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| A Chinese man works at a steel market in Shenyang in northeast China's Liaoning province. | ||
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, endorsed by the State Council, or Cabinet, at a meeting Wednesday, are intended to encourage purchases of cars and other vehicles, especially in the vast countryside and to help automakers and 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 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.
China's planners have long sought to consolidate and upgrade the auto and steel industries, which are highly fragmented with many smaller, regional companies using outdated, uncompetitive technologies.
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.
The new measures appear to be part of a wider 4 trillion yuan ($586 billion) stimulus package announced in November.
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 from the current 10 percent, the State Council said in a statement on the official government Web site.
More crucially, from March 1 until Dec. 31 the government plans to spend 5 billion yuan on one-time subsidies to farmers opting to replace three-wheeled vehicles or outdated trucks with small, 1.3-liter engine or less vehicles, it said without giving further details.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 to automakers to help upgrade their technology and develop alternative energy vehicles, it said.
The measures "are crucial for promoting stable, rather fast economic development in those industries," it said.
Tax hikes on big-engine gas guzzlers, announced last summer, 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announcement also outlined broad goals, but no specifics, for restructuring the steel industry to help eliminate outdated technology, promote energy conservation and encourage consumption.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 often substandard steel.
By Elaine Kurtenbach (AP)
