China offers incentives to replace old cars

China will expand payment of subsidies for replacement of aged cars and electronic appliances. The move follows success of the incentive program in rural areas.

The Chinese State Council in a meeting presided over by Premier Wen Jiabao Tuesday decided to provide a 10-percent subsidy for the purchase of new products to replace aged appliances.

Beijing has also significantly increased subsidies for new car purchases in return for replacement of aged vehicles.

The appliances eligible for subsidies include TVs, refrigerators, washing machines, air conditioners and PCs. The program will be introduced first on a trial basis in five provinces and major cities including Shanghai, Tianjin, Jiangsu, Zhejiang, Shandong, Guangdong, Fuzhou and Changsha, and then be expanded to other regions.

Owners of trucks and buses exceeding a given age or cars failing to meet certain environmental standards can also receive subsidies if they scrap the old vehicles for new ones.

The budget for the subsidy program has also increased from one billion yuan ($146 million) to six billion yuan. The Chinese government expects the policy to not only promote the automotive industry and improve air quality but also increase energy efficiency.

Earlier, Beijing began to offer tax cuts for buyers of small vehicles with engines 1.6 liters or less in January. In February, a 13-percent subsidy was given to rural residents who purchased electronic appliances, as the support program expanded nationwide.

In March, Beijing introduced a car purchase support program and began to pay a 10-percent subsidy to rural residents who bought cars with engines 1.3 liters or less, or small trucks to replace three-wheeled vehicles or aged cars.

Thanks to these promotions, retail sales in China jumped 14.8 percent last month year-on-year, while the automotive market continues to boom.