China's Urban Demand Stimulus Program to Benefit Taiwanese Suppliers

Taipei, May 20, 2009 (CENS)--To further stimulate domestic demand, the Chinese government has decided to subsidize replacement purchase of autos and home appliances in urban areas, a move expected to bring handsome business opportunities to Taiwanese auto-parts and home appliances suppliers.

The policy, publicized by the Chinese government's official website, was finalized by Chinese Premier Wen Jiabao at a State Council's meeting yesterday (May 19) and is expected to bring about some 70 billion yuan (NT$350 billion) of new consumption demand. The Chinese government plans to appropriate 7 billion yuan of budget for the program.

The program follows the "electronic products for rural areas" program, which has benefited many Taiwanese electronic products and parts suppliers. With the implementation of the program, the scope of benefit will extend to Taiwanese auto-parts suppliers, such as Tong Yang, TYC Brothers, Ta Yih, and Jui Li.

Under the program, purchasing tax for replacement purchase for autos with engine displacement under 1,600 will be halved to 5% by year end and residents of nine major cities and provinces will be entitled to subsidies amounting to 10% of pretax sale prices for replacement purchase of home appliances. The nine areas for the latter benefit are Beijing, Shanghai, Tianjin, Jiangsu, Zhejiang, Shandong, Guangdong, Fuzhou, and Changsha.

All the programs are designed to stimulate domestic demand, thereby alleviating the impact of the financial tsunami on the Chinese economy. Official statistics show that 14.9 million units of home appliances, worth 2.24 billion yuan (NT$11.2 billion), were moved under the "home appliances for rural areas" program in March.