China bets on sales of appliances for a boost

LANTIAN, China - A broad smile broke across Zeng Yalan's face as she perused the price tags on washing machines in a store in this farming town in northern China.

"The price is good. It's cheap," she pronounced.

China's leaders hope that millions of rural residents such as Zeng will open their wallets and buy appliances in coming months, stimulating consumption and keeping the factories of white-goods manufacturers humming at a time when global markets are in collapse and domestic sales growth has skidded.

The government rolled out a program earlier this month called "Delivering Appliances to the Countryside" that offers a 13 percent subsidy to farmers who dip into their savings to buy refrigerators, color television sets, washing machines, and even cell phones. China's leaders see it as a way for rural households to begin to catch up with their urban counterparts while priming an economic engine that's slowing for the first time in more than a decade.

As the U.S. recession deepens and the world economy sputters, China is trying to cushion the impact on its export-dependent economy with a $590 billion stimulus package and by coaxing its citizens to spend, keeping domestic factories from shutting down. Many Chinese are accustomed only to saving, however. They stash away an average of 45 percent of their earnings.

"To get the economy going, we need households to contribute [and] consumption to be boosted," said Jing Ulrich, the Hong Kong-based head of China equities for JP Morgan, an investment bank. "If these programs are successful, we think households in China will end up saving less and spending more."

China has set huge goals, saying that it expects rural families to buy 480 million appliances over the four-year life of the appliance program, which began Dec. 1.

By Western standards, China's big appliance makers produce goods at startlingly low prices. The cheapest refrigerator listed in the new program, after the rebate, is about $137 and washing machine, about $60. Color TVs can be had for about $82.

The central government and, to a lesser degree, the provincial governments pay for the 13 percent rebates. Manufacturers are delighted with the subsidies, which have boosted their prospects. Stock prices for major companies, such as Haier, have surged on the Hong Kong stock exchange this month.