China Dangled Rebates to Lure People to Spend. It’s Not Enough.

Four months ago, China’s leaders announced what seemed like a straightforward and proven plan to recharge the economy: Subsidize consumers who want to replace old cars and household appliances.

The early results are not promising.

Only 113,000 cars qualified for trade-in subsidies through June 25 — a blip in a country where monthly sales exceed two million cars. And buyers of new appliances such as washing machines and refrigerators are being offered discounts of only about 10 percent, depending on what city they live in.

The incentives are not enough to bring customers into stores.

“If it is not needed, people will not go out of their way to find an old machine to participate,” said Dai Yu, the manager of an appliance store in Jingdezhen, a city in Jiangxi Province in south-central China.

The idea of providing financial incentives to spur consumer spending is not new.

In 2009, the United States, Germany, France, Spain and Austria offered so-called cash for clunkers programs to revive car sales. They paid households to scrap gas guzzlers and replace them with newer cars with better fuel economy. China itself gave extensive tax cuts and subsidies for consumers to buy new cars and household appliances. Prices for many appliances were cut in half, particularly for rural residents, and sales surged.

The current strategy has been held back by tight eligibility restrictions and limited financing. As often happens, China’s central government has turned the appliance program almost entirely over to provincial and local governments, many of which are struggling with heavy debts and reluctant to offer more generous subsidies. The central government, which has fewer debts, pays 60 percent of the cost of the car subsidies.

So the effort has not yet fixed one of China’s biggest economic problems right now: weak spending by consumers. Factories have responded by chasing more customers overseas, but that has incited a backlash and trade restrictions by governments in Europe, the United States and developing countries.