Prices of air conditioners sold on China's mainland will likely cool by nearly 30 percent this year as a result of high inventories after rising for five straight years, industry analysts said on Tuesday.

But sales are expected to hardly change from last year as the government's subsidy program for rural areas is set to offset the impact of the financial crisis, experts said.

Around 28 million units of air-conditioners are expected to be sold in the country, said Jin Ming, executive president for marketing at Suning Appliance Co.

"The price will fall to almost the same level as five years ago because of plunging raw material costs and slumping demand both at home and abroad amid the global financial crisis," said a report released by Suning recently.

Producers are eager to boost capital flow and to meet new energy requirements.

The new energy efficiency standard, which aims at eliminating low-efficiency products with higher restrictions on energy consumption, is due to take effect from next month. Analysts believe the new standard will trigger another round of consolidation among firms as it did in 2003, which forced out as much as 75 percent of air conditioning brands.

"The new standard will accelerate the industry restructuring and firms with creative and cost management capabilities will boost their market share in this round," Shanghai Securities Co said.

Leading producers including Whirlpool, Panasonic, Haier, Hisense and Midea have agreed to offer nearly 1 million discounted air conditioners valued at 3 billion yuan (US$440 million) to Suning in the next several months. Discounts could go as high as 30 percent.

The Ministry of Finance said earlier that government subsidies are set to spark spending by 1.6 trillion yuan (US$234 billion) over four years. Air conditioner sales will reach 600 million units during the period, it said.

(Shanghai Daily February 25, 2009)