China boosts subsidies to replace old vehicles

China will expand an existing subsidy scheme to encourage the replacement of old cars and buses as part of efforts to stimulate the domestic auto industry, the Ministry of Commerce said on Wednesday.

Subsidies will rise to 1 billion yuan ($147 million) this year from 600 million yuan ($88 million) in 2008, the ministry said on its website, www.mofcom.gov.cn.

The amount is small compared with the incentives on offer elsewhere. Germany plans to boost its "cash for clunkers" plan, which boosted car sales 40 percent in March, to 5 billion euros.

China's cabinet, the State Council, unveiled an array of tax cuts and subsidies in January to boost the auto sector, one of 10 pillar industries that the government is supporting with various policy initiatives.

Incentives to encourage people to buy smaller, more fuel-efficient cars helped propel Chinese vehicle sales to a record 1.1 million in March.

The extra cash announced on Wednesday is aimed in part at spurring the replacement of old buses in urban areas. Buses less than 9 meters in length will now be eligible for trade-in subsidies.

"The move is to speed up the upgrading of public buses and encourage people to use public transport," the ministry said.