Watch VideoPlay Video
A government official says China should end preferential policies for car companies in order to curb over-capacity in its auto industry.
China's auto sales jumped a staggering 55 percent in August. Chen Bin, a senior official at the National Development and Reform Commission, said booming auto sales are leading to blind investments in the industry and could result in an annual production capacity of over 31 million units in 2015. He says that number will far outstrip market demand for the period.
Chen Bin, Official of National Development and Reform Commission said "Serious overproduction will lead to negative market competitiveness, a loss in enterprise efficiency, factory stoppages, and other problems."
Last year, China overtook the United Sates to become the world's largest car producer and market, with output hitting 13.79 million and sales reaching 13.64 million units. 27 of the Chinese mainland's 31 provinces, autonomous regions and municipalities have plants that are able to produce finished vehicles. Chen warned that the local governments have been making uninformed decisions to open new factories and expand capacity... encouraged by the industry's healthy profits and economic benefits.
Chen Bin said "In order to curb overcapacity, local governments should stop pushing manufactures to increase production and end preferential tax and land policies aimed at spurring production."
Chen also says the industry uses preferential energy-saving polices to ramp up traditional automotive products and this should be curbed as well.