With November economic figures out later today expected to show further sold growth in the economy, China has acted to curb speculation in real estate and cool the booming car sector.
China’s car sales jumped by more than 100% in November to 1.10 million, up 10.3% from November last year (when sales were falling sharply) and up 9.5% from October.
It was the first time the domestic monthly production and sales broke the 1 million unit barrier.
Total output of the sector hit 1.08 million units, 101% higher than that of November 2008.
That has seen steps to cool and redirect demand for new cars, and for attempts to quieten the booming property sector by the government’s major policy implementation group.
The country’s State Council, the most important body for implementing policy, has decided to scrap a tax break on property sales.
The State Council will re-impose a sales tax on homes sold within five years after cutting the period to two years in December-January, to help the weakened property sector.
That was after property prices in the 70 major urban areas fell in the year to December 2009 as the impact of the credit crunch and global recession rippled through China.
Now the central government will reduce some tax breaks for urban car buyers, while continuing to fund vehicle purchases in rural areas.
The move on property follows several months of rapidly rising prices, including a 3.9% rise in October from September.
Figures out yesterday showed property prices rose in November at the fastest rate for more than a year.
But it was the further acceleration in November, with a 5.7% jump from October that seems to have triggered the move by the government.
The government will also scale back preferential tax rates offered for purchases of vehicles with engines of 1.6 litres or smaller.
China in January cut the sales tax on the vehicles to 5% from 10%.
It also introduced the incentive to revive demand after auto sales rose at the slowest pace in a decade last year.
The rate will be 7.5% in 2010.
The tax cut had the desired impact.
In fact after the strong rise in November, China looks like selling (and producing) over 13 million vehicles in calendar 2009, the biggest ever and surpassing the depressed American industry.
China will also pick five cities for trials of subsidies designed to encourage individuals to buy alternative energy and energy-efficient cars, such as hybrids.
The State Council said the government will increase automobile trade-in subsidies to between 5,000 Yuan and 18,000 Yuan for these vehicle types, and extend subsidies for purchases of automobiles, household appliances and farming equipment in rural areas.
That follows statements from the Commerce Ministry two weeks ago which foreshadowed the move to boost consumption of whitegoods and other household appliances.
China will continue appliance trade-in subsidies beyond May next year when they had been expected to end.
Subsidies for motorcycle purchases will be extended to the end of January 2013.
The State Council decisions follow meetings of the government’s annual economic planning group in Beijing this week.
The State Council made the point in Wednesday’s statement that the government will endeavour to tap into the domestic market to boost consumption.
The statement said "China will continue to expand domestic consumption next year and especially to highlight consumption’s role in boosting economic growth, as China’s economy will still face many challenges next year, according to a statement on the Xinhua website.
"Policies to subsidize rural households to buy electric appliances will be continued next year and policies to subsidize rural households to buy automobiles will be prolonged to the end of next year.
"After home appliance replacement ended trial operation in May next year, the policies will be fully carried out and further promoted.
"Measures to subsidize agricultural equipment will be continued.
"Policies to reduce purchase tax on passenger cars will be continued but adjusted to 7.5 percent for models with engine displacements of less than 1.6 liters.
"The Chinese government is to raise the earnings of the middle and low income groups to boost consumer spending.
"The government will also raise the pensions for enterprise retirees and improve treatment for those who enjoy special care."
