Blaming intense competition in China’s refrigerator market, Kelon reported significant losses in 2000 and 2001. An accounting scandal revealed that the listed firm and its parent group had routinely shared credit facilities and paid each other’s operating expenses. Another Chinese refrigeration firm, Greencool Enterprises, acquired a majority shareholding in Kelon in late 2001. Kelon’s new management introduced a strategy of targeting China’s rural population, selling nearly a million units of a new lower-priced brand in the first year. Haier already had a strong presence in the rural markets, but had not specifically targeted this segment with specially priced products. “The future lies in the second-line and third-line markets, which is the rural population in counties and townships,” said Kelon’s chief executive. In 2003, about 23% of rural Chinese households owned a
refrigerator. Kelon posted a modest profit in 2003, but reported a loss of RMB 44.7 million in 2004,
citing weak sales.