Oriental Morning Post citing the Ministry of Finance said the preferential purchase tax rate for passenger vehicles with engine displacement of 1.6 liters and below will be canceled in 2011.

Such vehicles will be taxed at the general purchase tax rate of 10% along with larger vehicles. The Chinese government had granted a 50% discount off the purchase tax rate for the purchases of small vehicles in 2009 in order to stimulate domestic vehicle consumption which were affected by the financial crisis in 2008.

The tax rate was subsequently raised to 7.5% in 2010 resulting in a drop in the market share of small displacement vehicles.

According to data from the China Association of Automobile Manufacturers, the market share of passenger vehicles with displacement of 1.6 liters and below rose from 50% to 70% in 2009 when China became the world largest vehicle market and manufacturer for the first time.

(Sourced from Oriental Morning Post)