News of the government's recent offer to grant a 13 percent subsidy for household appliances has thrown Chinese farmers into a crazy scramble for televisions, refrigerators and mobile phones -- the three product categories on the preferential policy list.

Crazy buying

"I bought a 29-inch color TV set made by Sichuan Changhong Electric Company. It cost me only 1,499 yuan (207 U.S.dollars)," said Li Yuanhong, a 57-year-old farmer in Yongxing, a townhip in the southeastern Sichuan Province. "I hope the government would also grant subsidies to LCD TV." In front of home appliance shops, clusters of farmers crowded about the shop assistants. Some were discussing with their spouse while others were carefully taking out the money but still grasping it in their rough hands before giving it to the assistant. "The TV sets are great. Sharp images make them worth the money. Look, I just bought one for only 668 yuan," said 72-year-old Xu Guiling excitedly. "It will be easier for me to kill time when my children are making their living in big cities."

Wang Xiaoming, owner of a small appliance shop named Minghong, called the government's plan to stimulate rural spending "inspiring". "Six televisions, four refrigerators and one icebox sold out within half a day. It was common to have no appliances sell out for several days before the subsidy policy was introduced."

Sales figures for Sichuan Changhong Electric Company revealed more than 2,500 appliances were sold to farmers on Jan. 15 -- the first day on which the province started to implement the preferential policy.

"The sales figures of our more than 1,000 distributors are on the rise. The purchasing power of the rural population is amazing, " said Deng Xiaohui, the company's marketing manager.

Special presents

For farmers living in rural areas, the rebate offer was considered a surprise and a special present from the government with the Spring Festival, the country's most important traditional holiday, approaching.

The Ministry of Finance declared last month it would offer farmers a 13 percent subsidy on the prices of home appliances. This was done to stimulate sluggish rural consumption and improve their life quality.

Huge foreign direct investment and fast-growing exports have long been major contributors to China's economic development. As the negative impact of the U.S. subprime mortgage crisis overshadows the global economy, the Chinese government has started to attach more importance to tapping the domestic consumption, especially in the unexploited rural markets.

China's Minister of Agriculture Sun Zhengcai said recently in a report to the country's top legislature that per capita net income for the 900 million rural residents was expected to surge by seven percent to stand at 4,000 yuan in 2007.

"The urban market for household appliances has been saturated. Continuous price wars in cities are tragic. It is the time for us to cast eyes to the rural markets, where farmers want high quality products," said an expert with China Agricultural University on Sunday who preferred to remain anonymous.

"China has more than 50,000 townships and the number of rural households account for 68 percent of the total families. As of this month, the rural areas have a total purchasing power of 250 billion yuan for home appliance.

Such potential spending power was obviously not lost on the government as its subsidy offer touched the pulse of the market.

A pilot program to test this was initiated in three major agricultural provinces of eastern Shandong, central Henan and southwestern Sichuan. Color TV sets, refrigerators and mobile phones were the three categories of appliances on the preferential policy list and each rural household could purchase two items from each category.

In the pilot, China had signed cooperative agreements with 15 leading household appliance makers, including Haier, Hisense and Changhong.

The three listed manufacturers all saw their share index rise recently. The government's subsidy policy was considered to be the direct driving force behind the booming business.

"The government subsidies give rural residents great incentives to buy and it also provides appliance makers excellent opportunities to make breakthroughs in rural areas," said Wang Zhen, a Guotai Junan Securities analyst.

Customized design and guaranteed after-sale service

The major concern of the farmers before the pilot was implemented were after-sale service and whether the appliances were out-of-date.

Their worries, however, proved unnecessary.

"All the goods have just rolled off the production lines. Actually, we promote the performance of products to make sure the images on the televisions will not fluctuate even when the voltage is unstable," said Deng Xiaohui, Sichuan Changhong Electric Company marketing manager.

Like Changhong, Meiling Co. Ltd has also made some considerations to better its customers' lives. "They made a mouse guard on the back cover of refrigerators so that mice can not build nests there. It's a subtle change but it will extend the life of the refrigerators in rural places where there are more mice than in cities," said a shop assistant surnamed Wu.

Zhang Xing, Qingdao Aucma Group general manager, said his company was reaching out to rural areas and had so far established more than 10,000 sale terminals in country areas of the three pilot provinces. "Aucma will send not only products but also fashion, energy saving and the best services to the countryside."

The Ministry of Finance said the central and local governments would pay 80 and 20 percent of the subsidy, respectively. An insider said recently that the central and local governments' budget of the pilot had reached ten billion yuan.

In Shangdong, one of the pilot provinces, 178 million yuan in subsidies from the the central and provincial government had been allocated to counties and townships in advance. A villager in the city of Zhangqiu who bought his first refrigerator received a 241 yuan subsidy.

"Money is not a problem. The more villagers who buy, the more subsidies we would like to pay," said Yu Guoan, Shangdong Provincial Department of Finance deputy director.

The pilot ends on May 31. If it continues to sail smoothly, it will be spread throughout the country as all the rural population and more appliance makers are expected to benefit from the preferential agricultural policy.

(Xinhua News Agency January 21, 2008)