Government subsidy means that electricity prices in China are low by world standards, but at the same time rural areas are disadvantaged by unreliable delivery and arbitrary price increases.
The State Development Planning Commission has drawn up a blueprint to give the peasants more electrical power. The State Domestic Trade Bureau also stresses the importance of a reliable and cheap power supply, but powering up the rural market won't be cheap. The State Power Corporation announced in September that it would invest more than Yn l OObn (US$12bn) over the next three years on upgrading power grids in rural areas. The project is to involve more than 2,000 counties.
Improving the network
The vast countryside represents a largely untapped market despite the growth in income levels over recent years. Many of the household items on a peasant's wish-list, such as televisions, radios and air conditioners, are dependent on electricity. In big cities television ownership is 97 per cent, compared with 27 per cent in rural areas.
Connectivity to the power grid is high. Statistics from the State Development Planning Commission show that 95.5 per cent of all rural households had access to the power grid in 1997. Consumption, however, is very low ?less than 60 KWh a year, which amounts to only one-eighth of city dwellers' consumption.
There are many reasons for low usage levels: the building of the network is lagging behind schedule, equipment is outdated and management is sloppy. This has led to a highly uneven service, extensive wastage and high prices. Power companies usually take care of building the high-voltage trans-mission network out of a centrally-allocated budget. Construction of the low voltage power grid, on the other hand, is largely financed by the peasants themselves, who often resort to cheap, outdated and some-times dangerous equipment. With no specifications to guide the procurement process, service quality is Power; highly uneven. Outdated equipment, high wastage and inefficient management all lead to high prices, which the peasants are unable or unwilling to pay.
The State Development Planning Commission has now drawn up plans to tackle rural electrification. The government's guiding principle is summarised as `unified planning, unified standards, clear objectives and step-by-step measures'. Bank loans, local government spending and company and personal contributions will all be pooled to guarantee adequate financing.
In an article in Economic Daily in July, Bao Xuding, a vice-chairman of the State Development Planning Commission, argued that the power companies should be prohibited from using their monopoly position to reap unreasonable profits and harm the interests of peasants. That might prove difficult since he also called on the power companies to handle the wholesale supply of electricity in addition to managing the supply to consumers themselves. The objective is to have clear pricing and accounting rules to fore-stall overcharging.
Rationalising and improving the rural power supply is a tall order, but the potential rewards are huge. Without reliable and cheap electricity, it is virtually impossible to stimulate the rural economy and in doing so boost incomes.
The State Domestic Trade Bureau sent 76
divisional and bureau directors for a three-week inspection tour of 12 provinces and municipalities in May and early June to study rural markets and the consumption pattern of rural residents. They discovered an uneven state of development. In 1997 the average rural household net income was Yn2,090, but while the rural population in Jiangsu earned on average Yn3,269, the figure for Inner Mongolia was only Ynl,780.
The eastern provinces close to the coast are the most prosperous, and wealthy peas-ants are buying large-screen televisions, mobile phones and even cars. Their counter-parts in central regions are discovering washing machines, colour televisions and refrigerators. In the west, peasants are still spending their money on daily household items.
The portion of the budget rural consumers spend on food, clothing and articles of daily use decreased from 83 per cent in 1980 to 62 per cent in 1996 while productive consumption is on the increase. On the farm, more and more peasants are buying high-quality fertiliser, pesticides and tractors. Finally, demand for a whole range of services such as medical care and telecommunications is surging.
Retail sales at or below the county level amounted to 38.9 per cent of the national total. In certain areas the proportion drops to 26 per cent. These figures show that there is a huge rural market waiting to be tapped. In 1997 only eight per cent of rural households possessed a refrigerator, 27 per cent a colour television, 21 per cent a washing machine and 11 per cent a motorcycle.
Market information and after-sales service are below national standards in the countryside. People are left with inadequate information to make an informed choice. Moreover they tend to spend a large amount of money, saved over several years, on a few big-ticket items on special occasions such as a wedding or the building of a house.
Counterfeiting is also more prevalent in the countryside than in the cities. This means that if a product starts to malfunction, the 1owner has little or no recourse.
Manufacturers are advised to adapt their products to the rural market. Urban consumers might favour the latest models but rural residents prefer cheap, functional and easy-to-use appliances. More often than not they have difficulties deciphering arcane user manuals.