Offering 13% subsidies to rural residents on purchases of home appliances is seen by Beijing as a means to boost domestic consumption. Even if the scheme makes little difference to the overall economy, at least the piles of unwanted inventory – washing machines, refrigerators and TVs for which there is no export demand – will be a little smaller.
When asked about the scheme, Xu Bing, a farmer from Anhui province who now works in a factory in Shenzhen, said he would buy a computer. He believes he can turn information into cash flow.
Xu is the type of customer being targeted by computer manufacturer Lenovo, which has launched a new product line under the subsidy program. Xia Li, vice president of Lenovo Group, described it as part of the company’s "long-term commitment and investment in rural markets in China."
The 15 models, priced US$368-515, feature keyboards with a Chinese character layout and run on a wide range of electric voltages to compensate for the unreliable power grids in rural areas. The computers also come with agri-business software for farmers to track market demand for their crops. Lenovo hopes to reach 5 million rural households through the program.
Computers are not for everyone. Liu Huaxin, an aquaculture farmer who lives near Wuhan, said the first purchase he’d make would be a washing machine. That’s music to Haier’s ears. The appliance maker offers 70 of its models under the subsidy program. It currently has more than 6,000 of its rural stores offering subsidized products and is even offering same-day home delivery in some areas.
The program may seem like welcome news for Chinese companies struggling with the downturn, but the response to the program that CHINA ECONOMIC REVIEW received from farmers indicates appearances may be deceiving.
Of those farmers that could afford to buy new appliances, most were just taking advantage of the subsidies to make purchases earlier than previously planned – there was no conspicuous consumption. Villagers also said they would only purchase a product if it met their quality standards. Otherwise, they would postpone a purchase rather than buy something of lower quality.
Getting those rebates also seems to be a problem. None of the farmers that spoke to CHINA ECONOMIC REVIEW had received the rebate, nor were they told when they would be obtaining them.