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China mulls steel, vehicle support programs

(Xinhua)
Updated: 2009-01-13 18:12

China's State Council, or the Cabinet, is expected to meet this week to discuss a support plan for the steel and vehicle industries, a spokesman of the country's top economic planning body told Xinhua Tuesday.

The official of the National Development and Reform Commission (NDRC) said, without elaborating, that a final government plan for these industries would follow the discussions.

According to a report in Tuesday's Shanghai Securities News, the NDRC met with industry associations and research institutes to discuss specific amendments to the proposal.

The plan sets a goal of 12 percent annual growth in car production and sales for each of the next three years, the newspaper reported, quoting the Ministry of Industry and Information Technology.

The plan might include measures concerning car purchase taxes and the recycling of used cars, the newspaper said. It added that sales taxes might be abolished on cars with engine capacities below 2 liters.

The vehicle and steel industries are among those China is trying to support amid the global economic crisis, according to the China Business News. Others include shipbuilding, chemicals, textiles, manufacturing and nonferrous metals, the Shanghai-based publication said on Tuesday.

China Business News quoted an unidentified government official as saying that these plans were part of the 4 trillion yuan ($586 billion) economic stimulus package issued last November.

The impetus for support plans comes from China's industry-wide overcapacity, which caused inventory build-ups and declining corporate profits, said Wang Yuping, an industry researcher with the NDRC.

Wang told the China Business News that industrial restructuring, which should include eliminating obsolete capacity and speeding up technological improvement, would be guidelines in the plans.

"Production capacity was expanded in good times, but a problem such as overcapacity can also occur in times outside of a financial crisis. The crisis and sagging demand just made the problem emerge sooner," Zheng Xianling, an analyst with the CITIC Group, told the paper.

Sales of domestically produced cars rose 6.7 percent year-on-year in 2008, a drastic reduction from the 21.84 percent growth rate in 2007, according to the China Association of Automobile Manufacturers.