China halves car sales tax to boost sagging economy

China Car Tax For Small Engine Vehicles Cut In Half In Hopes To Boost Auto Market

In an effort to boost the world’s largest auto market, China announced it would halve its sales tax on small cars, according to Reuters. With the country’s economy continuing to slow, the tax cut is expected to run until the end of 2016.

The cut will apply to cars with a small engine, 1.6-liter or smaller, which makes up nearly 70 percent of total sales in China, Reuters reported. The move comes as China’s automobile market, the largest in the world since 2009, appears set to contract in 2015 for the first time since the 1990s, according to the Financial Times. New car sales in China fell for the third straight month in August amid sagging demand during an economic slowdown. Automakers were initially helped in August when China’s central bank cut the amount of reserves auto-financing firms must hold by 3.5 percentage points.

The government’s latest attempt to revive the market, announced by the cabinet Tuesday, initially boosted shares of Chinese automakers Wednesday. Great Wall Motor shot up by about 10 percent in Shanghai, with other carmakers rising, as well.

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