The central government yesterday issued a notice to encourage the use of environmentally-friendly, low- emission cars.
All restrictions on such small cars must be lifted before the end of March, it said.
The notice said that active increase of small car use would help build an energy-efficient society.
"It will help alleviate energy shortages and protect the environment, as well as foster brands in China's automotive industry," the notice said.
The notice called on manufacturers to invest more in development and production of environmentally-friendly and low-emission engines and automobiles, such as small cars, diesel-powered vehicles and those using new fuel sources.
The notice urged government departments to use tax breaks and preferential oil-pricing policies to encourage consumers to buy such cars.
Industry sources said regulators are creating a new auto consumption tax scheme, which will slash taxes on low-emission vehicles while raising charges on high-emission vehicles.
For example, consumption taxes on less-than-1.0-litre vehicles will be lowered to 1 per cent from 3 per cent. In contrast, the taxes on larger-than-3.0-litre automobiles are likely to rise to 14-20 per cent from 8 per cent.
The government notice advocated lower parking charges for small vehicles.
It also demanded government departments remove all limitations on the use of small cars in the transportation and taxi sectors.
Currently, 84 Chinese cities curb the purchase and use of small cars using all kinds of excuses, such as bad image and traffic jams.
In Guangzhou, capital of South China's Guangdong Province, less-than-1.0-litre cars have been banned from having license plates since August 2001.
Industry experts and manufacturers welcomed the news.
"We have been waiting for this policy for a long time," said Zhu Yiping, an official from the China Association of Automobile Manufacturers.
He added that small cars have been one of the mainstays of China's domestic auto industry.
Despite some discrimination, small cars are becoming more and more popular in China mainly because of soaring oil prices.
Statistics from the auto association showed that the proportion of less-than-1.6-litre car sales among domestically-made passenger vehicles grew to 66.1 per cent in the first 11 months of last year, from 62.5 per cent in 2004.
Sales of made-in-China passenger vehicles totaled 3.51 million units during the period, up 19.48 per cent.
Most domestic brands compete in the low-emission segment. These include Chery, Geely, Xiali, Chang'an and Hafei.
"We expect to perform much better than before thanks to the new policy. We will launch more low-exhaust-emission models," Qing Lihong, a sales manager of Chery Automobile Co, said yesterday in a television interview.
The notice also called on government departments to take the lead in using environmentally friendly vehicles.
Automobiles guzzle the bulk of China's petrol, and the country has been the world's second biggest oil consumer after the United States since 2002.
According to industry statistics, more than three-fifths of China's total petrol output and one-fifth of its diesel output are used by vehicles at present.
China's annual crude oil imports are forecast to grow to 190 million by 2010 from 123 million tons in 2004.
(China Daily January 5, 2006)