Local govts ask appliance makers to return subsidies

A woman takes a snapshot at the stand of Skyworth Digital Holdings Ltd during an industry expo in Wuhan, capital of Hubei province. [Photo/China Daily]

Local governments have asked major Chinese home-appliance makers to return the subsidies given to boost sales of energy-efficient products after reports of widespread misappropriation.

Appliance makers like Sichuan Changhong Electric Co Ltd, Skyworth Digital Holdings Ltd and TCL Corporation confirmed the development and said they have received notices from the respective local finance department asking for repayment of the subsidy.

According to a statement issued by Changhong in December, the Sichuan provincial finance department has decided to withdraw the 439 million yuan ($66.74 million) given to the company to subsidize sales of flat-panel televisions.

TCL said the economic development bureau of Guangzhou has asked it to repay 5.72 million yuan paid as subsidies, while Skyworth said it was asked to return 138 million yuan.

Preliminary estimates indicate that subsidy repayment notices sent out to companies stood at about 900 million yuan till date.

That said, there are still some contentious issues that need to be thrashed out before the subsidies can be repaid, said industry experts.

TCL said in a statement that it had communicated with related departments but it said it would not return the related subsidy for now. Skyworth said it has raised objections on the matter and is discussing the same with the relevant departments.

In May 2012, the Ministry of Finance, the National Development and Reform Commission and the Ministry of Industry and Information Technology issued a notification on promotion of energy-efficient appliances.

It said consumers who buy five types of energy-efficient appliance, such as air conditioners, flat-panel TVs, refrigerators, washing machines and water heaters from June 1, 2012 to May 31, 2013, were entitled to subsidies.

Statistics from the Ministry of Finance showed that the central government has allocated 12.2 billion yuan subsidies in total, or sales of 65 million units of energy-efficient appliances and 250 billion yuan in consumption.

However, there have been several instances of misappropriation of the scheme. In 2013, the National Audit Office punished eight appliance makers including Gree Electric Appliances Inc and Midea Group for swindling subsidies by utilizing the energy-efficient appliance scheme.

Liang Zhenpeng, a consumer electronics analyst, said that although the subsidy policy stimulated the development of appliances industry in the short term, it has some negative effects in the long run.

Liang said enterprises chase profits, and once the subsidy policy is launched, producers or distributors would fabricate sales numbers to get the incentives.

"Some enterprises just produce the types of appliances listed in the notification to enjoy the subsidy, which disrupts the market order," Liang said, adding the scheme does not promote the healthy and continuous development of the industry.

Zhang Yanbin, assistant director of All View Cloud, a Beijing-based consultancy specializing in home appliances, pointed out that there are problems in some parts of the policy, and it is sometimes the distributors, not the consumers, who finally get the subsidy. He said that the government should strengthen supervision in the sales section.