Market Insight

China's Energy-efficient subsidy expires

August 14, 2013

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The Chinese government's subsidy program for energy-efficient home appliances, initially enacted on 1st June 2012, expired after 1 year on 1st June 2013. According to the Chinese Finance Ministry, this energy-efficient subsidy program has enabled the purchase of 65 million home appliance products and generated 250 billion Yuan (41 billion dollars; 31 billion euros) of revenue in the past year.

The end of this program concludes the series of home appliance subsidy programs the Chinese government has enacted over the past five and a half years. The programs helped boost domestic demand for consumer electronic devices, and in the TV market especially helped boost flat-panel TV sales - enabling the flat panel penetration rate to reach 93 per cent across Chinese households by the end of May 2013.

A drawback to these programs has been the unhealthy level of dependence on state subsidies they have introduced for the profitability of firms in what was prior a highly competitive, market driven sector. Moreover, with several separate programs running over a number of years, this has caused volatile shipment fluctuations following their open and closure. In anticipation of the closure of the energy efficient subsidy, manufacturers already in the process of drawing down inventory, extended sales promotions through the month of June.  It is expected that in the coming months shipments will drop, partly reflecting worsened macroeconomic conditions, a now more developed market with smaller growth potential and the closure of the cost advantage created by the subsidy.

For more details on this development please see the recent report, The Chinese Energy-efficient Subsidy Program Review, by Senior Analyst Kathleen Zhang.

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