China’s Central Economic Work Conference, held in Beijing on 10–11 December, has outlined the country’s policy framework for 2026, with officials indicating that optimizing the implementation of the “two renewals” will be a priority next year, according to Chinese media reports. The policy pair—large-scale equipment upgrades and the consumer goods old-for-new program—has played a central role in stimulating domestic demand over the past two years.
The old-for-new program, funded through ultra-long special-purpose government bonds, allocated RMB 150 billion (US$21 billion) in 2024 and RMB 300 billion (US$42 billion) in 2025. The scheme covers automobiles, home appliances and other major consumer categories.
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According to the Ministry of Commerce, from January to November the program supported more than RMB 2.5 trillion (US$350 billion) in sales and generated over 360 million instances of consumer participation. Vehicle replacements exceeded 11.2 million units over the same period.
The China Passenger Car Association (CPCA) estimates that the auto-replacement market will surpass RMB 180 billion (US$25 billion) in 2025, supported by more generous incentives. When combined with the 10% purchase-tax exemption for new-energy vehicles (NEVs), the policies could cover 22% more sales than in 2024.
Given the NEV sector’s annual sales exceeding RMB 2 trillion (US$280 billion), the tax exemption removes more than RMB 200 billion (US$28 billion) in purchase taxes. Together with the state subsidies, nearly RMB 400 billion (US$56 billion) in policy support is expected to underpin above-consensus auto-market growth in 2025.
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However, the environment is expected to change markedly in 2026. NEV purchase-tax incentives will be reduced to 5%, shrinking tax relief by more than RMB 100 billion (US$14 billion). Analysts expect this shift to place pressure on market demand. CPCA data show that in the first week of December, national retail sales of passenger vehicles totalled 297,000 units, down 32% year-on-year and 8% month-on-month. NEV retail sales reached 185,000 units, declining 17% year-on-year and 10% from the previous month.
Market sentiment in the fourth quarter has already reflected concerns over the narrowing policy window. As incentives approach expiry or become less favourable, some consumers are delaying purchases, contributing to volatile monthly delivery volumes for automakers.