ENGLISH EDITION OF THE WEEKLY CHINESE NEWSPAPER, IN-DEPTH AND INDEPENDENT
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China Studies Aiding Auto Industry
Summary:

As the bail-out plan for US auto makers stalled; China was studying ways to boost its declining auto industry, which has seen negative growth for two months straight due to the global economic downturn.

Incentives such as tax cuts, perks for voluntary scrapping of old cars ahead of their lifespan, and fuel price adjustments were under consideration, said Li Yizhong, Minister of Industry and Information Technology.

Li said the industry was crucial for spurring consumption, as its production chain stretched into numerous other sectors, including steel, chemical, petroleum, textile, and light industries.

The industry experienced robust growth in the first eight months of the year; however, its output slumped into negative growth at -0.7% in October following a dip in sales. Li revealed that available data suggested the figure would drop another 16% in November.

"Recently, the US, England and France have all been looking at ways to assist their auto industries. What can China do?" Li said at Friday press conference, which was also broadcasted live online.

China's Embattled Industry Sector
Friday's press conference was held to reveal the Chinese government's plan to promote growth and stability of industry, which was suffered in the fallout of the global financial crisis.

Official statistics showed the growth rate of industrial valued-added output has declined since July, when growth was 14.7%; but in August, it dropped to 12.8%, and then further down to 11.3% and 8.2% in September and October respectively.

The government admitted that the global financial storm had spread, affecting export-oriented businesses first and now spreading to other industries, leading to more bankruptcies, plant closures, reduced production, salaries and staff cuts. Small and medium enterprises were the worst hit.

"We have yet to get to the bottom of it. We expected the impact would deepen in December," Li said.

The government had recently singled out nine industries for special attention, including auto, steel, textile, shipping, light industry, petrochemical, electronic and communication. Fiscal and monetary measures were in the pipeline to help these struggling sectors to overcome tight liquidity and a harsher business environment.

On possible ways to help the auto industry, Li said suggestions included lowering consumer taxes for cars with 1.6-liter engines and below; providing incentives for car owners to voluntarily scrap their old cars and replace them with new ones.

Both the above measures were also environmentally-friendly, as bigger and older cars emitted more air pollution, Li added.

Also under consideration was setting criterion for government procurement to give priority to China-made vehicles. "All other countries are doing so, why shouldn't we?" Li asked, adding policy on lower interest car loans was also discussed.

On the soon-to-be introduced fuel price adjustments and fuel taxes, Li believed private car owners who logged relatively lower mileage would not be gravely impacted, as the fuel tax would be offset by lower fuel prices as proposed.

Li admitted however that the move would affect the transportation industry, but stressed that the government would provide subsidies for public transportation, such as taxis and buses.

 

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