China to Boost Car Market With New Policies

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2009 and 2010 were golden years for the Chinese car industry with year on year growth of over 30%, however that has slowed down for 2011 and is looking even more miserable in 2012. China’s economy is still largely export driven but with a potential 1.2 billion consumers inside China the government is looking to offset export losses with internal consumption, namely through household electrical goods and of course automobile consumption.

China Daily are reporting on the governments new measures to stimulate the car market, one measure seems to hint at new subsidies to support those that are aiming to change their cars for new models. Of course China previously had several incentives for its local car market, the biggest one of all was a lower tax rate on sub 1.6L displacement cars, a cars to the countryside program where rural consumers were urged to swap their three wheeled motorbikes and other farm yard appliances in for small commercial vehicles and also a cash for clunkers scheme were above market rate subsidies were given to take older cars off the road. Should this new subsidy method get the go-ahead it is likely to be an extension of the cash for clunkers scheme that we have already seen, and will likely include other measures such as subsidies for school buses. The likelihood of sales tax being lowered on sub 1.6L cars once again is slim, the government already believes that the car industry does not need any more direct state support, but the government is actively trying to shape the automotive industry into a lean, green industry – ramping up the production and sales of high emission small displacement cars is not on the agenda.

Measures will be introduced to boost consumption, especially for vehicles and electrical appliances, as export demand weakens.

With tax rebate policies on vehicles and appliances having expired or due to expire, “new measures are in the pipeline,” to boost consumption, said Huang Hai, former assistant minister of commerce and member of the economic and trade policy consulting committee affiliated to the Ministry of Commerce.

“The Ministry of Commerce has drafted a proposal to continue the stimulus programs in the coming few years, but in different ways, and they are expected to cover vehicles and those related to real estate, say household appliances,” Huang told China Daily in an exclusive interview.

The measures may include subsidies for consumers in affordable housing to buy appliances and for those planning to change their cars.

Ministry of Commerce spokesman Shen Danyang also said the ministry is mulling over launching new programs, expected to be announced next week, on expanding domestic consumption.

The ministry is expected to hold the National Commerce Work Conference on Thursday and Friday, during which Commerce Minister Chen Deming will make a keynote speech.

Huang also disclosed that under the instructions of Premier Wen Jiabao a national circulation conference, the first of its kind, will be held around April.

Government officials will discuss how to introduce concrete measures to boost consumption at the conference, he added.

More than 10 central government departments including the Ministry of Commerce, the National Development and Reform Commission and the Ministry of Finance, are expected to make proposals after conducting research before the conference, Huang said.

China has sought to sustain fast economic growth through boosting domestic consumption, given the fact that export growth has been declining during the past few months with demand weakening from the European Union, China’s largest trade partner.