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China Expands Consumer Subsidies

Subsidies are for cars and home appliances

China announced on May 19 a massive expansion of subsidies for people who buy new cars and home appliances this year, state media said, in the government's latest bid to lift the crisis-battered economy.

The State Council decided to increase the money available to subsidize car replacements to five billion yuan (US$733 million) from one billion yuan when the program was announced last month, the Xinhua news agency said.

China started to subsidize car replacements in 2003 and increased the fund to 600 million yuan last year.

The government would also earmark two billion yuan this year to subsidise consumers who sell their home appliances for new ones, Xinhua said.

A trial program would be launched first in four provinces and five cities including Beijing and Shanghai to subsidize the replacement of TV sets, refrigerators and three other types of home appliances.

"In order to further boost domestic demand... it is necessary to implement policies to encourage auto and home appliance replacements," the report said, quoting a statement issued at the end of the meeting which Premier Wen Jiabao presided over. "It will not only help expand domestic consumption but also improve energy and resources efficiency and cut pollution," it said.

The new incentive is the latest in a series of government measures to encourage Chinese consumers to spend in the face of slumping exports as foreign demand weakened due to the financial crisis. Previously China introduced policies to subsidize farmers' purchases of home appliances and small cars.

Copyright Agence France-Presse, 2009

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