China’s Consumer Subsidy Surge Overloads Stimulus Program, Provinces Suspend Grants

China's 2025 consumer stimulus, centered on a government-funded goods trade-in program and national subsidies, has significantly boosted retail sales, particularly in home appliances, electronics, and digital products, with some categories experiencing over 50% year-over-year growth. The program, financed by a 300 billion yuan special sovereign bond package—double the previous year's amount—has driven strong demand but also led to rapid exhaustion of allocated funds, causing provinces like Henan, Chongqing, Guangxi, and Xinjiang to suspend or restrict subsidy distribution. While the initiative has been effective in expanding sales of subsidized products, concerns about the sustainability of this consumption rebound persist due to fiscal constraints, delays in fund disbursement, and risks of price inflation by some retailers. Beijing is facing challenges balancing immediate economic stimulus needs with longer-term measures to restore household income growth and private sector confidence amid a shrinking fiscal space and rising budget deficits. To complement consumer subsidies, officials are also implementing business-facing policies aimed at stabilizing growth, such as urging faster payments to suppliers and clearing overdue bills to private firms. The situation highlights the difficulties China faces in maintaining momentum in domestic consumption as subsidy funds wane and economic headwinds remain.