China's Small Cities Have Bigger Appetite for Electronics

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Sales of PCs and other electronics in minor Chinese cities grew in the first quarter on the back of a rebate program for residents of remote areas, a research firm said Monday.

But how much the 13 percent rebate plan has boosted demand remained unclear as China moved to simplify the bureaucracy-laden scheme, which it launched in February to speed recovery from the economic downturn.

The rebates helped push consumer electronics sales outside of China's major cities and provincial capitals up to 4 billion yuan (US$586.8 million) in the first quarter, a 72 percent rise from a year earlier, according to Wedge MKI.

Hewlett-Packard and Lenovo PCs in the scheme benefited, along with LCD TVs, and both laptop and desktop computers saw higher demand, according to the firm.

But analysts warned against expecting too much from the scheme, which also includes utilities like washing machines. Bigger moves are needed to solve the long-standing problem of low consumer demand in China, said economist Andy Xie.

Beijing has focused its efforts to revive the economy on increasing loans to manufacturers rather than addressing low household incomes, Xie said.

"China's demand cannot be sustained by this kind of subsidy," said Xie.

A public complaint section on the rebate plan's official Web site revealed frustration among users whose rebates were late or whose local officials were unfamiliar with the plan's rules. Some buyers said vendors charged fees beyond those mandated for laptops or TVs in the scheme.

China's finance ministry responded with changes to the scheme last week. Vendors rather than finance ministry outposts can now approve rebates, and in extremely rural areas vendors can also issue the money. Buyers elsewhere must still redeem rebates through a government agency.

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