Under a pilot project aimed at stimulating rural consumption, farmers in Shandong, Henan and Sichuan provinces will get government subsidies when they buy color television sets, refrigerators, and cell phones.
The government will select qualified enterprises to supply specially tailored home appliances under ceiling prices. And the rural buyers will get back 13 percent of what they pay for such items from local financial departments.
There has been plenty of talk about stimulating rural consumption. This is to date the most practical move to really tap that tantalizing potential.
And the reward will be tremendous. According to statistics provided by competent authorities, every 1 percent of growth in sales of one item of a home appliance in the country's rural areas means an additional demand of more than 2.5 million units. If the practice is adopted nationwide, and the scope of subsidies is expanded to gradually include such popular items as air conditioners and washing machines, as Ministry of Finance sources indicate, the increase in rural market demand may be phenomenal.
Such subsidies will prove instrumental in waking up market demand in the vast rural regions when income growth falls short of expectations. This may actually be the only effective approach for the time being.
The country's dual-track development strategies, which to a great extent sacrificed rural interests for urban well-being, has placed on the government a heavy moral burden to compensate. The subsidies, in a sense, are an ideal way to repay that moral debt.
Beyond that, the goodwill will harvest a huge benefit - the coveted demands from the populous yet nearly untapped rural market. For a long time, domestic experts and decision-makers have pinned high hopes on the largely potential rural market for upgrading domestic consumption. The concept of subsidized consumption, however, is quite imaginative. It is a functional way to improve quality of life in our relatively underdeveloped countryside.
The authorities have promised to provide rural consumers home appliances of reliable quality and at reasonable prices. They have even come up with ways to prevent suppliers from dumping obsolete products onto the rural market, which is essential in determining whether or not the subsidized appliances can win the hearts of rural consumers.
(China Daily December 24, 2007)
