China should avoid short-term measures to spur auto sales, adviser says
China should avoid short-term actions such as last year's purchase-tax cut to stimulate auto sales because they may result in overly fast growth and increase the risk of a steep downturn when they expire, said a former top government bureaucrat.
Instead, the government should consider long-term measures such as sales subsidies for rural residents to replace old, polluting vehicles, said Chen Bin, who was chief of the National Development and Reform Commission's industry department.
Chen stepped down in 2014.
"Policies should firstly ensure the healthy development of the auto industry," said Chen, now an executive vice chairman of the China Machinery Industry Federation, a state-backed advisory group. "Only by doing so can the industry act as a tool that benefits economic growth."
The tax cut that Chen criticized expires at the end of this year.
It helped revive demand for passenger vehicles, which had fallen for five straight months amid slowing economic growth.
Over the past five years, industry sales in China have grown 6.5 percent annually. The sector generates more than 10 percent of China's gross domestic product, tax income and employment, according to Sanford C. Bernstein & Co.
Last October, the central government halved the purchase tax to 5 percent on vehicles with engine displacements of 1.6 liters or smaller. The directive also forbade local municipalities from restricting the purchase of electric vehicles.
The government has not yet indicated whether it will extend the tax cut beyond December.
On April 23, Ford Motor Co. CEO Mark Fields said the health of China's economy and stability of financial markets may affect the government's decision whether to extend the tax cut.
Chen stepped down in 2014.
"Policies should firstly ensure the healthy development of the auto industry," said Chen, now an executive vice chairman of the China Machinery Industry Federation, a state-backed advisory group. "Only by doing so can the industry act as a tool that benefits economic growth."
The tax cut that Chen criticized expires at the end of this year.
It helped revive demand for passenger vehicles, which had fallen for five straight months amid slowing economic growth.
Over the past five years, industry sales in China have grown 6.5 percent annually. The sector generates more than 10 percent of China's gross domestic product, tax income and employment, according to Sanford C. Bernstein & Co.
Last October, the central government halved the purchase tax to 5 percent on vehicles with engine displacements of 1.6 liters or smaller. The directive also forbade local municipalities from restricting the purchase of electric vehicles.
The government has not yet indicated whether it will extend the tax cut beyond December.
On April 23, Ford Motor Co. CEO Mark Fields said the health of China's economy and stability of financial markets may affect the government's decision whether to extend the tax cut.
