China ponders trade-off with congestion and pollution on car purchase incentives to boost economy
- Environmental policy may have to play second fiddle to building home markets
- Analysts say that ‘front-loading’ car sales may kick problems down the road
A debate over whether the Chinese government should extend financial incentives for car purchases to increase consumption and economic growth is heating up.
It started as sales in the world’s largest car market fell for the tenth month in a row in March. This created problems for domestic and foreign carmakers and hindered Beijing’s efforts to create a “powerful home market” that would offset the impact of China’s trade war with the US and slowing demand for Chinese exports.
As China’s factories are important sources of tax revenues and jobs for local authorities, lobbying at central government level has intensified.
However, Chinese policymakers must confront the challenges of urban traffic congestion and some of the world’s worst air pollution. Many Chinese cities, including Beijing, Shanghai, Guangzhou and Shenzhen, have imposed car licence plate lotteries or an auction system to limit the number of new cars on the road.
The debate is an early test of the balance in China’s priorities – incentives to improve consumption and economic growth or a better quality of life with lower traffic congestion and air pollution.