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Shanghai's rural benefit from electronics policy

By Zhou Yan (China Daily)
Updated: 2009-05-11 07:59

The subsidy program may trigger rural consumption of 920 million yuan. [CFP]

Xue Juanjuan and her fiance have carefully prepared a long shopping list before stepping into an electronics chain in Shanghai, in the hope of racking up great deals via an appliance rebate program targeting rural residents such as them.

For the 22-year-old, who wants to buy some big-ticket items like a new refrigerator and an air conditioner for her new home in Jiading district an outlying area near Shanghai, about 20 km away before getting married in June, the government-backed appliance rebate scheme is her early wedding gift.

Just a few weeks ago, the municipal government of Shanghai launched the much talked-about subsidy program called "home appliances going to the countryside" close on the heels of 14 other cities and provinces around the country, which started the program last December.

Related readings:  Subsidies to spur rural spending  Rural home appliance sales surge in March on subsidy scheme  China details auto stimulus plan for rural residents  Suning bets big on rural expansion

The program in Shanghai, is expected to boost consumption among 1.74 million farmers and others living in the city's 14 districts and counties, as well as to alleviate pressure on manufacturing firms.

"The program is expected to stimulate rural consumption of around 12 billion yuan this year in Shanghai by giving 13 percent discounts on 1,600 types of low-priced home appliances," said Zhang Xinsheng, deputy director of Shanghai municipal commission of commerce (SMCC).

The designated products, which have been marked for the subsidy include color TVs, refrigerators, washing machines, mobile phones, computers and air conditioners, are capped at prices between 600 yuan and 3,500 yuan, and have been allocated to 370 sales outlets across the city.

According to the Ministry of Commerce's estimation, approximately 10.4 billion yuan has been put in to the government-funded project in 2008.

The four-year scheme is expected to trigger rural consumption of 920 million yuan, stimulate the growth of retail sales of consumer goods by 2.5 percentage points in rural places, and reach sales of 480 million units for home appliances across the country in four years.

"The potential for rural consumption is huge, and will help offset the persistent export slump," Zhang said.

Per capita net income for the country's 721 million rural residents reached 4,761 yuan in 2008, up 8 percent from previous year, according to figures from China's statistics bureau.

Yet their purchase of home appliances has lagged behind that of urban areas.

Sun Yiding, spokesman for Gome, the largest domestic electronics retailer, has said that due to the vast rural population, the demand for color TVs and refrigerators among rural residents may hit 100 million and 145 million units, respectively, within a decade.

"I had decided to hold cash until the crisis passed. But most product prices I've looked at in the store are within our budget. I plan to purchase a mobile phone which costs around 900 yuan for my daughter, if she can get a good score for college this year," said a 40-something woman surnamed Cheng from Qingpu district, in the western suburbs of Shanghai.

But Cheng added that she can only afford a few products at a time, since the combined price of big-ticket items was too high.

"Thankfully, the scheme will last for four years. But it looks complicated to get the subsidy, isn't it?" Cheng said.

So far, the average time to get the subsidy rebate after submitting applications has yet to come out, but complaints on lengthy procedures have mounted in other cities and provinces that had pilot programs.

Participating retailers and manufacturers, caution that products allocated to different cities should be varied in accordance with diverse demands and consumption power.

"The prices of products sold in Shanghai should have higher rates to meet the rigid demands of local people and their better living conditions," said Xin Kexia, general manager of Gome's Shanghai branch, suggesting that the price for color TVs, which are presently capped at 3,500 yuan nationwide, can be lifted to 4,500 yuan in Shanghai.

He added that Gome Shanghai has a narrower line of appliances because even the local rural people have better purchasing power than their counterparts elsewhere in the country. And they do not carry appliances that are at the lowest-end.

Zhu Jiagui, deputy general manger of Gome's rival Sunning Appliance, agreed. "The average price of our products sold in Shanghai is 1,600 yuan, 400 yuan higher than the average price we sell across the country."

"The policy could be better if adjusted to different city conditions," he said.

The rebate policy's intentions to boost rural consumption and mitigate weak home appliance makers, is noble. But complaints about the quality and piracy of products and unsatisfactory after sales service has not added to good reviews in cities and counties where the program has already been in force.

The program still needs to be polished before it can materialize its big sales ambition.