China to Subsidize Rural Farmers Consumption

What an interesting story - China is trying to turn its farmers into American like consumers. I suppose this is what you can do when every day your country bring in boatloads of cash in trade (exact opposite of the US situation)... but quite an interesting maneuver - not sure how much this centralized planning will work and I think farmers have other issues i.e. facing raging inflation costs in their food.... but....

China Subsidies To Boost Farmers' Appliance Spending

• China will subsidize farmers' purchases of televisions, refrigerators and cell phones to narrow the wealth gap with city dwellers and boost consumption in the world's fourth-biggest economy.
• The government will pay 13 percent of product prices for farmers in Shandong, Henan and Sichuan provinces in a pilot program that may be extended nationwide, the finance and commerce ministries said on their Web sites on Dec. 22.
• Almost 740 million of China's 1.3 billion people live in the countryside, where incomes are less than a third of those in the cities. Boosting rural spending may help to curb the nation's dependence on investment and exports for growth.
• ``Up until now, rural households have spent most of their incomes on food and clothing,'' said Qi Jingmei, a researcher in Beijing at the State Information Center, an affiliate of China's top economic planning agency. ``There's tremendous potential in the rural market.''
• The plan will ``significantly'' increase rural spending, improve farmers' living standards, narrow China's record trade surpluses and boost consumer-goods manufacturers, according to the ministries' statement. They didn't give costs.
• Rural ownership of home appliances at the end of last year was at the urban level of almost 20 years ago, Xinhua reported Dec. 22, citing government data. In the countryside, every 100 households had 89 color televisions, 22 refrigerators and 62 cell phones on Dec. 31. The urban figures were 137 color televisions, 92 refrigerators and 153 mobile phones.
• Rural per-capita income climbed 15 percent to 3,321 yuan ($451) for the nine months through September from a year earlier. That was less than one third of the 10,346 yuan earned by city dwellers.
• Rolled out nationwide, the subsidies may curb industrial overcapacity and, annually, reduce the trade surplus by more than $10 billion and increase domestic consumption by 100 billion yuan, Xinhua said, citing Zeng Xiaoan, deputy head of the economic construction department of the finance ministry.
• China's exports of televisions, refrigerators, washing machines, air conditioners and cell phones accounted for $50 billion, or 28 percent, of last year's trade surplus, according to Zeng.

Now if you were a cynic, you'd argue that the Chinese government's over zealous plan to overbuild any and all types of manufacturing is creating huge overcapacity in certain industries. And if you were a cynic you'd say this is a "2 for 1" special of alleviating some of that overcapacity AND trying to help the poor folk in the far regions of the country to maybe offset them being upset with their raging food inflation [China Inflation Highest in 11 Years - Why Do You Care?].

Luckily, I am not a cynic. ;)