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Chance to push clean auto policy

(China Daily)
Updated: 2011-01-04 14:54

The Ministry of Finance has restarted levying 10 percent purchase tax on vehicles with engines of 1.6 liters or below. This is one of the government measures to cool down the auto market, which seems to have gone wild, says an article in Huashang Daily. Excerpts:

The government reduced the purchase tax on vehicles with engines of 1.6 liters and below from 10 to 5 percent in 2009 to boost domestic consumption in the wake of the global financial crisis. It raised the tax rate to 7.5 percent last year after the world economy seemed to be on the path of recovery.

Because of the tax incentive and other preferential policies, China's auto market grew rapidly in past two years and overtook the United States as the world's largest.

But the rapid growth has exposed certain defects, too. On one hand, rapid urbanization over the past three decades has created a regional imbalance in China, and the auto market has over-flourished in big cities, where the numbers of cars have multiplied manifold creating gridlocks and crippling road traffic.

On the other, the unbridled sale of cars has greatly consolidated sellers' status. The quality of cars and supporting services has declined to a certain extent, and customer complaints have increased.

The incentive policies need to be adjusted now, especially since China's economy has regained its vitality.

Macro-control implemented in a drastic way affected not only the auto industry, but also related industries such as the steel sector. Therefore imposition of restrictions on the auto industry is sure to affect the long-term development of related industries, too.

Hence, it is important for the government to introduce macro-control policies in phases and use this opportunity to push its auto industry toward a clean and fuel-efficient path.