Rural people can enjoy low prices and government subsidies when buying personal computers, thanks to a national program promoting PC sales in China's less developed villages and counties.

The campaign also is helping a select group of domestic and foreign PC makers to tap the huge yet immature market.

The Chinese Ministry of Commerce in March announced the winning bidders for China's rural computer subsidy program.

Four large multinational PC vendors and 10 domestic PC vendors were authorized to supply PCs to 13 provinces for one year.

All the PC models that won the bid are priced from $290 to $510, and 67 percent are priced at less than $500.

More than half of the models are "entry level" portable and desktop PCs. All are offered at lower than the "street price" for typical PCs.

According to government figures, approximately 57 percent of the Chinese population with registered permanent rural residences - about 200 million households - will be eligible to obtain a 13 percent subsidy if they purchase a PC listed in the category.

Although the current economic downturn in China might discourage spending on PCs, especially in low-income areas, research firm Gartner said the affordable prices and free add-ons will attract many first-time buyers.

In a research note, Gartner said approximately 800,000 units will be generated as incremental shipments this year.

The price band of less than $500 will become an important factor driving PC sales, Garter reported.

"Most other large multinational PC vendors are a long way away from building up the strong network channel required in this market segment, although HP (Hewlett-Packard) has recently made inroads through a targeted five-tier market expansion," the research firm reported.

According to Gartner, the PC subsidy program will, on the other hand, likely create many challenges for suppliers.

For example, delivery of PCs to remote areas and the ability to offer effective after-sales services will be critical competitive differentiators.

Balancing profit margins with an attractive design and user-friendly service within the regulated price band will not be easy tasks, the research firm reported.

But the business opportunities offered by rural China could help mitigate the risks posed to PC vendors by higher-tier markets that have been negatively affected by the economic downturn, Gartner added.

The research firm noted that the increased market penetration created by the program will help the PC market in China recover earlier than markets in other regions.

According to research firm IDC, the growth rate of China's PC market is expected to drop to 3 percent this year due to the economic slowdown, compared with double-digit growth during the past decades.

IDC projected that China's PC market will see a recovery next year when the growth rate reaches 16 percent.

China is the world's second- largest PC market, accounting for 15 percent of the global pie, according to IDC.

The research firm said China would become the world's largest PC market by 2011.

(China Daily 09/14/2009 page12)