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December 11, 2009

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Home » Business » Consumer

Tweak in measures a surprise strategy

SHARES of electric appliance makers surged yesterday after the central government surprised the market by tweaking policies that were introduced to boost consumption in the home appliance industry and pledged to maintain them in 2010.

Home appliance sales may be boosted by 150 billion yuan (US$22 billion) next year which will enhance the profitability of the appliance makers for the next three years under the policies, according to an analyst.

In deciding to continue with the subsidies for rural purchases next year, the State Council, China's Cabinet, has also refined the policies by raising significantly the price limit for products which are eligible for the subsidies. It, however, has not released the price range yet.

The government has also decided to include more types of products in the subsidy program, including 42-inch liquid crystal display TVs, three-door refrigerators and rotary washers.

Hisense Electric surged 5.7 percent to 24.34 yuan and Sichuan Changhong Electric Co jumped 3.5 percent to 6.55 yuan yesterday.

"The higher price caps mean the government will hand out more money to spur demand and stimulate domestic consumption, which beat market expectations," said Fang Xin, an analyst at Guotai Jun'an Securities Co. The government now refunds 13 percent of the product price to buyers who trade their old appliances for new ones.

"Rural sales could be increased by 150 billion yuan in 2010, jumping more than 50 percent from this year," added Fang.

"The government seems to spare no effort to raise home appliance ownership in rural families to the level of city families in 2000 by the end of 2012," said Wang Xiaoying, a Sinolink Securities Co analyst, adding listed electric makers' profit may grow rapidly in the next three years.


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