China to ease car-buying restrictions for first time to prop up ailing market

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China plans to lift restrictions on all car purchases for the first time in the country’s history to stimulate growth, as sales fell for a 13th consecutive month in July.

Why it matters: The easing would mark a significant shift in policy for the world’s largest auto market. The government may look to help the flagging car sector and boost the economy, although this could hamper environmental protection progress.

  • Internal combustion engine cars make up almost all motors on China’s roads with only 1% of the 320 million total being electric as of last year, figures from the Ministry of Transport show.
  • Vehicle emissions made up about half of air pollutants in cities like Beijing and Shenzhen last year, Chinese media cited a government official as saying.

Detail: In a government statement released on Tuesday, the State Council urged local governments to “unleash the potential” of auto consumption and take actions like relaxing or even removing restrictions on car buying.

  • The rule is part of a broader policy package to boost consumption to offset the negative impacts of “multiple unfavorable factors at home and abroad,” said the government.
  • China’s economy has been hit hard this year as the trade dispute with the US escalated. Economic growth decelerated to 6.2% in the second quarter, the lowest level since 1991.
  • Auto sales fell 4.3% year on year to about 1.9 million units last month in China, following a decrease of 12.4% in the first half, according to figures from the China Association of Automobile Manufacturers.
  • Currently, eight cities adopt restrictive policies on car buying, including Beijing, Shanghai, and Hangzhou.
  • Local authorities in Guangzhou and Shenzhen already agreed in June to increase their joint quota by around 180,000 within two years.