Four months after China expanded its "home appliances to the countryside," program nationwide, appliance manufacturers are seeing signs of hope as the subsidy program stirred up sales in the countryside and partly offset the impact of plunging exports.

China, the world's largest producer and exporter of household electric appliances, is home to more than 120,000 household-appliance makers of various sizes. But since late last year, the industry, like the country's other export-oriented sectors, slid into crisis amid slumping demand following the global economic downturn.

Figures from the Ministry of Commerce showed that China's export of household appliances and electronic products last year were worth about US$72.5 billion, a year-on-year increase of 3 percent, much less than double-digit growth achieved in years before 2008.

For the color TV sets, the export dived from 20.3 percent year on year from the second quarter last year to merely 0.6 percent in the fourth quarter. In the first quarter of this year, China's export value of color TV sets came to US$1.67 billion, declined by 18.4 percent at an annualized rate.

"Owing to falling overseas demand, China's household appliance industry is facing very tough times," said Mei Xinyu, a researcher at the Ministry of Finance (MOF). As one of China's key industries-- which employs a large number of workers, including migrant workers -- it was imperative to help appliance manufacturers tide over the current difficulties, he said.

According to an industry report jointly released late last month by the National Bureau of Statistics and the Beijing-based Economic Daily, more than 1.4 million people work in China's home appliances industry.

Under the strategy of boosting domestic demand to secure economic growth, China on December 1 expanded the subsidy plan from the original three provinces to 12 provinces and provincial-level regions.

In December 2007, China launched the subsidy plan, called "home appliances to the countryside" plan, under which the government provided a 13-percent subsidy to farmers who buy designated brands of color TV sets, refrigerators and mobile phones in the three agricultural provinces of Shandong, Henan and Sichuan, as well as Qingdao City.

The subsidy program was nationally adopted as of February 1. It was running alongside other campaigns, such as "automobiles to the countryside", to boost domestic consumption at a time when foreign demand for China's exports is slumping.

Nine kinds of household appliances are included in the expanded subsidy program -- color TV sets, refrigerators or freezers, mobile phones, washing machines, computers, water heaters, air conditioners, microwave ovens and electro magnetic cookers.

Each rural household was allowed to purchase two items from each category and could claim the subsidies at their township government finance agencies in 15 working days.

The MOF said in March that the 2009 budget from the central government for this subsidy program was 20 billion yuan (US$2.93 billion), which would help increase household appliances sales by more than 100 billion yuan.

Premier Wen Jiabao said during his inspection tour in January to China's largest household appliance maker Haier that the subsidy program would last at least for five years. The policy could help boost household appliances sales by at least 500 billion yuan.

Industry analysts said the "home appliances to the countryside" campaign came after several years of rapid income growth among Chinese farmers. Many have the need to buy household appliances.

The scrapping of the 2,600-year-old agricultural tax in 2006, subsidies to farmers for purchasing better strains of seed and farm machines, and other government measures had been helping Chinese farmers raise their income. In 2008, the per capita net income of about 800 million rural residents surged by 8 percent to hit 4,761 yuan.

China had also stepped up efforts to build a better social security system for farmers. The New Rural Cooperative Medical Care System, introduced in 2003, has now covered part of the medical cost. The burden of school tuitions for rural kids also had been eased.

(Xinhua News Agency June 1, 2009)