Dec. 12 – The Chinese government is mulling over either reducing or cutting purchase tax for vehicles and granting subsidies to environmentally friendly energy vehicles to encourage its use.

According to Shanghai Daily, Chinese carmakers, including Guangzhou Automobile Industrial Corp. and Geely Automobile Co., are asking for government support for slowing vehicle sales during the second half of this year.

“The adjustment on taxation could be one of the most effective measures to boost vehicle sales if the slowdown continues,” Dong Jianping, deputy secretary general of the China Association of Automobile Manufacturers.

He said a proposal has been submitted to the State Council and China’s Cabinet to abolish purchase tax depending on engine capacity to encouragethe use of smaller cars.

For the first 11 months of the year, Chinese vehicle production and sales in the mainland dropped below 10 percent, reports the in the first 11 months of this year, the first time since 2006, CAAM said yesterday. Between January and last month, China produced 8.7 million vehicles, up 7.98 percent on the same period last year, and sold 8.63 million, up 8.52 percent.

Wang Xia, vice chairman of the Automotive Industry Branch of the China International Trade Promotion Association, also told Shanghai Daily that the Ministry of Commerce is looking at proposals to offer financial subsidies to eco-friendly vehicles.

“The purchase incentives on new energy vehicles will come out very soon,” said Wang.

The government has been swift to implement policies it deems suitable to stabilize an economy affected by the global financial crisis.