China expands fiscal interest-subsidy scheme for equipment-renewal loans to cover tech-innovation lending

Mechanism

Cai Jin [2026] No. 2 optimizes an existing central-fiscal interest-subsidy scheme for equipment-renewal loans first rolled out under the March 2024 "Two News" equipment-renewal/trade-in action plan (see [china-state-council-two-new-equipment-renewal-trade-in-action-plan](2024-03-13-china-state-council-two-new-equipment-renewal-trade-in-action-plan.md)). For qualifying fixed-asset loans tied to equipment-renewal projects, the central government subsidizes 1.5 percentage points of loan-principal interest for up to two years from loan issuance. Two changes distinguish this notice from the original 2024 scheme: (1) sector scope widens from the original industrial/energy/transport/logistics core to also cover construction, AI equipment, aerospace materials, agricultural facilities, cold-chain infrastructure and elderly-care equipment; (2) bank-originated science-and-technology-innovation loans issued from 2026 — previously supported only indirectly via PBOC's tech-innovation/equipment-renewal relending facility — are now brought directly into the fiscal interest-subsidy scope, removing the prior requirement that a loan carry relending support to qualify. Disbursement shifts to a "pre-disbursement + settlement" process: provincial finance departments pre-disburse subsidy funds to provincial-level banks within 10 working days of application and issue review results within 5 working days. 26 financial institutions (three policy banks plus major commercial and regional banks) participate. The policy runs through 2026-12-31, extendable depending on conditions.

This is one of three coordinated Cai Jin [2026] interest-subsidy notices issued in the same January 2026 window — alongside Cai Jin [2026] No. 4 (MSME loans in 14 industrial-chain sectors, filed as [china-msme-loan-interest-subsidy-key-sectors](2026-01-19-china-msme-loan-interest-subsidy-key-sectors.md)) and Cai Jin [2026] No. 5 (service-sector loans, filed as [china-service-sector-loan-interest-subsidy-expansion](2026-01-19-china-service-sector-loan-interest-subsidy-expansion.md)). Together the three notices extend fiscal interest-subsidy support across capex-side equipment renewal, MSME industrial-chain lending and consumption-side services in a single coordinated package.

Downstream implications

• Lowers financing costs for capex-heavy equipment upgrades across a

widened sector set, reinforcing demand for domestic capital-goods producers (machine tools, industrial robots, construction equipment) at the expense of import substitution pressure on foreign suppliers.

• Bringing bank-originated tech-innovation loans directly into the fiscal

subsidy (rather than requiring PBOC relending support) broadens the funding channel for the same tech-upgrading priorities served by PBOC's CNY 1.2trn tech-innovation/equipment-renewal relending quota, layering fiscal and monetary support on overlapping targets.

• Feeds the broader overcapacity/state-support narrative cited in EU

countervailing-duty and US Section 301 proceedings against Chinese manufactured exports, even though the instrument is a domestic credit subsidy rather than an export measure.

Open questions

• No aggregate fiscal-cost estimate disclosed; total cost scales with

loan uptake across the widened sector list.

• Whether the newly added sectors (AI equipment, aerospace materials,

elderly-care equipment) will see disproportionate uptake given their strategic-priority status under China's "new quality productive forces" agenda.