Continuing in its efforts to stimulate domestic demand, China's Central Government has extended a pilot subsidy program for home appliances to all rural areas in China. The program is called "home appliances to the countryside" (家电下乡).
Rural buyers of certain durable goods will be eligible for a 13 percent subsidy. The list of eligible goods includes refrigerators, TVs, mobile phones, washing machines, motorcycles, personal computers, water heaters and air conditioners. There are of course limitations on the size of individual subsidies so as to prevent the purchase of luxury goods.
The program was piloted in three provinces beginning in December of 2007, then extended to a total of 14 provinces in December of 2008. As of 1 February 2009, the program has now been extended to rural areas throughout all of China.
Apparently preliminary results convinced authorities it was worth extending nationwide. During the first 20 days of January, "Chinese farmers had bought more than 160,000 subsidized goods. This is already 90 percent of the total sold in December 2008." (Chinaview.cn, 30 January 2009)
The cost of the original pilot was shared 80-20 between central and local governments, respectively. There is no indication (yet) as to whether this particular provision will continue with the nationwide program.
It is easy to be critical of Beijing when focusing solely on currency policy, but programs like this are evidence that China's leaders aren't sitting on their hands. These appliance subsidies, along with tax cuts on auto purchases, should help somewhat to ease pressure on China's exporters, and therefore, on China's trade surplus.
Additional sources: Sina.com, People's Daily
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UPDATE: Posting a link to the story about Haier mentioned by Duncan in comments to this post.
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It should certainly benefit some, but the fact that Haier was said to account for around 42% of the unit sales in the first phase of the plan (according to a post on Plastics News China) suggests the benefits may be somewhat skewed towards a few companies...
ReplyDelete@Duncan...
ReplyDeleteThis supports what I have heard from a few Chinese friends -- that Haier is far and away the favored brand among Chinese consumers. Their reason? That Haier now also exports to the U.S., so its goods must be superior.
On the other hand, some also speculate that Haier is exporting because it is already highly favored by the Central Government (even though it's a local firm in Qingdao).
Regardless, I agree with your point that 42% skewed in favor of a single manufacturer indicates some external factor that isn't immediately apparent.
I'm trying to think of who the other competitors are in the white goods space. Hisense, Kelon and Wanbao come to mind. Am I missing any major players here?
Thanks for your comments!