China’s Successful Appliance Subsidy at an End

Although there is still room for the Chinese economy to expand through investment, many of the country’s top policy makers are placing increasing importance on consumer spending as a way to bolster growth. But while media attention in recent years has largely been focused urban Chinese consumers’ growing taste for high-end luxury goods, spending in the country’s rural hinterlands has quickly and quietly boomed in recent years thanks in part to government subsidies on a variety of consumer appliances and electronics.

After a trial run in Shandong, Henan, Sichuan and later Qingdao city between 2007 and 2008, the Chinese government launched its massive subsidy program for the purchase of new white goods across the country’s vast rural areas in 2009, just as foreign demand waned during the height of the financial crisis. Under the program, up to 13 percent of the cost of certain new home goods – such as refrigerators, air conditioners, televisions, and washing machines – would be covered by subsidies. In the months following the launch of the program, subsidies were also extended to other products such as personal computers and electric motorbikes as well.

By most accounts the government’s subsidy program, which came to an end at the start of 2012, was a major success for the country’s white goods industry, with monthly and quarterly growth rates reaching double and occasionally triple digit figures at various times during the program’s lifespan. During the whole of last year alone, appliance and electronic goods subsidies to farmers and rural residents resulted in the purchase of 103 million items valued at a combined 264.1 billion RMB ($41 billion USD), up 34.5 and 53.1 percent respectively from the year before according to recent figures from China’s Ministry of Commerce. To put these figures into perspective, it is estimated that the combined value of last year’s output from China’s appliance industry totaled 1.1 trillion RMB ($173.7 USD), up 17 percent from 2010.

Aside from these subsidies, favorable policies for farmers and agricultural workers in recent years as well as rising wages throughout China may have also played prominent roles in boosting consumer spending in China’s rural areas. Prior to the subsidization of the appliance sales, for example, the Chinese government launched a similar campaign which helped Chinese farmers purchase 300,000 new pieces of farm machinery in 2006, while during that same year abolishing the country’s agricultural tax.

Combined with such policies aimed at farmers, rising wages across China – especially minimum wages, which increased by an average of 24 percent last year – undoubtedly also played a role in recent increases to consumer spending in the countryside, where inflation and cost-of-living expenses remain relatively low compared with the China’s first and second tier cities.

Despite the end of the government’s subsidy program, China’s appliance industry will likely play an important role both in the development of consumer spend and the country’s continued economic growth as a whole. Home appliance manufacturing is one of the country’s key industries, boasting some of China’s most valuable brands (including Haier, Gree, Midea, TCL and Hisense) and employing a work force of over 1.4 million people as of 2009.


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