Main­land to halve car pur­chase tax amid flag­ging sales

The China Post - - BUSINESS INDEX & -

Main­land China said Wed­nes­day it will halve pur­chase taxes on ve­hi­cles with small en­gines, in an at­tempt to boost sales in the world’s largest car mar­ket where de­mand has weak­ened.

Car sales in China have been fall­ing for five straight months since April as ex­pan­sion of the world’s sec­ond-largest econ­omy has slowed.

The cut ef­fec­tive from Thurs­day ap­plies to pas­sen­ger cars with en­gines of 1.6 liters or less and seat­ing fewer than 10 peo­ple, the fi­nance min­istry said in a state­ment.

The pol­icy — which sets the sales tax at 5 per­cent — will last un­til the end of next year, it added.

Num­ber plate re­stric­tions in some ma­jor cities to ease traf­fic grid­lock and volatil­ity on China’s stock ex­changes have weighed on de­mand.

In­dus­try group the China As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers re­port­edly said it ex­pected sales to de­crease this year.

The tax in­cen­tive comes af­ter China’s state coun­cil said Tues­day it would of­fer sup­port for “new energy” cars, by lift­ing li­cense re­stric­tions in an at­tempt to “cul­ti­vate new eco­nomic growth driv­ers.”

China im­posed a sim­i­lar tax cut in 2009 dur­ing the af­ter­math of the global fi­nan­cial cri­sis, which helped China to over­take the United States as the world’s big­gest car mar­ket. The pol­icy was scrapped in 2011.

The tax an­nounce­ment is ex­pected to help Ger­man car­maker Volk­swa­gen — which is em­broiled in an emis­sion-cheat­ing scan­dal world­wide — as China rep­re­sents more than a third of their global sales.

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