The penetration rate of home appliances in rural areas at present is about the same as it was in urban areas in the 1980s. According to MOFCOM, each percentage point increase in the penetration rate of a particular home appliance in China's more than 200 million rural households is equal to new demand for around 2 million units of that particular home appliance. To boost rural spending on consumer goods, the ministry has provided additional support for the construction of sales outlets for home appliances, consumer goods and agricultural production materials in rural areas. The ministry will work out a blueprint and begin building 150,000 retail stores in rural areas and 1,000 distribution centers in the countryside this year.

China's vast rural market backed by more than 800 million rural residents offers huge potential for consumer goods purchases. Once the purchasing power of rural residents improves, farmers will gradually start spending more on clothing, education, entertainment, and medical care and health services.

Is it sustainable?

Yet some analysts are sober about the effects of the rural stimulus in the future. Shi Wei, a reporter with Farmers' Daily, a national newspaper that covers all issues related to agriculture, rural areas and farmers, questions whether the rural spending spree can be sustained. It is meaningless to compare the growth rates of rural and urban spending on consumer goods, because total spending by rural residents has been much lower than that of urban dwellers, he said. A small increase in rural spending could produce a higher growth rate, but in the case of urban spending, an increase in spending could be diluted by an already high spending base, he said.

Furthermore, Shi said it was still unclear as to how large a portion of rural spending growth has been contributed by valid spending. It is also not known which items farmers have spent most of their money on or the major areas that have seen high growth in rural spending, he said.

The structure of farmers' consumption is pertinent to the quality of their spending and the healthy and sustainable development of the rural consumer market, Shi said. One thing for sure is that the increase in farmers' spending on home appliances boosted by the subsidy scheme is a major reason for rural spending growth as a whole. The growth rate would be much smaller if the 13-percent subsidy on sales of home appliances were subtracted from the total volume of sales in rural areas, he said.

Also, to apply for the subsidies, farmers have to complete complicated application procedures, are limited to buying only older appliance models, and find it hard to obtain invoices from retailers. This would prevent rural spending from further expansion, he said. The scheme to subsidize farmers' home-appliance purchases as a way to tap rural potential has to be enhanced by other more effective measures, he said.

Difficulties in increasing farmers' income are paramount this year. The increase in rural residents' incomes slowed in the first four months. More important is that the real per-capita disposable income of urban residents increased 11.2 percent in the first quarter, higher than the 8.6-percent increase that rural residents saw.

It is thought provoking that the income growth for rural residents was smaller than that of urban residents, but that their spending growth was higher than that of urban residents, Shi said. MOFCOM's Market System Development Department said in the announcement that it was "cautiously concerned" about this.

"It is uneasy to have this robust growth in rural spending amid the global economic downturn, but some factors of uncertainty within the macroeconomy will bring uncertainty to stable rural spending growth in the future," the announcement said.

The announcement also listed several problems to be addressed to activate rural commodity circulation and expand rural spending on consumer goods. On the one hand, the less than satisfying shopping environment in rural areas has prevented the farmers' potential demand for such goods from being tapped, the announcement said. Although China now has 260,000 small retail stores in rural areas, they cover only 49 percent of townships and 33 percent of administrative villages; and most grocery stores are run by rural couples. This has posed a great challenge for logistics infrastructure improvements in rural areas, it said.

On the other hand, millions of migrant workers have returned home after the outbreak of the global financial crisis last October. The stark reality for their reemployment has also affected increases in farmers' incomes. Their income growth has already slowed since the beginning of this year. To make it worse, the prices of agricultural products represented by pork prices have decreased in the past several months.