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China plans tax cuts, subsidies for auto industry

China plans tax cuts, subsidies for auto industry

China has approved a new set of tax cuts and subsidies aimed at boosting flagging demand for cars, while pledging more help for its ailing steel sector.
The measures, approved at a meeting of the State Council on Wednesday, are intended to encourage purchases of cars and other vehicles, especially in the vast countryside. They are meant to help autos and auto parts makers upgrade to more modern, energy-efficient technology.
Auto sales grew 6.7 percent last year, the first time growth has fallen below 10 percent since 1999. Leaders are banking on strong demand in the countryside, which has lagged the consumer boom of the cities, to help tide the country through the lean months ahead, given the plunge in overseas demand for China's exports.
Expectations that the industries would get fresh help spurred a share rally on Wednesday. The benchmark Shanghai Composite Index rose 3.5 percent to 1,928.87, with Baoshan Iron & Steel, one of the country's biggest steelmakers, rising 3.4 percent to 5.13 yuan.
It appeared likely that the new measures are part of a wider 4 trillion yuan ($586 billion) stimulus package announced in November that is aimed at countering a sharp slowdown by boosting domestic consumption.
From Jan. 20 to the end of this year, the government will reduce the tax on purchases of cars with engines smaller than 1.6 liters to 5 percent, the State Council said in a statement on the official government Web site.
From March 1 until Dec. 31, it has earmarked 5 billion yuan ($730 million) to provide one-time subsidies to farmers who opt to replace three-wheeled vehicles or outdated trucks with small, 1.3-liter engine or less vehicles, it said without giving further details.
In the next three years the government will provide 10 billion yuan ($1.5 billion) to automakers to help upgrade their technology and develop alternative energy vehicles, it said.
"Irrational" regulations would also be scrapped, it said without elaborating.
The measures "are crucial for promoting stable, rather fast economic development in those industries," it said.
Tax hikes on big-engine gas guzzlers were apparently left in place.
Wednesday's announcement also outlined broad goals, but no specifics, for restructuring the steel industry to help eliminate outdated technology, promote energy conservation and encourage consumption.
At the same time, it warned against reverting to the "excessive expansion" that has left the industry with huge inventories of substandard steel.


Updated : 2021-07-31 11:14 GMT+08:00