Appliance subsidy scheme taps China's rural market potential amid weakening export 2009-02-27 14:50:54   Print

Special Report: Global Financial Crisis

    By Xinhua writers Lu Chuanzhong, Pei Jianrong, Shen Yang

    NANCHANG, Feb. 27 (Xinhua) -- Strolling a rural home appliance shop, Shen Liangsheng asked salespeople questions about the freezers on display as he considered buying one for his small village grocery store.

    The 61-year-old from Liantang Township of east China's Jiangxi Province, was considering taking advantage of the government's subsidy to farmers for household appliance -- a nationwide policy that was rolled out in February.

    "The old freezer is in bad shape, but still can do with at the moment. Since we enjoy the preferential policy, why not buy a new one?" said Shen.

    Under the new program, more than 900 million farmers are eligible for a subsidy equal to 13 percent of the prices of home appliances they bought. The four-year policy was designed to stimulate rural consumption to boost domestic demand as exports weaken amid the financial crisis.

    Increased sales could also help home appliance manufacturers upgrade their businesses and fare better in the economic downturn.

    A pilot project began in December 2007 in the Henan, Shandong and Sichuan provinces, and was extended to nine more provinces a year later. It was nationally adopted as of Feb. 1.

    Ten types of products are covered under the policy: Color TV sets, refrigerators or freezers, mobile phones, washing machines, computers, water heaters, motorcycles, air conditioners, electro magnetic cookers and microwave ovens.

    Price caps are set for these products. The rebate to the consumers is shouldered 80 percent by the central fiscal government, and 20 percent by provincial fiscal governments.

    Only retailers who have won bids will be able to participate in the program.

    Each household is allowed to buy two subsidized items under each product type, easing the original limit of one for each.

    In Luoshe Village of Youlan Township, about a 20-minutes drive from Liantang, 45-year-old Yu Yunquan purchased a subsidized refrigerator, priced at 1,999 yuan (292 U.S. dollars), as part of the dowries for his daughter's wedding.

    Yu said he had been considering buying a subsidized refrigerator for his home as well some day.

    "Appliances like fridges, color TVs and washing machines are very common in city homes. Now we farmers also want these things as more and more of us can afford them."

    An estimate by the Ministry of Finance earlier this month showed sales of up to 600 million home appliances in rural China by 2012, or during the four-year implementation of the policy. The plan is expected to spur domestic spending by 1.6 trillion yuan (234 billion U.S. dollars).

    In Shandong, one of the pilot provinces, more than 1 million subsidized products were sold as of early January, generating sales value of 1.7 billion yuan. Sales of refrigerators and color TVs in Henan last year doubled compared with 2007, and its total sales of designated appliances reached 1.6 million units worth 2 billion yuan.

    The two regions are strong indications that the national goal is feasible.

    Wang Bao'an, an official with the ministry, said the program was the first time the country has leveraged its fiscal subsidy instrument for the consumer market. He also expected the project to help upgrade rural quality of life.

    Although they welcomed the offer, farmers like Yu and Shen also had their own concerns.

    "It's good to pay less, but we want more than that," said Yu. "The products' quality and after-sale services are equally important. We want name brands, and won't buy low-quality ones no matter how cheap they are."

    Shen said he had heard that the rebate process was somewhat lengthy due to the government's efforts to keep the money secure.

    "I still want the process to be simple and fast."

    The government is taking steps to address these concerns.

    In early February, the General Administration of Quality Supervision, Inspection and Quarantine urged its local offices to beef up quality control of subsidized products sold in the countryside and the supervision of enterprises that have won the bids for the project.

    Unqualified products will be recalled and enterprises found with substandard products or poor post-sale services will be blacklisted, disqualified and punished according to laws, it warned.

    A conference of the State Council (Cabinet) on Feb. 19 also decided to simplify the rebate collection procedure for farmers. As the process is refined, rebates will be collected by consumers through their banking accounts at point-of-sale. Cash will be rebated in remote areas with less developed banking networks.

    "I never expected to get money for buying home appliances," said a happy Yu, although at the moment he still has to wait for one month before the rebate of 260 yuan is channeled into his account.

Editor: Xiong Tong
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