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Household appliance trade-in policy to bring 50 bln yuan market
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16:42, June 02, 2009

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On May 19, Premier Wen Jiabao presided over the Executive Meeting of the State Council to research and implement measures to promote the trade-in of automobiles and household appliances. The State Council decided to have trial points for trade-in in Beijing and another eight cities covering TVs, fridges, washing machines, air-conditioners and computers. The subsidies for consumers who choose to trade in can be as high as 10% of the price of the new products.

2 billion yuan subsidies for household appliances

At the meeting, the State Council also decided that the central government would put in 2 billion yuan as subsidies for the trade-in of home appliances. In terms of the scale of consumption, this is undoubtedly another significant measure to stimulate domestic demand after the "Household Appliances to the Countryside" scheme. Estimates based on the 10% subsidy suggest that the 2 billion yuan subsidies for home appliances can at least increase consumption for household appliances by 20 billion yuan.

In addition to increasing demand for consumption, the trade-in policy can also improve the efficiency of energy utilization, alleviate pollution, promote energy conservation, reduce emissions and develop cyclic economy. "Rongsheng Electric Appliances Corporation will completely stop producing products of energy efficiency lower than the second degree by 2010." Zhou Xiaotian, president of Haixinkelong said that the company would use 10 million yuan as subsidies for energy-saving products. "Energy-saving products only took up 60% of all the fridges of our company in 2008. But the proportion has reached 93% this year."

Liang Qichun, general manager for the Center of Brand Management of TCL, expressed that the trade-in policy could accelerate the upgrade of the TV industry and promote the development of the flat panel TV industry.

Business opportunities to be discovered

As summer is approaching, used household appliance markets in Beijing become busy. Part of the consumer market consists of young people who live in leased houses. "I just rent a sunny room. The landlord didn't provide any air-conditioning for me. If I buy one here, I can save some money." said Xiao Zhang, who was choosing an air-conditioner in a used household appliance market in Beijing. Xiao Zhang also told the reporter that the landlord sold a 29-inch TV to a vendor for only 50 yuan. The TV cost a few thousand yuan nine years ago. The huge price difference is the reason why people would not like to sell their old household appliances. "He charged me three or four hundred yuan for an air-conditioner like this. But it may only cost him less than a hundred yuan."

Suppose subsidies for every appliance averages around 200 yuan, Analysts point out that if the 2 billion yuan subsidies are fully utilized, this will increase sales of household appliances by about 10 million. It is estimated that this can promote the sales of products of every kind to increase by 5%. The "Household Appliances to the Countryside" scheme mainly targets low-income consumers. It's the first time for most of them to buy household appliances. The new trade-in policy mainly targets those people who are not covered by the "Household Appliances to the Countryside" scheme and have demand for upgrades.

Areas covered by the new policy are relatively rich cities. The policy is a good measure to stimulate domestic demand.

Insiders estimated positively that the policy could also promote the development of the recycling industry: "The trade-in policy can explore the potential market for home appliances recycling worth at least 5 billion yuan. Plus services, logistics and derived products accompanying household appliances, the total increase of domestic demand can reach 50 billion yuan."

Consumers expect details

The trade-in policy of household appliances has drawn extensive attention from household appliance producers and consumers since it came out a week ago. Experts generally agree that this policy is beneficial to the household appliances market, but the details have not been announced yet. How will the subsidies be used? Which household appliances are entitled to subsidies? Which stores of household appliances are allowed to provide subsidies? What is the limit for the amount of subsidies? Both producers and consumers are waiting eagerly for the announcement of details.

Ms Guo is a public official. She was considering replacing old household appliances. Whether or not she can buy new ones depends primarily on how this policy works. How much are the old appliances worth? Who will decide the price? What the measurements look like? How much will the government subsidize? All these questions remain unsolved. If the trade-in policy is favorable enough to price old appliances reasonably, she would consider replacing several old household appliances.

Ms Mai is an office lady. In her opinion, besides the amount of subsidies, whether it is convenient to get subsidy or if one has to go through procedures is another important question. The best way is that the subsidy is provided in the form of a reduction in price, which amounts to an extra discount. It is very inconvenient if consumers need to wait in a queue to get the subsidy.

According to an investigation report, the implementation of the trade-in policy faces several difficulties due to lack of details. For example, the useful life of old products, brand and model can't be confirmed, therefore it is hard to determine the discounted value of old products. Producers urge the announcement of details in order to replace old appliances of consumers to the fullest extent. But because the procedure of the trade-in of household appliances is very complicated. The Ministry of Commerce has not announced a definite time for the disclosure of details.

By People's Daily Online

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