Beijing Offers New-Car Subsidy to Farmers in China

In a unique Chinese twist on economic stimulus measures, the central government is offering to subsidize 10 percent of the purchase price of a new car to farmers who trade in their old vehicles.

In an effort to boost vehicle demand, from March 1 to the end of the year, farmers who opt to replace three-wheeled vehicles or old trucks for new light commercial vehicles or minibuses powered by a 1.3-liter engine or less will get a maximum subsidy of $731, the Ministry of Finance said.

The subsidies "not only bring benefits to farmers, but also are important measures to create domestic consumption," the ministry said.

The measures are part of the $700 million in auto subsidies in the government's rescue plan for the industry, which is banking on stronger demand in rural areas to rev up flagging sales caused by China's cooling economy and the global financial crisis.

The plan, announced Monday, also includes a $300 subsidy to farmers if they scrap three-wheeled vehicles and $450 to get rid of low-speed trucks.

Industry analysts estimated that the "Vehicles Sent to Village" program would create additional demand for 1 million units this year.

The central government approved tax cuts and subsidies in mid-January to lift sales. It temporarily halved the purchase tax to 5 percent for automobiles with engines smaller than 1.6 liters.

 

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