Xinhua Insight: Subsidies to boost eco-appliances market?

Once a largely honorary recognition of a fridge or TV's green credentials, home appliances' official energy-efficiency ratings are assuming more importance after the Beijing government promised firms subsidies if they score highly in the tests.

The Beijing Municipal Commission of Commerce made that promise earlier this month to makers of nine types of products, including fridges, air conditioners and water heaters.

It did not elaborate on the size of subsidy when announcing the policy, but manufacturers on its list say top-performing products labeled "grade-1" can have 13 percent of the prices refunded when sold in Beijing, and for grade-2 products, 8 percent.

The move has been hailed a step forward from the announcement by central government recently that it would favor energy-efficient appliances in government purchases and industrial projects.

China has been urging production of energy-efficient home appliances as it encourages domestic consumption and industrial upgrades and tries to make good on its commitment to fighting climate change.

It has pledged to cut carbon emissions per unit of GDP by 40 percent by 2020 from the 2005 level.

As well as shifting from fossil fuels to cleaner solar and wind power, the country is mulling tighter vehicle emission standards. According to a study by the Global Commission on the Economy and Climate, tougher energy efficient standards could cut annual global greenhouse gas emissions by 10 percent by 2030.

There is a precedent for the subsidy scheme. In 2012, the central government piloted a similar deal nationwide on fridges, air conditioners, washing machines, panel TVs and water heaters, though it ceased a year later amid concern of a market bubble.

LOWER PRICES

Wang Xiaoming, general manager of the Henan subsidiary of water heater maker Usaton, said a subsidy of 13 and 8 percent is a huge boon for the home appliance industry, given the products' low profit margins.

"If applied nationally, it will surely increase sales of energy-saving appliances and boost their production," Wang told Xinhua.

Despite its short-lived nature, the 2012 subsidy buoyed the market and encouraged energy conservation technology in industry, he added.

The company now produces mostly grade-1 and grade-2 water heaters, while products under grade-3 are already rare in China.

There's less of a fresh breeze blowing through the market for air conditioners though. A search on shopping website Tmall.com shows the best-selling air conditioners are mostly grade-3 products.

Interviews with customers also suggest the concept of energy efficiency alone may have limit appeal to price-savvy shoppers.

"When selecting an air conditioner, my priorities are still its brand, price, quality and after-sales service," said Liu Bo, a bank clerk who has just finished decorating his apartment in the central city of Zhengzhou.

"Energy saving is good, but I may still opt for a not so energy-efficient air conditioner if it is much cheaper," Liu added.

Liu agreed that the subsidy could increase the appeal of energy-efficient appliances, but that this depends on "how much it can reduce the price."

Some industry observers have argued that the most profound implications of the subsidy lie in raising eco awareness among Chinese shoppers and signaling future government support for energy-saving products. Endi