Rural home appliance subsidy expires

China's stimulus program for home appliance purchases in rural areas expires Thursday, with experts saying the program should not continue as it does not mesh with the country's plans to encourage industry upgrading and technological innovation.

The program, which was initiated in December 2007, offers rural consumers subsidies equal to 13 percent of the purchase price of home appliances. It has been part of the government's efforts to stimulate domestic consumption amid the global economic downturn.

Under the subsidy program, home appliance sales in the country's rural areas amounted to 298 million units and 720.4 billion yuan ($115.7 billion) from 2007 to the end of 2012, according to the latest data from the Ministry of Commerce.

"The program has not only helped domestic home appliance manufacturers survive amid the weakening export market, but also boosted rural consumption of home appliances," said Zuo Yanque, brand director of market research firm China Market Monitor Co.

Before the program, in 2007, every 100 rural households owned 26 refrigerators, but the number rose to 61 units by 2011, he said, citing data from the National Bureau of Statistics.

But experts said the effect of the rural subsidy program has weakened over the past year due to saturation in rural markets, and some companies said the expiration of the program will not affect their business.

"We have prepared for the expiration of the program, and are currently turning our focus to the ongoing subsidy program for energy-efficient home appliances," said the spokesperson for air-conditioner maker Chigo, as quoted Wednesday in the Beijing News.

In June 2012, China launched a one-year subsidy program for buyers of five types of energy-saving home appliances such as air conditioners, refrigerators and flat-panel televisions, as part of the country's efforts to save energy and stimulate domestic demand.

Zuo said small home appliance companies will be affected more than large ones by the expiration of the rural subsidy program.

"With neither the subsidy nor well-known brands, they will lose their appeal to rural consumers," he said.

The expiration of the rural subsidy program marks the end of a raft of stimulus policies, including an old-for-new home appliance subsidy program, launched amid the global financial crisis.

But industry experts said there is no need for the government to continue the rural subsidy program.

"The rural subsidy program sets a low standard for appliances and does not encourage technological innovation. For instance, many low-end home appliances such as CRT TV sets have been dumped into the rural market over the past few years," said Liang Zhenpeng, a Beijing-based independent home appliance analyst.