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Subsidies on vehicles for farmers

CHINA is to give subsidies of more than 10 percent to farmers for buying fuel efficient vehicles as part of a bid to increase consumption in the countryside and slow the decline in vehicle sales.

Last month the central government said from March 1 to December 31 it planned to spend 5 billion yuan (US$731 million) on one-off subsidies to farmers replacing three-wheeled vehicles or trucks with 1.3-liter-engine vehicles or smaller.

"Each purchase will be subsidized between 3,000 yuan to 5,000 yuan," said Rao Da, secretary general of China Passenger Car Association.

"This may work effectively to boost the sales of minivans by 100,000 units this year."

A series of stimulus plans also include tax cuts on vehicles with an engine capacity of less than 1.6 liters and offering subsidies to car makers to develop new-energy and self-branded vehicles.

Wang Zhihui, an auto analyst from China International Capital Co Ltd, said the subsidies would mostly benefit the makers of minivans and light trucks.

China's vehicle sales grew 6.7 percent to 9.38 million units last year, the first time growth has fallen below 10 percent since 1999. January sales continued to dip 0.2 percent to 647,594 units from a year earlier, according to China Association of Automobile Manufactures.

But Rao said the decline was less than expected as falling oil prices and tax cuts played a positive role.

"Small-engine vehicles and minivans posted sales growth," said Rao.

Meanwhile, China is also to offer subsidies of at least 42,000 yuan for new-energy vehicles to help cover the price difference compared to traditional models, according to the Ministry of Commerce.

Subsidies of around 60,000 yuan per vehicle are also to be provided to the public-transport segment and government agencies.


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