7b yuan subsidy for appliance, car purchases

PUBLISHED : Wednesday, 20 May, 2009, 12:00am
UPDATED : Wednesday, 20 May, 2009, 12:00am

In its latest effort to boost domestic consumption, Beijing announced plans yesterday to provide more subsidies for purchases of cars and home appliances.

The State Council said at an executive meeting that, for the first time, it would allocate 2 billion yuan (HK$2.27 billion) in subsidies to encourage consumers to replace old home appliances.

It will also increase subsidies for replacing old cars to 5 billion yuan this year from 1 billion yuan.

The measures followed nationwide campaigns such as 'home appliances down to villages' and 'cars to villages' rolled out earlier this year.

Beijing is hoping to stem the economic slump by spurring domestic consumption as the country's exports remain dampened by shrinking global demand.

The State Council said the previous measures to encourage consumption in rural areas had helped to drive consumption and create jobs.

'To further stimulate domestic consumption ... it is necessary to roll out car and home appliances replacement subsidy schemes,' the State Council said, adding the schemes would help improve energy consumption efficiency and environmental protection.

It said the home appliance replacement scheme would begin trial runs in Beijing, Shanghai, Tianjin, Fuzhou and Changsha, as well as in the provinces of Jiangsu, Zhejiang, Shandong and Guangdong. It did not say when it would be expanded to the whole country.

During the trials, a consumer who replaces one home appliance, such as a television set, refrigerator, washing machine, air conditioner or computer, will get a rebate worth 10 per cent of the new item's selling price.

'This policy is unprecedented, as such rebates were previously given only by producers. It is definitely good news to home appliance makers,' said a spokesman for Sichuan Changhong Electric Group, the mainland's top maker of televisions and other electronic appliances.

Suning Appliance, the top retailer of appliances, said it would 'actively' take part in the scheme and estimated that the new policy would spur additional home appliance purchases by 20 billion yuan.

With the expanded subsidies, the mainland vehicle industry was also expected to register higher sales, analysts said.

According to the China Association of Automobile Manufacturers, total vehicle sales on the mainland climbed 25 per cent to 1.15 million units last month.

The increase followed the unveiling of a government support package that included cutting sales tax on cars with engine capacities of 1.6 litres or less and providing subsidies to buyers in the countryside.