CHINA UNVEILS STIMULUS PACKAGE FOR AUTO AND STEEL SECTORS

BEIJING, Jan 15 (Bernama) -- China has issued measures to prop up its ailing
auto and steel industries and is expected to unveil support moves for eight more
sectors including shipbuilding, petrochemicals and textiles in the coming days.

With domestic auto sales growth falling to a 10 year low in 2008, the State
Council on Wednesday cut sales tax from 10 per cent to 5 per cent for cars with
engines of less than 1.6 litres starting Jan 20 and increased subsidies for car
owners to switch to new smaller engine vehicles, China Daily said.

"In order to adjust and revive the auto sector, we must implement a
proactive consumption policy to stabilise and boost auto demand," said the State
Council which promised to cancel "any unreasonable rules" hampering sales.

The cabinet also passed five billion yuan (RM2.5 billion) to help farmers
replace three-wheeled vehicles and slow trucks to mini trucks or van.

The stimulus package also includes another 10 billion yuan (RM5 billion) to
help automakers upgrade their technology and develop alternative energy vehicles
to meet the government's aim of having mass produced electric powered vehicles
in big and medium cities.

China Daily said the package is likely to benefit more than 80 auto and
steel-related firms in Shanghai and Shenzhen.

Last year, a quarter of 45 automakers did not meet even half of their
annual
targets as sales slumped to 9.38 million units of a 10 million target.

The 6.7 per cent growth, sharply down from 21.84 growth in 2007, dented the
profits of the country's 19 biggest auto producers.

To beef up the steel sector, the government would curb capacity increase and
to shut down outdated plants, China Daily said.

"It will adopt a flexible tax policy on steel exports to stabilise the
country's share in the global market," the report added.

Other measures include encouraging a restructure to form international scale
industry players, a special fund for technology upgrades, research and
innovation and increasing domestic demand.

China is the world's largest steel producer but demand last year was hit
badly by the global crisis.

Local media had reported that the measures for the industries are part of
the four trillion (RM2 trillion) economic stimulus package announced by the
government in November.
-- BERNAMA