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China to cancel subsidy of small-engine vehicles in 2011

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Back in 2009, the Chinese government agreed to slash the sales tax charged on vehicles sporting engines that displace 1.6 liters or less. The decision, which halved sales tax from ten percent to five percent, was meant to spur buyers into purchasing fuel-efficient autos. Well, the measly savings, which amounted to an average of $442 per vehicle, didn't exactly ignite a buying frenzy.

When the new year rolls in, China will resume levying a ten percent purchase tax on vehicles equipped with those smaller engines. Liu Shangxi, an official with the Chinese Ministry of Finance, explains the situation from the government's point of view. Shangxi suggests that the tax cut program was only launched to boost domestic consumption amid the financial turmoil that hit the nation hard back in 2009 and, now that the crisis has come to an end, it's time for the policy to vanish.

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[Source: People's Daily]

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