China implemented a home appliance subsidy program for rural Chinese in February of 2009, whereby the government pays about 13% of the cost of appliances such as refrigerators, televisions, and air conditioning units. The program was so popular that they later expanded it to include a wide range of amenities such as DVD players and gas cookers.
One and a half years old, appliance sales are still going gangbusters.
46.36 million appliances have been sold year to date as of the end of August, which is an increase of 160% over the previous year, when the subsidy program was already in effect, according to China Daily. Moreover, sales growth accelerated in August, and home appliances purchased under the subsidy program are now of a higher-value mix:
The annual sales growth in August was 7 percentage points faster than the July figure. About 16 billion yuan ($2.36 billion) worth of home appliances were sold in July.
The growth in August lifted the sales value of home appliances during the first eight months to 100.94 billion yuan ($14.89 billion), an increase of 2.1 times from the same period of last year.
It is amazing what a small discount, provided to China’s farmers, can do to stimulate demand, and the massive sales growth stimulated by this ‘Chinese cash for clunkers’ highlights the potential pent-up demand that exists among China’s rural majority. Think about it — 160% sales growth, 46.36 million appliances in seven months, and just a ~13% discount.