China's auto and steel industry gets government stimulus

China, the world's third largest economy gave its auto and steel industry a boost when it unveiled a wide range of stimulus package to cope with the global financial turmoil that has put the brakes on its fast growing economy.

China, having the world's second-largest car market, recorded the slowest growth in the auto industry in 10 years, against sales and production targets of 10 million units as vehicle sales slowed to 6.7 per cent in 2008 after a continuous double-digit growth in the past five years. (See: China's auto sales post slowest growth in a decade)

The State Council came out with a stimulus package to the auto industry yesterday where the government will reduce the sales tax from the present 10 per cent to 5 per cent on cars that engines are less than 1.6 litres from 20 January to 31 December 2009.

The government will increase the subsidy to people who are willing to trade off their old polluting and gas guzzling cars to newer fuel efficient and low emission cars.

Under a $730-million package, farmers will get a one-time allowance to either upgrade their three-wheeled vehicles and low-speed trucks to mini-trucks or buy new mini-vans with engines less than 1.3 litres and the scheme is open from 1 March to the end of the year.

With 9.38 million vehicles being sold in the country last year, more than 93 per cent were sold in the domestic market but less than 10 per cent people bought their vehicle through credit and now the government will reform the credit system for car purchases so as to make more people avail of loans to buy cars in order to boost sales.