Hong Kong Stock Concepts | Boosting Consumption: Dual Interest Subsidy Programs Implemented to Benefit Key Sectors

On August 12, two major fiscal initiatives were jointly introduced by China’s Ministry of Finance, the People’s Bank of China, and the China Banking and Insurance Regulatory Commission. The first, titled the “Implementation Plan for Fiscal Subsidy on Personal Consumer Loans,” was released alongside the “Implementation Plan for Loan Subsidies for Service Sector Business Operations,” which was developed in coordination with eight additional ministries, including the Ministry of Civil Affairs. Both programs are scheduled to operate from September 1, 2025, through August 31, 2026.

The consumer-loan subsidy program applies to personal borrowing—excluding credit card advances—issued by designated financial institutions. To qualify, funds must be deposited into accounts designated for consumption. Transactions under RMB 50,000 are eligible for full subsidies, while those above that threshold receive a capped subsidy of RMB 50,000. Covered categories include vehicle purchases, eldercare and childbirth-related expenses, educational and training costs, cultural tourism, home upgrades, electronics, and healthcare services. Upon completion, the program will be reviewed to assess its impact and determine whether it should be extended or modified.

Participating lenders include six state-owned commercial banks, twelve national joint-stock banks, and five licensed consumer-finance companies. Regional financial authorities are encouraged to expand the program’s reach by supporting additional qualified institutions based on local conditions.

In parallel, the service-sector loan subsidy initiative offers a one-year rebate of 1% on loan principals for eligible bank loans up to RMB 1 million. Funding is split between central and provincial governments at a ratio of 90% to 10%. Loans must be issued between March 16 and December 31, 2025, and directed toward infrastructure or capacity improvements in industries such as hospitality, healthcare, eldercare, childcare, domestic services, cultural entertainment, tourism, and sports. Like the consumer-loan program, this initiative will undergo a post-implementation evaluation.

These measures reflect policy priorities outlined in the 2024 Central Economic Work Conference and the 2025 Government Work Report, both of which emphasized the importance of boosting domestic consumption and improving investment efficiency. In March 2025, the Party Central Committee and State Council released a “Special Action Plan for Boosting Consumption,” directing fiscal tools toward stimulating household spending. The State Council’s 65th executive meeting on July 31 formally approved both subsidy programs and assigned the Ministry of Finance to oversee their implementation.

Following the announcement, major state-owned banks—including the Big Six—and joint-stock institutions such as China Everbright Bank pledged to begin rollout promptly. On August 12, Agricultural Bank of China and China Zheshang Bank confirmed they would begin offering interest rebates starting September 1, 2025, with detailed procedures to be published through official channels.

Market analysts expect these subsidies to support both consumer demand and service-sector investment. Lou Feipeng of Postal Savings Bank of China noted that the measures would reduce borrowing costs for households and enhance service providers’ ability to invest and improve quality. Dong Ximiao of China UnionPay and the Shanghai Institute of Finance and Development added that the clear policy signal would boost market confidence, encourage effective credit demand, expand loan issuance, and help stabilize interest rates.

In the financial sector, Postal Savings Bank of China (01658.HK) announced in July the creation of China Post Financial Assets Investment Co., Ltd., funded with RMB 10 billion under the “Provisional Measures for the Administration of Financial Asset Investment Companies.” This move supports national objectives in technology finance and aims to strengthen innovation and private enterprise without significantly affecting the bank’s financial health.

Bank of China (03988.HK) reported a 2.9% decline in net income for Q1 2025 compared to the previous year, slightly below UBS projections, though it led state-owned banks in revenue growth. UBS maintains a “Buy” rating with a target price of HKD 4.70. Agricultural Bank of China (01288.HK) posted 2% net income growth to RMB 72 billion and a 5.1% quarter-on-quarter increase in its loan portfolio, prompting DBS to raise its target price to HKD 5.30 while maintaining a “Buy” rating. China Merchants Bank (03968.HK) saw its H-shares rise 33% year-to-date, outperforming Bank of Communications by 15 percentage points, leading Goldman Sachs to identify a turning point in the domestic banking sector.

In the automotive industry, BYD Company (01211.HK) is on track to exceed its overseas sales target for 2025. July sales remained steady at 344,000 units year-on-year, while cumulative sales from January to July increased by 27% to 2.49 million units. Li Auto (02015.HK) streamlined its Li i8 lineup, naming the Li i8 Max as the base model, reducing its price to RMB 339,800, and bundling a complimentary RMB 10,000 Platinum audio system. A rear-seat entertainment screen is available as an optional upgrade.

In the home appliance and furniture sector, Haier SmartHome (06690.HK) reported stable U.S. retail appliance sales in Q2, prompting CLSA to raise its H-share target to HKD 30 and A-share target to RMB 32. Hisense Home Appliances Group (00921.HK) posted interim 2025 revenue of RMB 49.34 billion, up 1.44%, and net income of RMB 2.077 billion, up 3.01%. Q2 revenue reached RMB 24.502 billion, though net income declined 8.25% year-on-year.

In cultural tourism, dining, and retail, H World Group (01179.HK) recorded Q1 2025 EBITDA of RMB 1.6 billion—RMB 1.5 billion after adjustments—leading Goldman Sachs to reaffirm its “Buy” rating and set a 12-month target of USD 55/HKD 43. Trip.com Group (09961.HK) met Q1 2025 revenue expectations and exceeded margin forecasts, with Goldman Sachs projecting 12–17% revenue growth for the year and assigning a 12-month target of USD 78/HKD 608. Haidilao International (06862.HK) maintains a “Buy” rating from CMB International, which raised its target price to HKD 20.20, reflecting an implied P/E of 18 and a projected 6% dividend yield to cushion downside risk.