Old-For-New
- Source: Global Times
- [22:26 July 07 2009]
- Comments
Photo: CFP
By Tu Lei
In its latest effort to stimulate domestic demand, the government has announced a pilot project for consumers in nine pilot cities and provinces to encourage consumers to buy new home appliances after receiving subsidies for their used ones. It began on June 1 and will end on May 31, 2010.
Though details of the old-for-new policy were released on July 2, it is clear that despite 2 billion yuan ($290 million) to ensure it goes well, problems are already apparent.
Under the policy, consumers in the pilot areas, including Beijing, Shanghai, Changsha in Hunan Province, as well as Jiangsu Province, can buy new home appliances at discounts subsidized by the government with the maximum discounts for TV sets and computers being 400 yuan ($60); air conditioners, 350 yuan ($50); and washing machines, 250 yuan ($37). The used appliances are then sold to recyclers.
A report by Guotai Junan Securities predicted that the move is expected to generate a sales volume of 25 billion yuan ($3.66 billion).
But how to decide the price for each old appliance has been a major question.
According to the rules, recycling businesses that are selected through a contract bidding system will purchase the used appliances for “a reasonable price.” However, payment guidelines for rating the old appliances aren’t clear, said Liu Fuzhong, vice chairman of the China Home Appliance Association.
Home appliances differ in quality and depreciation standards, which makes it difficult to set payment guidelines, Liu said.
“If the prices are too low, the consumers won’t want to sell the appliances to the recyclers,” Liu said. “But if they are too high, the costs may have a negative impact on the recycling businesses.”
How much is ‘reasonable?’
Moreover, the vague term “reasonable price” also worries the producers.
“I have no idea on how much should I provide for each used appliance,” said Song Feng, vice general manager at Henan Xinfei Electric Co Ltd. He added that different stores have different prices, which makes it harder to arrive at a standard depreciation rate.
Some consumers also said the proposed kickbacks aren’t enough of an incentive to get rid of their old appliances for new ones.
In a Suning appliance store on Beijing’s North Fourth Ring Road, a Haier sales representative said only certain types of consumers would participate in the program.
A customer at the store agreed. “The subsidies aren’t so attractive if I want to buy an appliance for more than 6,000 yuan ($880),” said Zou Runlei. He said that sales promotions for appliances with discounts higher than 400 yuan ($58.54) would make the government old-for-new payments even less attractive.
Expectations shouldn’t be too high for the project, said Han Jianhua, general secretary of the Shanghai Commercial Trade Association of Household Electric and Electronic Appliances. Han said it’s not common for people to update their home appliances when given only 10 percent discounts.
Recycling woes
According to a guideline on the service life for home appliances issued in May by the Standardization Administration of China, the average life for a TV and air conditioner is between eight and 10 years, eight years for a washing machine and six years for a computer.
In a July 3 survey done by Tencent, a leading Internet service portal, 76 percent of 246,522 consumers surveyed said they would buy new home appliances under the program, and the National Development and Reform Commission predicted there would be a 1.5 billion yuan ($219.51 million) recycling market for the project.
Finding qualified recyclers to take the job might be difficult, though, and appliance makers said they would continue to focus on production, although the recycling market is potentially huge.
“Take an air-conditioner for example, the recycling price for each one is around 100 to 200 yuan ($15 to $30), but it isn’t profitable for us to buy used ones due to the additional transportation and dismantling costs,” an anonymous home appliance dealer told Nanfang Daily in June.
Song Feng from Henan Xinfei Electric said the company has never engaged in recycling and doesn’t plan to in the future.
“Our business is to focus on production,” Song told the Global Times.
“As a formal environmental protection enterprise, the biggest challenge is that we can’t collect enough waste and old home appliances,” said Lin Chuntao, board chairman of O’Meet Environmental Technology Co Ltd. “The street vendors are our main competitors.”
In Beijing, three kilometers from Zhongguancun, Beijing’s technology hub, sits Houbajia village (or e-waste village), the capital’s biggest e-waste distribution center.
Everyday, hundreds of traders wonder its streets for junked home appliances and other recyclable rubbish. After picking up waste with possible value, they package it and transport it to Guangdong,
Zhejiang, Hebei, Hunan and Jiangxi provinces, according to the international environmental group, Greenpeace.
Additionally, under the current government rule, participating recycling businesses will only have the transportation costs subsidized.
There is also the question of where the old home appliances will ultimately go.
“If the old home appliances go to the rural markets, that will conflict with the new home appliance subsidy project going on there,” warned Luo Qingqi, senior director of Pully Consulting, which monitors the household electrical appliance industry.