As many as 600 million home appliances worth about 1.6 trillion yuan (US$234 billion) could be sold in rural China by 2012 as government subsidies expand to cover more people and more products, the Ministry of Finance (MOF) estimated Wednesday.

Starting on Feb. 1, all of China's more than 700 million farmers became eligible for subsidies equal to 13 percent of the price of designated home appliances. The subsidy was originally offered in a pilot program in three provinces in 2007.

Subsidies were expanded to 12 provinces in December 2008 and four more items were added to the list: motorcycles, personal computers, water heaters and air conditioners. Originally, the subsidies covered such items as color TVs, refrigerators, washing machines and mobile phones.

China is counting on the policy as a major means to stimulate domestic demand as exports weaken amid the financial crisis. The policy "could enhance rural consumption as well as better farmers' lives," according to Finance Minister Xie Xuren.

Increased sales could also help home appliance makers upgrade their business, he added.

Narrowing the gap

"I never expected to get money for buying home appliances," said Zhu Xiaozhan, villager from Zhongmou County in Henan Province. He bought two color TVs and one refrigerator before the Spring Festival. Of the total cost of about 3,800 yuan, more than 500 yuan was covered by subsidies.

"The policy helps us farmers get good stuff at a lower cost," Zhu said, adding that he might also buy a motorcycle and a washing machine.

Besides spurring domestic demand, the subsidies could also help China narrow the gap between urban and rural ownership of home appliances.

Take personal computers, for example. There were 53.8 sets per 100 urban households in 2007, but the figure in rural areas was 3.7, according to statistics from Ministry of Industry and Information Technology (MIIT).

In Henan, one of the three trial provinces for subsidies (the others were Shandong and Sichuan), sales of refrigerators and color TVs doubled in 2008 compared with 2007. Total sales of designated appliances reached 1.6 million units worth 2 billion yuan.

Yang Zhou, a provincial finance official in Henan, forecast sales of eligible appliances would reach 5 million items worth 10 billion yuan during the next three years or so.

Joint government efforts

Wang Baoan of the MOF described the work of extending the subsidies as "a fairly difficult task" that involved millions of farmers.

The MOF has asked 10 ministries including Commerce and MIIT, as well as domestic home appliance associations, to work together to ensure efficient production, distribution and sales of eligible products. The first meeting of these bodies was held in January.

A joint supervision system has been established to make sure farmers get their subsidies. "We will launch the first inspection in March of the home appliance suppliers and local government departments," said Wang.

"Further measures are needed to support policy implementation, such as regulations covering home appliance companies to guarantee distribution and after-sale services," Wang said.

(Xinhua News Agency February 13, 2009)