16 March 2016
Switched on to Green Manufacturing
Chinese mainland manufacturers are developing an increasingly efficient range of household appliances after the government designated energy-efficient household appliances as a priority development sector.
Under a series of incentives introduced last November, mainland purchases of nine categories of energy-efficient household appliance will be eligible for a 13 per cent subsidy. The categories covered include refrigerators, air conditioners, water heaters and air purifiers, with appliances meeting China Energy Label's Grade 1 criteria receiving the full 13 per cent subsidy. Those meeting the Grade 2 requirements receive an eight per cent subsidy. With a maximum subsidy of Rmb800 per product, the policy is set run until 30 November 2018.
Both online and conventional sales are covered by the policy, prompting the sectors to heavily promote the incentive programme. Leading mainland e-tailer JD.com, for instance, highlighted the scheme across its portal as soon as it was announced.
The scheme is considered a key way to boost development of energy-efficient appliances and support the sector’s overall growth. It is also expected to weed out manufacturers unwilling or unable to upgrade their products.
Apart from the subsidy scheme, a new Energy-efficiency Leaders programme will be introduced, to recognise products or manufacturers that maintain the highest energy efficiency standards within a particular category. These manufacturers will qualify for additional support, including subsidies on R&D and promotional work. They will also be included in the Central Government's priority procurement list of energy-efficient appliances.
Companies that win the designation will also be entitled to feature the "Energy-efficiency Leader" logo on their relevant product labels. The scheme applies only to domestically produced household appliances.
|The Way Ahead|
|According to industry analysts, four key innovations will shape the future development of China's energy-efficient household appliance sector:|
• Wider application of inverter technology
• The introduction of high-efficiency motors, which will lower energy consumption levels for many households
• Reduction in standby power consumption to substantially cut the wastage levels accrued by household appliances
• Centralised power-consumption control. With a consensus emerging on the desirability of governing multi-facility operations via a communal central control terminal, this will effectively raise the efficiency of many household appliances
Excess Manufacturing Capacity
According to staff at leading mainland electrical appliance retailer Suning, sales of many conventional appliances – including televisions, refrigerators and air-conditioners – have been lacklustre in recent years. In Q4 2015, however, sales in the sector enjoyed a surge, thanks largely to the onset of the year-end home improvement season and the advent of the Double Eleven and Double Twelve shopping festivals.
According to Zhang Yanli, Director of the Economic Institute of Industrial Economics and Technology Industry Research Center, the mainland household appliances industry has long suffered from excess capacity – due partly to the subsidies available – which outstripped potential demand. With the market now seemingly settled, she believes the promotion of energy-efficient household appliances may prove timely, creating renewed demand and providing new opportunities for manufacturers.
In line with this, a January 2016 report by the China Household Electrical Appliances Association identified energy conservation as the key development goal for the country's appliance sector over the next decade. The report recommended that the overall efficiency standard for refrigerators should show a 25 per cent increase over its 2015 level by 2020, with a further 12 per cent rise by 2025.
Such ambitious targets will result in rising R&D and manufacturing costs for many companies in the sector, with several unable to sustain such an overhead. Ms Zhang believes the requirement will eliminate many of the weaker manufacturers.
According to China’s Ministry of Environmental Protection, environmental protection expenditure during the 13th Five-Year Plan (2016-2020) is expected to increase to Rmb2 trillion annually. Overall, total expenditure on environmental protection is expected to top Rmb17 trillion over the five-year period, more than double that allocated under the 12th Five-Year Plan.
Room for Improvement
Indeed, one of the mainland's leading household appliance manufacturers, Gree, recently received the British RAC Cooling Industry Award for its photovoltaic (PV)-powered centrifugal chiller technology. The company was commended for its significant contribution to technological innovation, energy conservation and environmental protection. At present, Gree is seen as a pioneer in the low-cost chilling sector.
Its PV-powered chiller, however, lacks mass-market appeal. One of the company's fully PV-powered chillers, capable of refrigerating a 12,000 square-metre chamber, requires capital investment of Rmb5 million for the necessary equipment, while also needing approximately 5,000 square metres of operational space, making it unsuitable for most commercial premises. A five-kilowatt unit, suitable for home-use PV refrigeration, requires 50 to 60 square metres of roof space. Unfortunately, such specifications make the units unappealing to the majority of would-be purchasers.