SteelOrbis Shanghai
At a meeting held this week, China's State Council (the Chinese cabinet) chaired by Premier Wen Jiabao approved a reduction of the sales tax on small cars and also stated its intention to curb steel outputs, as part of its plan to boost the country's automotive and steel industries.
Specifically regarding the auto industry, the State Council declared that the sales tax on vehicles with engines of capacity lower than 1.6 liters would be halved to five percent from January 20, 2009 to December 31, 2009. In addition, starting from March 1, 2009 to December 31, 2009, China will set aside RMB 5 billion in subsidies to be given to farmers for the exchange of old vehicles for new ones with engines smaller than 1.3 liters. Meanwhile, the government is also to provide financial support for the mass production of alternative-energy and fuel-efficient vehicles in large and medium cities.
Meanwhile, regarding the steel industry, at the State Council meeting it was agreed that, in order to speed up the development plan with regard to the steel industry, it would be necessary to focus on output control, elimination of disqualified capacities, mergers of mills and technical upgrades. Among the meeting's recommendations were:
1. To implement measures to boost domestic demand. A moderate and flexible export tax policy will be necessary for mills to acquire
shares in the international markets.
2. To strictly control steel output and eliminate disqualified capacities. The initiation of steel projects aimed only at capacity increase is to be forbidden.
3. To promote mergers between steel corporations. It is important to build up large-sized and super-sized steel groups which are competitive in the global markets.
4. To provide special capital funds for infrastructure investment within the State Budget. These funds will be used for technical upgrades, structural adjustments and quality improvements in the steel industry.
5. To establish principles of conduct by which enterprises in the iron ore import market will have to abide (e.g. in relation to high prices charged by companies qualified to import iron ore).