Consumers prefer to go green, even without the subsidies

The imminent expiry of China's home appliance subsidy policy is unlikely to have a major impact on the nation's "white goods" market, as such incentives reshaped customers' buying habits to seek even greener products, said a leading industry executive.

The end of the subsidy policy, to which the government allocated 26.5 billion yuan ($4.2 billion) to encourage the purchase of energy-saving appliances, has fanned market speculation that demand will nosedive when it ends on May 31.

But Wang Lei, deputy secretary-general of China Household Electrical Appliances Association, said that the market would continue to experience modest growth over the next few years, largely fueled by customers' desire to upgrade electronic gadgets.

"Although the market may not see the double-digit growth of a decade ago, emerging energy-saving technologies will unleash huge demand for higher-end products," she said.

According to Wang, the volume of China's white goods market, which generally comprises refrigerators, washing machines and air conditioners, was expected to reach 1.14 trillion yuan in 2012.

Customers' growing desire to go green will drive companies to address energy-saving issues and boost demand for high-quality key components such as compressors and frequency conversion technologies, she said.

"We are seeing more intelligence-driven technologies, and the quality of the materials used is improving," she noted.

Three complementary projects comprise the country's home appliance subsidy plan that is aimed at boost domestic consumption and curb pollution.

In addition to the energy-saving appliances subsidy, the home appliance replacement scheme - which ran from 2009 to 2011 - recycled used white goods and entitled buyers in nine provinces and cities to 10 percent discounts on televisions, refrigerators, washing machines, air conditioners and computers.

A third policy, "home appliances going to the countryside", expired in January. It guaranteed a 13 percent rebate offered by the government to boost consumption of big-ticket items among the nation's 737 million rural residents.

Some experts have argued that many people were enticed into buying home appliances as a result of the energy-saving subsidy, even if they didn't need or couldn't afford the items.

"But the energy-saving subsidy simply encouraged people to choose high-efficiency products, on the premise that they wanted to buy something in the first place," said Wang.

Driven by rebates to rural users, the market penetration of refrigerators across the countryside increased by 40 percent, washing machines by 30 percent and air conditioners by 20 percent over the past four years.

Roberto Campos, president of Embraco, a world leading refrigeration compressor maker which supplies almost every fridge maker in China, said that the nation's increasingly "demanding" customers have in effect become the driving force of technological upgrades.

He said the pickup in sales of multi-door refrigerators with bigger internal space best illustrates how the pursuit of energy efficiency reshuffled the market landscape.

"Because we manage to use less space in the compressor, we can effectively save space in the refrigerator, which makes our products popular," Campos said.

The upcoming expiration of the subsidy caused a nationwide buying frenzy for energy-efficient appliances. In addition to the government subsidy, vendors are busy offering extra discounts to lure more customers.

A Suning outlet in Shanghai is offering additional discounts for air conditioners and TV sets, so that customers might enjoy combined discounts by the end of May.

It remained unclear whether similar policies may be offered in the future, so salesmen are suggesting that customers snap up green appliances as soon as possible.

Jiang Yinan in Shanghai contributed to this story.