlook
While the Chinese economy has clocked a year-to-date GDP growth of 5.2% year-on-year as of December, it is projected to grow only 4.4% in 2026, according to a report from the World Bank. It expects the existing headwinds to persist next year as well.
The Global X MSCI China Consumer Staples ETF (CHIS), which tracks Chinese consumer stocks, has declined by more than 34% over the last year. Meanwhile, the iShares U.S. Consumer Staples ETF (IYK), which tracks U.S. consumer stocks, has climbed more than 3% over the same period.
The Consumer Staples Select Sector SPDR Fund (XLP) declined marginally by 0.11% in the past year, while the Vanguard Consumer Staples ETF (VDC) was up by 0.03% in the same period.
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(1 Chinese Yuan = $0.14)
