China boosts subsidies for car, appliance buyers

[May 19, 2009]  SHANGHAI (AP) -- China will subsidize purchases of cars and home appliances to replace older models, expanding a program first introduced in rural areas to major cities, the government said Tuesday in its latest move to stimulate the economy.

The decision by an executive meeting of the State Council is meant to pump up China's domestic demand, supporting domestic industries hit by a slump in demand for exports and encouraging use of more energy-efficient, less polluting cars and appliances, said a statement on the government's Web site.

Areas qualifying for the "swapping old for new" subsidies, as they are dubbed, include Beijing, Shanghai, Tianjin and several provinces in China's affluent coastal regions. The earlier program focused mainly on boosting sales of small vehicles and appliances in the rural areas.

The plans were announced a day after the government outlined plans for revitalizing and restructuring China's light industries and its often loss-making petroleum refining sector.

Those plans, issued by the State Council, or Cabinet, late Monday are meant to create about 3 million jobs.

The government gave no specific dollar amount for those programs, and it was unclear whether or not some costs are included in a 4 trillion yuan ($586 billion) economic stimulus package announced late last year, which focused on construction projects.

But leaders had promised additional help if the earlier package failed to give the economy the oomph it needs to overcome the blow to its export sector from the global downturn.

According to the State Council's announcement, Beijing will spend a total of 5 billion yuan ($732 million) on subsidies to consumers who trade in older vehicles for new ones. It will devote 2 billion yuan ($290 billion) to the appliance subsidy program, which will pay rebates of 10 percent of the purchase price.

Expanding domestic demand is a top priority for Beijing, and the measures announced Tuesday reflect the leadership's determination to keep Chinese shoppers spending. So far, retail sales growth has remained in the double digits.

Economic data announced last week showed mixed trends, with exports plunging while investment soared, disappointing those who had seen signs a recovery might be looming in unexpectedly strong data for March.

Many of the policies announced this week are typical of the Communist leadership's penchant for grand, multiyear economic plans.

The outline for the refining sector calls for raising crude oil processing capacity by about 18 percent from last year to 405 million tons a year by 2011 and building three or four major large, modern refineries in the Yangtze River Delta, near Shanghai, and the Pearl River Delta, in southern China.

The government's plans for the light industrial sector call for upgrading technology and providing more support for small- and medium-sized businesses that dominate the sector but suffer from a lack of access to back loans and other financing.

Light industries such as home appliance, apparel, shoe, furniture and plastics products makers employ some 35 million people and once dominated China's export sector.

Although China has been keen to shift export manufacturing to higher value-added industries, light industries provide crucial support for the country's rural majority, with roughly half producing agriculture-related products that provide a livelihood for some 200 million farmers and migrant workers.

One additional aim of the industry support policies is to help alleviate the heavy pollution and waste of energy and other resources resulting from three decades of rampant industrialization.

Thousands of such factories have closed amid the global downturn and many of those remaining need upgrading and improved environmental protection.

"At the same time that our light industry has grown very quickly, some long-term, acute contradictions and problems have emerged," the State Council said in a statement on its Web site.

According to the plans outlined so far this week, existing oil refineries will be upgraded to become less polluting, with improved energy efficiency and reduced discharges of waste water and sulfur dioxide.

The plans also mandate a nearly 30 percent reduction in waste water discharge and the elimination of excess production capacity for various industries, including 30 million units of low-efficiency refrigerators and 600 million units of incandescent light bulbs.

[Associated Press; By ELAINE KURTENBACH]

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