12 Feb 2016
Energy-Efficient Household Appliances Designated a Mainland Priority
Government-backing and a number of related incentives have seen mainland manufacturers actively developing an increasingly efficient range of household appliances with a view to taking a global lead in this highly competitive sector.
With energy-efficient household appliances now designated as a priority development sector by the mainland government, manufacturers have been swift to take up the gauntlet. This has seen a move towards establishing China as a global leader in the production of such appliances and has also acted to bolster domestic demand. Despite the progress to date, though, the government's ambitious targets for the industry still require manufacturers to overcome a number of technical challenges if mass-market success is to be guaranteed.
Incentives for Domestic Producers
Under a series of incentives introduced last November, mainland purchases of nine categories of energy-efficient household appliance will be subject to a 13% 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% subsidy, while those complying with only the Grade 2 requirements receiving only 8%. 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 both sectors to heavily promote the incentive programme. JD.com, one of the mainland's leading e-tailers, for instance, highlighted the scheme across its portal as soon as it was announced.
For many within the industry, the scheme has been seen as a key way of boosting the development of energy-efficient appliances, as well as supporting the overall growth of the sector. It is also expected to weed out those manufacturers unwilling or unable to upgrade their products.
In addition to the subsidy scheme, a new Energy-efficiency Leaders programme is now set to be introduced. This will act to recognise those products or manufacturers that maintain the highest energy efficiency standards within a particular category.
Such Leaders will then be eligible for additional support through four distinct channels. Firstly, they will be entitled to receive a number of incentives and subsidies related to both their on-going R&D activity and any promotional work undertaken. Secondly, all products approved under the programme will be included as part of the central government's priority procurement list of energy-efficient appliances. Thirdly, all of the government's fixed asset investment projects will prioritise product purchases from recognised Energy-efficiency Leaders. Fourthly, all infrastructure investments and energy-efficient reconstruction projects funded by the central government will also designate Energy-efficiency Leaders as preferred suppliers.
All enterprises in receipt of 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, specifically excluding imported products.
Excess Manufacturing Capacity
According to staff at Suning, one of the mainland's leading electrical appliance retailers, the sales of many conventional appliances – including televisions, refrigerators and air-conditioners – have been lacklustre over recent years. In Q4 2015, however, sales in the sector enjoyed something of a surge, largely thanks to both 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 been characterised by excess capacity. She said this was partly because the value of the subsidies available in the sector had already outstripped the potential demand. With the market now somewhat becalmed, she believes the promotion of energy-efficient household appliances may prove a timely one, creating renewed demand and providing a new opportunity 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. In terms of priorities, the report recommended that the overall efficiency standard for refrigerators should show a 25% increase over its 2105 level by 2020, with a further 12% rise by 2025.
Such ambitious targets will result in rising R&D and manufacturing costs for many companies in the sector, with a number of them unable to sustain such an overhead. Zhang believes such a requirement will squeeze many of the weaker manufacturers out of the sector, something likely to benefit the industry as a whole in the long run.
According to the 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
China's household appliance energy-efficiency technology is seen as still having considerable room for improvement. A number of manufacturers, however, are committed to closing this perceived skills gap with their overseas competitors.
In line with this, Gree, one of the mainland's leading household appliances manufacturers, has recently received the British RAC Cooling Industry Award for its photovoltaic-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, though, is seen as lacking mass-market appeal. One of the company's fully PV-powered chillers, capable of refrigerating a 12,000 square metre area, requires a 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 5 kilowatt unit, suitable for home-use PV refrigeration, requires 50-60 square metres of roof space. Unfortunately, such specifications have rendered the units unappealing to the majority of would-be purchasers.
Four Key Developments
According to industry analysts, four key innovations will shape the future development of China's energy-efficient household appliances sector:
1. Wider application of inverter technology.
2. The introduction of high-efficiency motors. These will lower energy consumption levels for many households.
3. Reduction in standby power consumption. This will substantially cut the wastage levels accrued by household appliances.
4. Centralised power consumption control. With a consensus emerging as to the desirability of governing multi-facility operations via a communal central control terminal, this will effectively raise the efficiency of many household appliances.
Ren Yuan, Special Correspondent, Beijing