Market Intelligence
Equipment and Machinery China

China Industrial Equipment Upgrading

The PRC government has been actively promoting industrial equipment upgrading and consumer trade-ins since the 2023 Central Economic Work Conference in December. This initiative has emerged as a major economic policy effort in 2023 aimed at both stimulating demand while simultaneously furthering the PRC government’s goal of industrial upgrading. 

In March, the State Council released an Action Plan for Promotion of Large-Scale Equipment Replacement and Trade-in of Consumer Goods, which calls for a 25-percent increase in capital investments in equipment by 2027 across seven key areas: industry; agriculture; construction; transportation; education; culture and tourism; and healthcare. Chinese media analysis suggests that, if successful, this would represent an additional RMB 270 billion in capital investment in equipment compared to baseline growth expectations. The Action Plan also indicates that these investments should be focused across five dimensions: energy saving and low carbon; ultra-low emissions; production safety; digital transformation; and intensified smartification. 

A subsequent notice released by the Ministry of Industry and Information Technology and several other agencies on the Implementation Plan for Promoting Equipment Renewal in the Industrial Sector provides additional details on specific areas targeted under the industrial equipment upgrading part of the initiative, with a particular emphasis on energy efficiency, and smart manufacturing across industries, including replacement of outdated equipment and upgrading equipment in key sectors like aerospace, solar energy, and battery manufacturing.

Other notable elements of this initiative include encouraging consumers to trade in old autos and appliances for newer, more energy-efficient products; promotion of the circular economy and efforts to reuse or recycle old industrial and consumer goods; upgrades to urban homes and infrastructure; and using the standards setting process to cull old and inefficient equipment.

Government Support 

  • Tax and Fee Preferential Policies: Released nearly simultaneously with the Implementation Plan, the latest Guidelines on Tax and Fee Preferential Policies to Support the Development of Manufacturing Industry published by the Chinese Ministry of Finance and State Taxation Administration, offer value-added tax (VAT) exemptions to manufactures of organic fertilizer, ethanol gasoline, naphtha and fuel oil, software, lubricating oil, batteries and coatings, and self-produced new wall materials. Additionally, reduced tax rates are provided to high-tech enterprises, small-scale VAT taxpayers, small and micro enterprises, newly established high-tech enterprises in economic special zones, and several encouraged industries in western regions and Hainan Free Trade Port. 
  • Financial support: The Action Plan proposes establishing special re-loans dedicated to technological innovation and transformation and encourages financial institutions to bolster their support for equipment renewal and technological transformation projects. On April 7, the People’s Bank of China announced a 500 billion RMB ($69.1B) relending program to support small and medium-sized tech companies in their early stage of development or in growth stage. 
  • Fiscal Support The action plan also suggests allocating funds from the central budget to finance essential equipment renewal and technological transformation projects, such as scrapping and renewal of agricultural machinery, recycling and treatment of waste electrical and electronic products and government procurement of green products. 
  • Local governments support: Local governments are encouraged to prioritize protecting essential resources required for enterprise projects, including land use and energy consumption.

Impact on Foreign Companies

  • Business Opportunities: Foreign companies specializing in industrial equipment manufacturing, smart technologies, and energy-efficient solutions can tap into the demand boost that will likely result from these policy initiatives. Opportunities exist in providing cutting-edge equipment, digital solutions, and safety enhancements. 
  • Challenges: Foreign companies must navigate regulatory compliance, intellectual property protection, and localization requirements. Competition from domestic manufacturers may intensify and domestically-manufactured products will likely be prioritized in certain sectors.

Conclusion

China’s industrial equipment upgrading and consumer trade-in policies present both challenges and opportunities for foreign companies. In the short term the policies should stimulate additional demand, which foreign companies can look to fill with superior equipment and products. At the same time, these policies align with the PRC government’s ambitions to upgrade its domestic industry to compete with international firms. Foreign companies looking to take advantage of these policies will need to leverage strong local partnerships and stay informed and adapt to the changing landscape.  
For information on the impact and implementation of these policies in specific industries, please see our detailed Market Intelligence Reports on this subject: 

  • Safety Equipment
  • Chemicals
  • Environmental Technologies
  • Energy
  • Design and Construction
  • Autos

For more information, please contact Office.beijing@trade.gov
 

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