Global PC giant Hewlett-Packard is speeding up its business in rural China, eager to win a larger share of the growing, but largely untapped market.

Chinese rural residents account for half of China's population, but the average per capita annual income is around $700.

Although it's a market that's difficult to penetrate, market research firm Gartner Inc said affordable prices and free add-ons will attract many who never owned a personal computer.

The Chinese government's rural PC program is expected to create 1.5 million new PC shipments in China this year.

More than 400,000 PCs were sold by August under the program, which gives rural residents a 13 percent rebate when they purchase selected products.

About 40 percent of PCs sold under the rural subsidy program were from China's Lenovo, while US-based HP accounted for about 1 percent of sales, according to the Ministry of Commerce.

Although HP is not a newcomer in China's rural market, its rural computer market was previously targeted at coastal regions where farmers earn more than in western regions.

HP's Chinese rival, Lenovo, has been working to expand its reach to rural counties and villages since 2004 and currently holds 42.4 percent of China's rural computer market.

Founder, another Chinese computer maker, has also been expanding into rural areas since 2004 and now has 5,000 shops in towns and villages.

HP's market share in China increased to 14 percent during the first half of this year, up from 5 percent in 2005, according to research firm IDC. The company now has 7,000 stores and 10,000 resale partners in China.

HP is also planning to establish 700 new county-level stores within the next three years.

Isaiah Cheung, vice president and general manager of the Personal Systems Group for HP China and Hong Kong, began introducing HP products to third-tier cities and remote, rural areas six years ago.

HP has since been growing at twice the industry average, making it the largest foreign computer maker in China, second only to domestic market leader Lenovo.

Cheung declined to discuss HP's rural market share in China, only saying that third-tier rural districts account for 40 percent of HP's market share.

In May, HP launched its "Harvest Plan" in joining China's PC subsidy program.

The Ministry of Commerce in March announced four large global PC vendors and 10 domestic PC markers as winners of the bid to supply PCs to 13 provinces for one year as part of the rural computer subsidy program.

All participating PC models are priced from $290 to $510 each, which is lower than the traditional retail price. Of these models, 67 percent are sold for less than $500 each.

"The Harvest Plan is more focused on the western region this time, and the 'five 100' will be mainly in the western part," Cheung said.

The "five 100" refers to HP's donations of 100 HP computer centers, 100 information caravans and 100 computer specialist training villages, as well as programs to train 100 teachers this year.

"The rural area is not a mature market, so HP not only hopes to earn money from the market, but we also would like to foster a market by boosting rural informationization," he said.

Wanzikou, a fishing village in East China's Shandong province, has a population of 3,000 and an average annual household income of $7,000. In the village, 70 percent of households chose HP computers.

The village is also one of the 100 HP computer centers, where HP dispatched information specialists to teach villagers how to use computers and the Internet.

Sun Yujiao, 30, a housewife who sells seafood at the online commerce site Taobao, finds HP's "Agriculture Trading Platform" software helpful to her business.

"It has information such as curing sick white shrimp and, moreover, I can find buyers through the trading center," Sun said.

"I bought a computer three years ago and am now considering buying a laptop, since the price is fairly affordable," she said.

HP sells information systems along with their computers to rural customers.

Every HP product comes with software that helps farmers master agricultural knowledge and obtain updated market information.

The PCs also were built to accommodate unpredictable variations in power supplies, which tend to be unstable in many rural regions.

Each HP computer is installed with software that allows adults to monitor their children's activities on the Internet.

HP has sent vans with information specialists to rural elementary schools to teach children, as well as farmers, how to use its PCs.

(China Daily 10/19/2009 page4)