The three-day Dragon Boat Festival holiday has become a sale season for home appliance makers as they use the break to off-load a backlog of stock caused by the struggling export market.

Many producers, such as Haier, Panasonic and Samsung, lowered prices during the holiday despite higher material costs. Export volume of home appliances dropped 2.6 percent in the first two months of this year partly due to the appreciation of yuan, higher metal prices and labor costs.

Meanwhile, air conditioner sales to the United States, the biggest appliance export market for China, dropped 40 percent.

The slowdown in consumption means some air conditioner makers have had to reduce their inventories in the short term as the country will also launch a stricter energy-threshold for the products from next year - a move expected to phase almost 80 percent of air conditioners out of the market.

"Air conditioners, washing machines and refrigerator makers were very eager to offer discounts during the Dragon Boat Festival," said Ling Guosheng, vice president of Suning Appliance Co, the country's second-largest appliance retailer.

Many air conditioner makers can no longer bear risks of high inventories and chose to lower prices for a quick turnover, the retailer said.

Gome Electrical Appliance Holdings Ltd and Suning began sales promotions for air conditioners this month and Suning said it would offer stored air conditioners and drop the average price by 15 percent compared with May.

Some analysts have suggested appliance companies set up plants in overseas regions to solve the export problem.

Haier Group has set up nine R&D centers, 15 information centers and many production bases for refrigerators overseas.

"Haier will produce one-third of its refrigerators in overseas plants," said Liang Haishan, vice president of the group.

In 2007, the group's output of refrigerators totaled 10 million sets, with about 3 million sets made in overseas plants.

(Shanghai Daily June 10, 2008)