The rural subsidy program

China's subsidy policy for home appliance products in rural areas is intended to encourage farmers to buy home appliance products, by giving them a 13 percent direct subsidy for these products.

In December 2007, the program started on a trial basis in three provinces. In February 2009 it was implemented nationwide, and the scope of subsidized products expanded from color TV sets, refrigerators, and mobile phones to a total of nine products including PCs.

Open public tenders were invited for the selection of subsidized products and sales channels and requirements were set in terms of product price limits and specifications. All the companies that conformed to these requirements were allowed to participate in the tenders. Considering new product generation, new tenders are likely to be invited each year to keep the products up-to-date.

In January 2009, regulations were set for tenders in the first batch of 16 provinces for the PC subsidy program in rural areas. Each company could only bid for 15 product models, not limited to desktop or notebook PCs. The price limit for products was 3,500 yuan. All the products had to be equipped with legal versions of operating systems.

In March 2009, a total of 14 computer makers including Lenovo, Dell, HP, Acer, Founder, Haier, Great Wall, TCL, Tongfang, Inspur, Hasee, Beijing Manjiang, Malata and Southwest won the first round of bids. Taiwan's Asus and BenQ did not make the cut. The tender will be valid for one year and will initially cover 13 provinces in China.

On May 14, the Chinese government announced that 17 companies had won the second round of bids, with Taiwan's Asus, Nanjing Fuzhong, Blue Star and Hedy winning and Inspur losing out. The tender will soon be expanded to cover all the provinces in China.

Research firm Gartner expects approximately 800,000 units will be generated as incremental shipments this year. IDC expects the program to create additional shipments of 1.5 million units in China.

(China Daily 05/18/2009 page12)