News Analysis: Purchase subsidies for energy-saving appliances boost economy
The announcement of the subsidy program late Wednesday by the State Council, or China's cabinet, was a timely fine-tuning measure by the government amid slowing exports and domestic demand, said Wang Jun, a researcher at the China Center for International Economic Exchanges.
"The subsidy program for promoting the consumption of energy-saving products may boost sales by 500 billion yuan (79.5 billion U.S. dollars)," Wang said. [ The State Council announced Wednesday that the government will earmark 26.5 billion yuan to subsidize the consumption of household electrical appliances for a one-year period.
The appliances include air conditioners, flat-panel television sets, refrigerators, washing machines and water heaters that meet energy-saving standards, according to a statement released after an executive meeting of the State Council presided over by Premier Wen Jiabao.
Meanwhile, the government will allocate another 2.2 billion yuan to promote the consumption of energy-saving light bulbs and LEDs (light-emitting diodes) and 6 billion yuan for purchases of vehicles with engine sizes below 1.6 liters, the statement said.
Another 1.6 billion yuan will be earmarked to promote the consumption of highly efficient electrical machinery, according to the statement, which did not elaborate on how the subsidies will be implemented.
The statement said the promotion of energy-saving products can help maintain economic momentum and expand domestic demand, as well as boost economic restructuring and energy savings.
The government will also carry out public campaigns to promote frugality and low-carbon consumption, the statement said.
"The subsidies will hopefully make the consumption of green home appliances a new engine for growth and stabilize the industry's production," Wang said.
Wang said the subsidies may also give a boost to the slowing economy, which grew 8.1 percent in the first quarter of this year, marking the slowest growth in nearly three years. Exports rose only 4.9 percent year on year in April, down from a 8.9-percent increase in March.
Wang said adopting short-term subsidy programs is largely intended to expand domestic consumption. He said the government should carry out reforms concerning income distribution in order to encourage consumption among middle- and low-income earners.
When the global financial and economic crisis hit in June 2009, China implemented a similar subsidy program that boosted sales of energy-saving cars and home appliances by hundreds of billions of yuan.
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