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Auto subsidies boost rural consumption
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A new policy that gives subsidies to farmers who purchase vehicles in the countryside officially took effect on Sunday. According to the policy, the State Council will allocate a subsidy fund of 5 billion yuan for people who buy cars that have an engine size of 1.3 liters or smaller.

The new policy has prompted many farmers around the country to go car buying.

Liu Xingnong, a buyer, says, "the government will subsidize me, and I only have to pay around five to six thousand yuan to buy a truck that's much better than my old one. I'm very happy."

The preferential policy will save around five thousand yuan for farmers who buy a car worth 40 to 50 thousand yuan.

And it also means a big boost for the auto industry. It's expected the policy will be directly responsible for 50 billion yuan worth of consumption in the countryside.

Zhang Xiaoyu, executive vice president of China Machinery Industry Federation, says, "the auto industry may see a 5 percent growth rate in 2009 without the stimulus policies, but if these measures are completely carried out, we will see the output increase by at least 10 percent this year."

Auto makers are also seizing this opportunity to expand their business in rural areas. Many compact car manufacturers are developing products to meet the requirement of farmers.

Zhao Jingguang, Beiqi Foton Auto, says, "we will make some adjustments to our models so as to meet both the policies' requirements and rural demand."

Analysts forecast light vans will be the most popular model among farmers, saying that 5 billion yuan in fiscal subsidies will prompt the purchase of around one million light vans and compact cars. Including related industries such as auto insurance and maintenance, the policy could result in more than 100 billion yuan of rural consumption.

(CCTV March 3, 2009)

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