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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 131

China Business Intelligence No. 131

Samsung Economic Research Institute Beijing Office

Aug. 26, 2009

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Highlights:

I. Economy

In 2009, the Chinese government implemented upward adjustments on the water rate in most of its major cities. This move is a part of efforts to fund the construction of sewage treatment factories, to upgrade facilities to enhance the quality of water, to reduce the deficits of water management companies and to save energy. However, apart from the obvious aim of saving energy, the other reasons for the hike in the water rate lack persuasion. The current prevailing view is that it is unreasonable to raise water rates in order to expand the construction of sewage treatment plants and improve facilities to enhance water quality. Not only is the indiscriminate hiking of water rates unreasonable but the results will also be insignificant. It is necessary to implement a progressive tariff that is based on the amount of water used minimizing the negative effects of the hike on the mid- and low income bracket as well as effectively promoting water saving efforts. It is also imperative to listen to public to resolve conflicts.

II. Industry

In the first half of 2009, 9.61 million units of home electronics worth 16.23 billion yuan were sold in China through the government's "Home Appliance to the Countryside" stimulus policy. The "Home Appliance to the Countryside" policy is a subsidy program that offers rural households a rebate on various home appliances, including selected brands of TVs, refrigerators, mobile phones and PCs. In many cases, the goods are from domestic companies. The biggest beneficiary of this stimulus policy is local front-runners. Local companies swept the top spots in sales in each subsidized product category. Haier was positioned at the top, followed by Midea and Hisense. Haier achieved sales of 5.83 billion yuan, accounting for 35.9% of total rural sales. In contrast, foreign companies, excluding Nokia, Panasonic and Sanyo, reported negligible sales.

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