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issue: January 2009 APPLIANCE Magazine

Appliance Industry Forecasts: China
Web Exclusive: China's Appliance Industry in 2009

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Diane Ritchey, News Editor

China, the world’s second largest national economy, is also feeling the effects of the global economic crisis. The Chinese economy grew at double-digit rates in each of the last five years, with 10% GDP growth in 2006, 10.4% 2007, and 12% in 2008. Yet, economic growth in 2009 for the country should only be 7.5%, according to the International Monetary Fund (IMF).    “Countries in East Asia, including China, generally have suffered smaller markdowns, because their financial situations are typically more robust,” IMF said. “They have benefited from improved terms of trade from falling commodity prices, and they have already initiated a shift toward macroeconomic policy easing,” it said.

Days after unveiling a massive fiscal stimulus programmed, the Chinese government said that industrial production had increased by 8.2% in October, well below forecasts. That number followed an increase of 11.4% in September 2008 and 17.8% in March 2008. Steel production dropped 17% in October 2008 compared with October 2007, while power generation fell for the first time in a decade. In addition, the Chinese government reported decline in house prices in October.

Ken Peng, economist at Citibank, said the slowdown in production growth in China was even more rapid than during the Asian financial crisis a decade ago. “The data underscore why risks of 5% GDP growth remain real,” he said. “We need to see evidence in the coming months that fiscal easing has gained traction to avoid 5% becoming a reality.”

To help stimulate growth in the China’s economy, the Chinese government in late November announced its biggest interest rate cut in 11 years, hoping to spur private borrowing and support a multibillion-dollar stimulus package to boost slowing economic growth. The 1.08 percentage-point rate cut was the fourth cut in three months. The 4 trillion yuan ($586 billion) stimulus aims to inject money into the Chinese economy through spending on new highways and other public facilities. But its ultimate goal is to increase consumer spending, something that all economists agree would be the best scenario.

OEMs In China

Carrier Corp. invested in China in 2008 as part of a joint venture with Guangdong Midea Electric Appliances Company, Ltd. to produce residential and light commercial duct-free split air-conditioning systems exclusively for Carrier for the global market. Both companies reportedly invested 200 million Yuan (approx. $29 million) in registered capital to establish the new company.

Earlier in 2008, outdoor appliance maker Husqvarna Zenoah, under the Husqvarna Group of Sweden, made an additional investment of $26.2 million in the Changzhou National Hi-Tech District in Jiangsu Province, with the plan to build a new factory for Zenoah (Changzhou) Machine Co., Ltd.

“We had conducted in-depth investigations into the investment environment in Changzhou before coming here to make investments. The natural environment is satisfactory, geographic position is favorable and people are honest here. What’s more important is the government pays great attention to the introduction and development of foreign enterprises,” said Bo Andreasson, executive vice president of the Husqvarna Group.


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