Beijing likely to extend tax break for small cars

The Chinese government is expected to extend a 50 percent cut in the sales tax on small vehicles, according to an official with the China Association of Automobile Manufacturers, a government-backed industry body.

Government ministries are assessing the impact of the tax incentive on China's car market, Ye Shengji, vice secretary general of the association, said last week at a news briefing in Beijing. 

"The final decision will be made by the State Council, but the chances for an extension [of the tax cut] are very high," Ye said.

To stoke vehicle sales, Beijing halved the purchase tax last year to 5 percent for vehicles with engine displacements of 1.6 liters or less. The tax cut is due to expire at the end of the year.

The tax cut proved to be an effective incentive. In the first ten months of the year, China's light-vehicle sales rose 15 percent year on year to 19.09 million vehicles. 

During the same period, small vehicles accounted for 72 percent of sales, up 4.1 percentage points from a year earlier.

Ye's association has been lobbying the government to extend the tax cut for another year to prevent sales from stagnating.