China’s Commerce Ministry plans to expand its home appliance and electronics trade-in scheme beyond the nine provinces currently taking part in the pilot program. In June 2009 Beijing earmarked US$293 million in subsidies for the “old-for-new” scheme – introduced as part of the economic stimulus package – which provides a discount of up to 10% off the price of a new appliance when trading in an old one.
Shoppers can save up to US$58 on television and computer purchases, US$51 on air conditioners, US$44 on refrigerators and US$36 on washing machines. As of February 4, the nine provinces involved in the scheme had generated sales of US$3.4 billion, or one third of total home appliance and electronics sales.
The sector as a whole has benefited considerably from the scheme. Suning (002024.SH) and Gome (0493.HK) both feature on the program’s designated retailer list, while white goods makers including Midea (000527.SH) and Haier Group (1169.HK, 600690.SH) booked first-half net profit increases of 18.63% and 27.15% respectively. They attributed the growth to the government’s preferential policies, which also included discounts on domestic appliances and consumer electronics in rural areas.
However, with the scheme due to terminate on May 31, firms must be wary of relying on government policy alone as they seek to maintain strong revenue growth going into the second half.