China is offering subsidies to people in rural areas who buy PCs as part of a massive economic stimulus package the government hopes will keep the country from sliding into recession.
The subsidy program offers a rebate of 13 percent of the purchase price to rural Chinese who purchase a computer. The program could help domestic and multinational PC makers expand sales to less-developed but growing regions of China after national demand for computers fell well below expectations in the last quarter of 2008.
"We applaud the Chinese government for launching these kinds of programs," said Steve Felice, president of Dell's Small and Medium Business division. "We think that will help them enhance the lives of nearly 900 million farmers throughout China and help boost domestic consumption."
Lenovo, China's largest PC maker, also embraced the program. The company will extend its sales network to 320,000 villages over the next three years, it said Wednesday. It offers 15 computer models eligible for the subsidy program, ranging in price from 2,500 renminbi (US$365) to 3,500 renminbi, it said.
In comparison, average income for rural Chinese residents was 4,761 renminbi last year, far below the figure for urban residents of 15,781 renminbi, according to the country's statistics bureau.
Hewlett-Packard will offer 15 eligible desktop and notebook models of its own, each equipped with agricultural and educational software to meet rural customers' needs, the company said Thursday. The program creates a solid starting point for HP's strategy of priming the rural market, HP said.
Besides PC makers, component makers will also benefit. Taiwanese LCD panel maker Chi Mei Optoelectronics said its first quarter sales will be better than expected because of the Chinese PC subsidy.
A slowdown in Chinese demand for PCs during the fourth quarter caught the industry by surprise and clouded the outlook for the coming year. On Monday, IDC lowered its forecast for annual growth in PC shipments to 3 percent in 2009, from an earlier forecast of 9 percent.
"I don't think people anticipated around the world that emerging countries would get hit from the economic crisis in a way that's more dramatic than the developed parts of the world, but that did in fact happen," Felice said.
Faced with falling demand for exports to Europe and the U.S, China is counting on domestic demand and infrastructure projects to pick up some of the slack. China's government announced a 4 trillion renminbi stimulus package in November to spur consumption.
The PC subsidy is one part of a wider subsidy program contained in the stimulus package that's designed to spur rural demand for white goods and home electronics, including televisions and water heaters.
Continued strong economic growth is a key goal of China's government, which worries that rising layoffs and growing numbers of unemployed workers could lead to widespread social unrest.
On Thursday, Premier Wen Jiabao told delegates at the annual National People's Congress meeting in Beijing that China's economy could grow by 8 percent this year. That number has long been seen as a critical level of economic growth, providing sufficient labor demand to employ the millions of university graduates and migrant workers who enter China's workforce each year.
What impact the PC subsidy will have on China's PC market remains to be seen, but observers don't expect it to dramatically shift overall demand.
"Theoretically, it could help a bit," said Bryan Ma, director of personal systems research at IDC Asia-Pacific. "But there won't be any major accelerating impact on the market."
(Dan Nystedt, in Taipei, contributed to this story.)