China may cut or scrap car purchase tax from Feb

Shanghai, January 6 (Gasgoo.com) The Chinese government has finished drawing up policies to boost the steel and automobile industries, Premier Wen Jiabao said in Qingdao on Friday. The auto industry stimulus plan, which includes cuts in the vehicle purchase tax, may be launched next month, National Business Daily reported today.

The auto industry stimulus plan has been submitted to the State Council, China's Cabinet, for final approval. The Chinese government's many departments, such as the Ministry of Industry and Information Technology, National Development and Reform Commission, Ministry of Commerce, People's Bank of China, and State Administration of Foreign Exchange, will sign the plan before it is issued and implemented.

The Chinese auto industry stimulus package is intended to boost the auto market growth by 10% in 2009. Industry analysts said that the incentive measures, including the vehicle purchase tax cuts or exemption, auto financing support, and auto credit, are expected to stimulate the auto market demand and auto buying. The government's supportive policies will likely favor the Chinese brand vehicles powered by new energy.

An earlier media report said that China would cut the 10% tax paid by car buyers to 2% at least for engine sizes of up to 1 liter. The tax would be cut by less for larger cars, and stay at 10% for engines above 4 liter. It is also proposed that the tax be removed completely for the smallest cars.

Economic experts believe that cutting the purchase tax will be the most effective method for reviving the auto market. Sources said the auto industry stimulus plan would be launched after the Spring Festival, or Chinese New Year, which will fall on January 26 this year.