In early 2025, China's National Development and Reform Commission (NDRC) and Ministry of Finance unveiled new measures to expand the "Two New" policy, aimed at driving large-scale equipment upgrades and promoting consumption through product replacement incentives. Building on the success of similar initiatives in 2024, this year's efforts will feature increased funding and an expanded scope of subsidies. These changes are set to influence both domestic and international markets, offering global businesses a glimpse of new opportunities in the world's second-largest economy.

This year's "Two New" policy significantly increases funding supported by ultra-long-term special treasury bonds. While exact figures will be announced during China's annual "Two Sessions," early estimates suggest substantial growth over the approximately RMB 300 billion allocated in 2024.

Preliminary funding has already been released to ensure policy continuity during peak consumption periods like the New Year and Lunar New Year holidays.

The expanded funding aims to support key sectors, including industrial equipment, energy power systems, and digital consumer goods. By lowering financing costs through subsidized loans, the policy also seeks to reduce barriers for businesses investing in equipment upgrades.

In a notable expansion, subsidies now cover smartphones, tablets, smartwatches, and fitness trackers—products with high replacement cycles and growing consumer demand. Eligible buyers will receive subsidies covering up to 15% of the purchase price, capped at RMB 500 per item.

Additionally, the policy extends incentives to replace older vehicles and e-bikes, further targeting consumer segments that can drive near-term economic activity.

For businesses, the broadened scope presents opportunities to capture demand in categories beyond traditional durable goods like appliances and vehicles. Multinational electronics manufacturers and local brands alike stand to benefit from the policy’s inclusion of newer tech categories, leveling the playing field for enterprises across various ownership structures.

The 2024 version of the "Two New" policy demonstrated remarkable effectiveness. Data from the Ministry of Commerce shows that product replacement subsidies spurred sales of over 5.2 million passenger vehicles and nearly 90 million units of household appliances. Analysts estimate that these measures contributed approximately RMB 250 billion in additional consumption by year-end.

Investment outcomes were equally notable. Ultra-long-term bonds funded over 4,600 equipment renewal projects, with key sectors like energy and transportation upgrading more than 200,000 units of equipment. Such data underscores the multiplier effect of well-targeted fiscal interventions in boosting both consumption and investment.