The economic recovery of China in 2009 not only increased development in China, but also played a key role in maintaining the global economy. In 2010, the Chinese economy continues to develop soundly, which indicates that the Chinese economy has, for the most part, totally recovered form the global financial crisis since 2008.

 

 

It seems the Chinese government pays more attention to the air conditioning industry than any other; in 2009, this industry was the only one that was covered by the Home Appliances to the Countryside Scheme, Energy-saving Products Waste Management Project, and the Appliance Trade-in Allowance. With the start of these three policies in February, June, and August 2009 respectively, air conditioner sales saw no decrease in the otherwise low season and considerable growth in the sales season.

 

The sale of high-efficiency products continues to increase into 2010. By February 2010, the sales of such products accounted for 86% of the total air conditioner market. The Energy-saving Products Waste Management Project also accelerated the sale of inverter air conditioners. By February 2010, the sales of this type of air conditioner already accounted for 51% of the total air conditioning market.

 

The Chinese government has recently released the 3rd batch of products included in the Energy-saving Products Waste Management Project. 4,290 types of products produced by 27 companies were included, and the products with Energy Efficiency Grade I have become mainstream. Benefitting from this project, the prices of high-efficiency products have decreased from the previous RMB 3,000 to 4,000 (about US$441 to US$ 588) to the current around RMB 2,000 (about US$ 294), which accelerated the popularization of high-efficiency products. The new version of the national standard, ‘The minimum allowable values of the energy efficiency and energy efficiency grades for room air conditioners,’ which was put into force in June 2010, will further speed up this process.

 

On May 5, 2010, the Ministry of Finance of China and the National Development and Reform Commission announced the adjustment of the allowance policy on high-efficiency products. According to the new policy, the allowance on the Energy Efficiency Grade II products in the previous national standard has been cancelled and the allowance on the other high-efficiency non-inverter products had been decreased. However, inverter products have been included in the new policy. The adjustment was made based on the new national standard, ‘The minimum allowable values of the energy efficiency and energy efficiency grades for room air conditioners,’ which requires products which satisfy the requirement of the former Energy Efficiency Grade III as a minimum to enter the market.

 

The new policy was put into operation on June 1, 2010 and will be end on May 31, 2011. With the continuous implementation of the Energy-saving Products Waste Management Project, high-efficiency air conditioners will finally dominate the domestic market.

 

Because the production of high-efficiency products necessitates a higher cost, leading air conditioner manufacturers will further strengthen their domination in the market via their advantages in the cost control.

 

 

Inverter air conditioners have obvious advantages in energy conservation, lower noise and accurate temperature control compared with non-inverter units. However, high production costs and lack of support from the Chinese government meant high prices of such products. With the high-efficiency air conditioners becoming the mainstream in the market and the new adjustment in the national policies. The sales of inverter air conditioners increased to a large extent in both the domestic and overseas market in the first three months of 2010, which was a result of inverter products having been added to the list of the Home Appliances to the Countryside Scheme and the increased demand from the overseas market.

 

In March, 2010, Gome, Yongle and Dazhong, electronics retail stores, signed a contract for the purchase of air conditioners, worth RMB 10.9 billion (about US$ 1.6 billion). High-efficiency and inverter air conditioners were the leading products in the contract.

 

 

According to industry insiders, 2010 will still be at the peak of a new round of appliance replacement. In 2009, about 40% of families in metropolitan cities replaced their home appliances. With the continuous incentive policies for high-efficiency products, it is estimated that more home appliances will be replaced and even more high-efficiency products will be sold in 2010. Additionally, 2010 will also probably be the hottest year ever since 1950, which is another major factor for the growth of air conditioner sales.

 

All of these factors have led industry insiders to estimate that more than 30 million air conditioners will be sold in the Chinese market in 2010 and the sales value will be more than RMB 90 billion (about US$ 13 billion).

 

However, there are different opinions on prices this year. Some estimate that there will be a 10% price decrease for ordinary and high-efficiency non-inverter air conditioners and a 20% decrease for inverter air conditioners. Nevertheless, others believe that the highest price growth since 2007 may be seen.

 

 

There are more than 10 active foreign brands in China at present, which include Panasonic, Daikin, Mitsubishi Electric, Mitsubishi Heavy Industries (MHI), Hitachi, Sanyo, Fujitsu General, Toshiba, Samsung, LG, Electrolux and Whirlpool.

 

The sales volumes of the foreign companies are usually less than 1 million units, and although the foreign brands had lower sales compared with the leading domestic manufacturers, average profits at these companies are higher than the Chinese manufacturers. This is due to the fact that most of the foreign brands are aiming at high-end customers and have not participated in the price war caused by the domestic manufacturers.