China counts on rural markets to boost economy

China kicked off Monday a four-year scheme to subsidize the selling of household appliances to its massive rural market, as part of its effort to shore up domestic demand and ease the impact of global economic depression.

The stimulus plan, called "electronic products go down to villagers", is targeting more than 200 million rural households, and expected to generate 920 billion yuan in sales (US$131 billion) over four years.

This initiative has been on trial since late 2007 in the populous Shandong, Henan and Sichuan Provinces as well as Qingdao city. The 20% subsidies offered by the government have prompted a rise of 40% in sales in these areas. China plans to roll out the successful scheme in every rural area by February 2009, bringing with it a lower subsidised rate of 13%.

China's three decades of reform and opening-up has dramatically improved the lives of villagers. As a result, an average of 8 million impoverished people in China shook off the poverty annually from 1978 to 2007.

Purchasing power in rural China has gradually risen. Nowadays it is commonplace to see villagers using mobile phones and computers, and even driving cars. These luxurious goods were not at the top of their priority during the 1990s. What available cash they had was used to purchase color TVs, fridges and washing machines. The symbols of wealth among rural families in the 1980s were bicycles, sewing machine and watches.

Televisions have played a far more important role than other consumer white goods as it helps rural China get to know the outside world. When the first televisions arrived in rural parts of China in the mid 1970s, they created great excitement. Often, they were communal television sets, bringing audiences of excited villagers together to share a completely new experience. At that time, there was only one television set available for every 1,600 people in rural China.

Today, 95% of rural families possess a television. This contrasts with urban families, a third of which own more than one television; Urban ownership of fridges is three times that of rural communities; and the proportion of washing machine users is double.

The four-year national plan aims to increase the use of household appliances in rural China to the 2000 level in urban areas.

China-brand manufacturers have actively engaged in the plan. Foreign brands like Siemens, Panasonic, Nokia and LG also set to join their Chinese counterparts and explore the vast business opportunities in China's rural areas.

The knock-down effect of the financial crisis has taken a toll on China's economy, which relies heavily on exports of a large amount of household appliances. In one example, growth of its colour TV exports alone during the 3rd quarter of this year were pulled back by 11% from a year earlier.

The national export prospects for the last quarter of 2008 are looking bleak, as demands in the West are not thought to be as strong this Christmas.

Some 60% China’s exports are destined for the United States, the EU and Japan, all of which are suffering from serious economic recession.

China forecasts that its 2008 foreign trade will rise by 20% from the 2007 level, reaching US$2.6 trillion. However, the country lowers down its foreign trade growth expectation for 2009 to 8.5%.

The UN World Economic Situation and Prospects 2009 report has warned of the biggest contraction of global economy in 2009 ever since the 1930s.

It also highlights that the globalization has left developing countries to face higher borrowing costs and lower export growth from a crisis started in the developed world.


The photo is from A partial history of television in China

Copyright Dongying Wang

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