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Rural subsidy plan may spur US$14b in demand

CHINA'S 15-billion-yuan (US$2.19 billion) subsidy plan on home appliance purchases in rural areas this year may spur 100 billion yuan (US$14 billion)in additional demand, Morgan Stanley said.

The amount equals to about 13 percent of annual industry revenue, it added.

''The environment for rural market development is improving,'' the investment bank said. ''The scheme could generate other benefits to boost rural home appliance demand in the long term.''

Approximately 55 percent of China's population and 47 percent of Chinese households live in rural areas, where households are not able to afford home appliances unlike their urban peers.

Meanwhile, rural per capita net income has posted a 13 percent compound annual growth over the past five years, according to the report.

The rural home appliance subsidy scheme is a four-year government plan to refund 13 percent of the selling prices of designated products including refrigerators, washing machines, air conditioners, TV sets, handsets, and other small appliances. Every rural household is entitled to a subsidy for two products.

The Ministry of Commerce said earlier it expected the subsidies to boost spending by 150 billion yuan this year.


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