China's annual auto sales will rise by 5 percent in 2009 and for the first time will outstrip US sales, says the China Association of Automobile Manufacturers (CAAM).

Dong Yang, CAAM's executive deputy director and secretary-general predicted China's auto sales will outstrip the USA's in 2009. But he added that the expected performance reflected continuing strong demand in the Chinese market rather than improvements in product development and management in the domestic industry.

CAAM's statistics, released on February 10th, show that in January China, for the first time, recorded higher monthly sales than the USA, with 735,500 compared to the US figure of 657,000. Demand slipped in both countries, however, by 14.35 percent in China and 37 percent in the US. A favorable tax policy in China spurred a 4.43 percent increase the January passenger vehicle figures.

The January statistics show that tax cuts have boosted sales of low-emission vehicles. It gave sales of multi-purpose passenger vehicles the biggest push, with a 50 percent increase over the previous month.

Zhu Yiping, assistant secretary-general of CAAM said that the major market for multi-purpose passengers is rural areas because of the vehicles' low prices and powerful engines, combined with the government's preferential policies towards agriculture. So far, the stimulus plan for the automobile industry has been quite effective, Zhu said adding that more detailed measures were still needed in rural areas.

On January 14, the State Council approved a plan to stimulate and modernize the automobile industry. The tax rate on vehicles of 1.6 liters or below will be reduced from 10 percent to 5 percent. In addition, the government will spend 5 billion yuan (US$729 million) on subsidies to farmers to convert their utility vehicles, or purchase mini-vehicles of 1.3 liters or below.

(China.org.cn by Pang Li February 11, 2009)