Chinese carmakers surge on govt subsidy scheme

Shares of Chinese car makers soared Wednesday after the government issued details of a subsidy scheme that could stimulate billions of dollars in consumers spending.

Car owners who replace their old vehicles with new ones will receive a state subsidy of between 3,000 yuan (439 dollars) and 6,000 yuan per unit until the end of May next year, the commerce ministry said in a statement.

The government has allocated five billion yuan for the programme, the statement released Tuesday said.

Chinese regulations mandate that car owners must replace their cars after a certain time period depending on its make and size and whether or not it can pass pollution emission tests.

Commerce minister Chen Deming, the subsidy policy is aimed at getting vehicle owners to buy new ones this year when a total of 2.7 million cars are expected to be scrapped.

The move, coupled with up to 90 million household appliances that need to be replaced this year, could generate more than 500 billion yuan in demand, Chen said Wednesday.

Beijing has said it will earmark two billion yuan this year to subsidise consumers who sell their home appliances for new ones.

Shares in Chinese auto makers surged after the announcements.

Chongqing Changan Automobile ended up 8.7 percent at 11.15 yuan, and SAIC Motor rose 3.1 percent to 19.55 yuan.

Beijing has introduced a series of measures, such as subsidising farmers' purchases of home appliances and small cars, to encourage consumers to spend in the face of slumping exports due to the financial crisis.