China expands old-for-new subsidies

In its latest move to stimulate the economy, China announced plans to expand a programme of subsidies for new car and home-appliance purchases to major cities, the Associated Press reported. First introduced in rural areas, the “swapping old for new” subsidies will be available in Beijing, Shanghai, Tianjin and several provinces in affluent coastal regions.

The State Council decision is meant to support domestic industries affected by a slump in demand for exports, and to encourage use of more energy-efficient, less-polluting cars and appliances. It follows plans outlined by the government on Monday for revitalising and restructuring China’s light industries (which include home appliances) and the petroleum-refining sector. Those plans are meant to create about three million jobs.

It was unclear whether some of the costs are included in a four trillion yuan (US$586 billion) economic stimulus package – focused on construction projects – that was announced in late 2008. Officials had promised additional help if that package failed to boost the economy.

Beijing plans to spend five billion yuan (US$732 million) on subsidies to consumers who trade in older vehicles for new ones. Two billion yuan (US$290 million) is to be allocated to the appliance subsidy programme, which will pay 10% rebates on the purchase price.

In the refining sector, China seeks to increase the processing capacity of crude oil by roughly 18% over last year and build at least three large, modern refineries in the Yangtze and Pearl River deltas. In light industry, the government intends to upgrade technology and provide more financial support for small- and medium-sized businesses. Plans also call for such businesses to be less polluting, less wasteful and more energy efficient.

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