China is intensifying efforts to expand domestic demand, with service-related spending emerging as a key growth driver.

In response, regulators have rolled out consumer finance measures designed to support consumption upgrades and encourage household spending.

Earlier this year, the National Financial Regulatory Administration directed financial institutions to broaden their consumer finance offerings as part of a wider push to stimulate demand.

"The regulatory guideline encourages banks to increase personal consumption lending and support financing needs for emerging consumption scenarios, such as digital, green and smart consumption. This will create new business opportunities for banks, particularly in wholesale and retail, culture and tourism, and also healthcare and elder care services. By innovating in products and services, banks can expand their market presence and strengthen revenue streams," said Zeng Gang, chief expert and director of the Shanghai Institution for Finance & Development.

Zeng said that simultaneously boosting consumption capacity and financial supply will ease households' concerns about spending and provide enterprises with the capital to expand production, thereby forming a virtuous cycle in which rising demand drives optimized supply and further unlocks consumption potential.

The consumer goods trade-in program has been one key measure to stimulate consumption this year.

The Ministry of Finance, in cooperation with the National Development and Reform Commission, has allocated 300 billion yuan ($42 billion) of ultra-long-term special treasury bond funds to support the program, continuously unleashing consumption potential and driving industrial upgrading, Wu Gai, a finance ministry official, said at a news conference on July 25.

"This round of consumer goods trade-in policies has delivered remarkably positive results, significantly boosting sales of key consumer items such as home appliances and communication equipment. It has supported profitability and performance improvement in related industries, thereby promoting consumption and stabilizing employment," said Zhou Jingtong, deputy director of the BOC Research Institute, the in-house think tank of Bank of China, and Fan Ruoying, a researcher at the institute, in a report on Aug 12.

To better implement the initiative, Bank of Communications, a Shanghai-based State-owned commercial lender, launched a "trade-in" service section on its mobile banking app. The section integrates comprehensive features including subsidy policy inquiries, subsidy eligibility criteria, partner merchant directories, and coupon collection and redemption, enabling a seamless one-stop process for obtaining and utilizing coupons.

Looking ahead to the second half of this year, experts noted that as the consumer goods trade-in program gains traction, some companies may face cash flow pressure from pre-financing costs since businesses participating in the program must advance funds for the subsidy portion. Banks are expected to step in to help ease these financing strains.

At the same time, cultivating new growth drivers in service consumption is widely seen as a key lever for supporting economic momentum in the months ahead, experts said.

Pan Gongsheng, governor of the People's Bank of China, announced on May 7 that the central bank would establish a 500-billion-yuan relending facility for service consumption and elder care, in coordination with fiscal and industry policies, to better meet the needs of consumption upgrading. Banks are now making every effort to implement this policy.

Zeng said the relending program will directly benefit households by helping enterprises improve service quality, expand supply in the consumption sector, and enhance elder care infrastructure. He expects the policy to spur industry development, create jobs, and raise household incomes.

Recently, supported by this policy, the Shanghai branch of Bank of China issued nearly 1 billion yuan in service-consumption working capital loans to a leading private tourism company. The funding will support the company in expanding business and enhancing market competitiveness while meeting the growing demand for diverse, high-quality travel experiences.

This year, BOC plans to issue over 1 trillion yuan in loans, focusing on both traditional and emerging consumption sectors to expand supply and stimulate consumer vitality.

The bank is enhancing products to capture demand in areas such as home renovation and smart living. It is also backing the consumer goods trade-in program by providing home renovation and furnishing trade-in installment financing of up to 2 million yuan, with maturities of as long as five years. Select eco-friendly appliances and digital products qualify for zero-interest installment plans.

Aligned with government efforts to spur big-ticket consumption, Bank of China has teamed up with 17 new energy vehicle makers to expand subsidized auto installment financing. For certain popular models, customers can access installment plans with terms of up to five years at zero interest.

To further spur consumption and expand domestic demand, China unveiled plans to offer interest subsidies for qualifying personal consumption loans and eligible business loans in the services sector on Aug 12.

According to the financial institutions authorized to participate in the subsidized personal consumption loan program, which began Sept 1, the procedure has been simplified. Applicants only need to authorize banks to check loan accounts and identify eligible consumption transactions. Subsidies are directly deducted from interest payments in line with policy rules. If the bank system cannot match transactions, borrowers may present receipts at branches for manual review before receiving subsidies.

Following the launch of the new loan subsidy programs, Lin Li, executive vice-president at Agricultural Bank of China, said the bank is working quickly to finalize operating guidelines, upgrade technology systems, and ensure effective rollout so that the policy benefits households and businesses efficiently.

ABC is actively responding to the national consumption stimulus campaign, supporting new consumption models, business formats and scenarios. The large State-owned commercial lender has launched a dedicated consumption loan action plan across its branches.

Lin said ABC is optimizing credit policies on access, approvals, renewals, maturities and interest rates, while increasing personal loan supply to support consumption in sectors such as healthcare, elder care, tourism and education.

The bank is also advancing integration of consumer finance with real-world scenarios, launching innovative products, streamlining processes, and extending the maximum term for personal consumption loans from five years to seven.

As of end-June, ABC's personal consumption-related lending balance reached 1.45 trillion yuan, an increase of 114 billion yuan. Of this, personal consumption loans increased by 62.7 billion yuan, while credit card loans increased by 51.3 billion yuan.

At its 2025 interim results briefing on Aug 29, China Construction Bank President Zhang Yi said CCB will continue to carry out its consumer stimulus campaign, with a strong focus on implementing the latest policies.

"We believe the two interest subsidy policies will effectively lower borrowing costs for households and businesses, channel more credit precisely into consumption, and promote robust growth in personal and service-sector loans," said Zhang.

CCB will focus on meeting real consumption demand, streamlining subsidy procedures, improving user experience, and further integrating loans with consumption scenarios to ensure that more market participants benefit from these policies and unlock consumer potential.

In the first half, CCB issued more than 90 billion yuan in loans under a special campaign to support large-scale equipment upgrades. As of end-June, its personal consumption loan balance reached 614.2 billion yuan, up 86.3 billion yuan from the end of last year.

From June 14 to 30, during an auto sales event in the Wuhan East Lake High-tech Development Zone, CCB's local branch partnered with the government and dealers to distribute car purchase subsidies via the CCB Life app, a local life service platform, with subsidies reaching up to 4,000 yuan.

The campaign attracted over 1,000 participants and generated more than 300 million yuan in spending. The branch also helped distribute 23.2 million yuan in coupons via the CCB Life app in the first half, driving more than 1.4 billion yuan in spending.

jiangxueqing@chinadaily.com.cn