Beijing picking up some of the bill for iPhones sold in China
What? Why? Xi wants people spending, so has extended a subsidy scheme to phones, tabs, and smartwatches
If you want a cheap iPhone, China’s the place to be right now thanks to a government subsidy scheme that means resellers are discounting the devices to make sure Beijing helps to pick up the bill.
China has often offered subsidies for consumer purchases, sometimes to drive replacement of outdated equipment and on other occasions to spur domestic demand.
The latest subsidies, annnounced in early January, added smartphones, tablet computers, and smartwatches to the list of items for which China’s government is willing to pay up to 15 percent of the purchase price.
Only smartphones that sell for less than ¥6,000 ($824) are eligible for the subsidy, and cheaper products can attract higher subsidy rates. In China as elsewhere, premium smartphones sell for more than ¥6,000.
Chinese e-tailers are therefore reportedly dropping the price of the iPhone, and other kit, to ensure they are eligible for subsidies.
Other items eligible for subsidies include air conditioners and cars, to promote the adoption of more efficient machines. Microwave ovens, dishwashers, and rice cookers are also on the list, as are agricultural machinery and buses.
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iPhone discounts are rare, anywhere, anytime. Buying one at the current low prices on offer in China is not entirely infeasible, because the nation currently doesn’t require tourists to arrange visas for short visits.
That waiver of the usual travel formalities is hoped to stimulate tourism, as is the consumer subsidy scheme. Both are attributable to the sluggish performance of China’s economy which has struggled to shake off the effects of the COVID-19 pandemic and rolling crises in the residential property sector.
Supply chain problems during the pandemic also made many importers outside China feel they had an over-reliance on the Middle Kingdom as a source of manufactured goods. They therefore started to diversify beyond China, another hit to the economy.
Chinese President Xi Jinping has tried to address the situation by increasing domestic consumption and making the country less reliant on exports.
But the gloomy economic mood means that effort hasn’t worked well, and the smartphone sector is one indicator of the malaise: analyst firm Counterpoint this week reported a year-on-year decline in smartphone sales for the last quarter of 2024. By way of contrast, the firm found smartphone shipment growth in the first nine months of 2024.
The smartphone subsidies commenced on January 20th and will continue through next week’s Lunar New Year festivities, a time when many go shopping.
If these subsidies spark increased sales of iPhones, that will be a Phyrric victory as Apple is of course an American company, meaning Beijing will be filling Cupertino’s coffers.
Chinese smartphone brands are also reportedly making sure their products can be acquired for under ¥6,000. They should sell well: Counterpoint’s data ranks local heroes Oppo, Honor, and Vivo as China’s three best-selling smartphone brands, with Apple in fourth place and sinking fast.
The analyst firm predicts the subsidy scheme “could serve as a catalyst for boosting sales”, bet believes the most likely outcome for Chinese smartphone sales this year is “low-single-digit growth.” ®