Farmers will be given subsidies for buying household electric appliances in a bid to stimulate sluggish consumption in rural areas and reduce a rising trade surplus, officials said over the weekend.

A pilot phase of the plan will be carried out in the three major agricultural provinces of Shandong, Henan and Sichuan - farmers who buy color TV sets, refrigerators and mobile phones can get 13 percent of their purchases subsidized, the Ministry of Finance said on Saturday.

A total of 197 types of the three categories of appliances specially made for the rural market will be available till May next year, with air-conditioners and washing machines included in the future, ministry official Zeng Xiaoan said.

So far, the government has signed cooperative agreements with 15 household appliance makers - including Haier, Hisense and Changhong -- and 21 dealers.

"The move is meant to give farmers more benefits and divert more government expenditure to the consumer sector from fixed asset investment and the export industry," Zeng said.

While consumer spending is playing an increasingly important role in China's economic growth, investments and exports are seen as bigger contributors to growth. The country's vast countryside, with a population of 800 million, is still thought to have huge market potential.

Official figures show rural regions lagging nearly 20 years behind urban areas in terms of the use of major home appliances such as TV sets, refrigerators and washing machines.

By 2010, the plan to subsidize the purchases of electric appliances is expected to narrow the gap to 10 years and increase consumption in rural areas by 100 billion yuan (US$13.6 billion) a year, Zeng said.

"If one more percent of the rural families buy TV sets priced at 1,000 yuan each, it means 2.5 billion yuan," he said.

The program is essential for expanding domestic consumption as "raising farmers' income remains difficult and the gap between rural and urban areas is large", he said.

To improve farmers' livelihoods and expand rural consumption, the country is also spending hundreds of billions of yuan to extend the country's electricity grid to every remote village by 2010.

China is the world's largest producer and exporter of household appliances. Half of its production of the appliances is sold abroad every year, Zeng said.

Color TV sets, refrigerators, washing machines, air conditioners and mobile phones combined contributed US$50 billion, or 28 percent, to China's trade surplus last year, up 45 percent from a year earlier.

Selling more household appliances to rural families will help the country reduce the trade surplus and ease the problem of overcapacity for many manufacturers, he said.

Zeng added that by 2010, the program will divert 20 percent of the exports to rural markets and reduce the trade surplus by US$10 billion annually.

(Xinhua News Agency December 24, 2007)