Rural Consumer Credit in Jiangxi

Last year China began a campaign to increase rural consumption by giving subsidies or rebates for purchases of appliances like washing machines, refrigerators, TVs, cell phones, water heaters, and air conditioners. The subsidy is about equal to the value-added tax, so the government is basically waiving tax on products to encourage purchases. The program is now a central part of the government's new coordinated development strategy which emphasizes expanding consumption.

A big challenge is to encourage rural people to buy things they can't afford--just like Americans. In Jiangxi Province lack of cash proved to be an obstacle for rural people who want to purchase appliances. Many of them had spent their cash on farm inputs or fixing up their houses. The provincial commerce department enlisted the rural credit cooperatives to earmark "consumer loans" for purchases through the "home appliances down to the countryside" program. In selected districts, rural households who have a credit rating can get a microloan at a preferential rate of 10%, for no more than 50% of the purchase price, capped at 20,000 yuan and no more than a 2-year loan period.

The program is still small. Last year, 793 households in the province got loans totaling less than US$1.2 million. Most of the loans were in one county--Xiushui county, which is designated as a "poverty county" where the average per capita income is the equivalent of 2,557 yuan ($375) a year. The manager of the credit cooperative says credit managers in their network of cooperatives have a consultation program with rural families to implement the loans. A farmer can go to the market and ask the salesman about credit for appliances he wants to buy.

In one market they claim sales went up to 7 million yuan last year (a little over $1 million) from 3 million yuan the previous year. They were able to build a new 4-story building for the market. The manager claims that most purchasers are raising fish and aquaculture sales are good now. He says all the loans were paid off in February. So Chinese farmers are not quite addicted to debt like Americans are...

There are ongoing complaints that farmers can't get credit; however a rural credit cooperative manager says that the loan business for traditional farm inputs like fertilizer and seed is stagnant. He thinks credit cooperatives can invigorate their business by focusing on consumer loans for houses, cars, and appliances.

Actually, there are other obstacles to appliance purchases. A survey by the Jiangxi commerce bureau showed that the most common reason for not buying washing machines or water heaters is lack of running water. They don't buy TVs and cell phones because there's no signal. Other reasons are expensive electricity (air conditioners) and expensive or inconvenient repairs--especially important if you're buying poor quality items that break down a week after you buy them.