Trade body suggests easing auto credit policy

China should ease its auto credit policy and convert part of its idle housing funds to finance car purchases, a move which could boost the sluggish auto market, an industry association suggested on Dec 25.

The average interest rate of an auto loan is 1.4 times the basic rate, and twice that of a housing loan, which is the main factor impeding auto consumption credit business, the National Passenger Car Information Exchange Association said.

About 16 percent of car buyers purchased their cars on credit in 2004, but the figure tumbled to eight percent in 2008, compared to the average 70 percent worldwide, according to the association.

A looser auto credit policy similar to the favorable housing credit policy should shore up auto consumption on credit to 13 percent, and push up a four percent increase in auto sales in 2009, according to the association.

China's auto industry would shrug off the current doldrums should the ratio reach 20 to 30 percent, Jia Xinguang, chief analyst of China National Automotive Industry Consulting & Developing Corp, told the Oriental Morning Post.

The State Council, or China's Cabinet, said in early December that the government would take measures to support auto consumption credit businesses, and extend auto financing companies' financing channels.

The association suggested converting the idle part of the housing fund, now amounting to 400 billion yuan ($58.39 billion), into a housing and auto consumption fund to finance individual house and car purchases.