Removal of subsidy caps to boost sales, say PC makers

08:26, December 08, 2009      

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The Chinese government's recent efforts to encourage sales of high-end electronic products in rural markets may encourage computer makers from home and aboard to increase their presence in Chinese counties and villages.

Wang Zhong, general manager, Desk Computer Marketing, Lenovo Group, said though demand for high-end computers is high amongst rural consumers, sales have been limited by the current price cap in the rural electronic subsidy program.

"According to our estimates, nearly 62 percent of the rural consumers in China want to purchase computers priced above 4,000 yuan," he said. "If the price caps are lifted, I think rural consumers will have more choices."

The Chinese government launched the program earlier this year by offering 13 percent subsidy to electronics buyers in rural areas to stimulate the economy. But the subsidy was offered only for purchase of computers priced below 3,500 yuan.

According to figures from the Ministry of Commerce, sales of rural computers through the government's subsidy program reached 792,766 units from January to October this year, compared with the 40 million annual PC shipments in the country each year. Lenovo had a 40 percent share of the market while foreign players like Hewlett-Packard and Dell had less than 3 percent market share.

Some critics say the price cap has severely limited the effects of the subsidy program.

Last month, Zhao Bo, a deputy director of China's Ministry of Industry and Information Technology, said at an industry seminar in Wuhan that the government is working on new measures to consummate its consumer electronics subsidy program.

The measures, which will be published by this month, will lift the current product price cap in the program and encourage sales of high-end electronic products in rural areas.

"China has a huge geographic diversity and some rural consumers in southern and eastern provinces actually have a very strong purchasing power," said Simon Ye, analyst from research firm Gartner Inc. "I think the lifting of the price cap will boost China's PC market, which has already started showing signs of recovery."

According to figures from research firm Gartner, the PC market in China is estimated to have grown 39 percent during the third quarter of this year, compared with a worldwide average growth of 0.5 percent in the same period.

The recovery, according to Ye, was largely due to the increasing demand for laptops in urban areas as well as the desktop sales surge in rural market.

Weekee Yeo, director of the HP's consumer PC business in China, said the company is planning to introduce more high-end products in rural areas.

"Last year, we have expanded our network to over 2,000 Chinese counties," he said, noting that the lifting of price cap in the subsidy program will further stimulate the rural market.

Source: China Daily
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