Xinhua quoted the Ministry of Finance said China will resume levying a 10% purchase tax on vehicles with engine sizes of 1.6 liters or less beginning in 2011 as the country rebounds from the financial crisis and the economy has regained its rapid growth.

China halved the sales tax from 10% to 5% on cars with engines of 1.6 liters or smaller in 2009 to combat the financial crisis and spur the use of clean and fuel-efficient cars. The tax was then raised to 7.5% on January 1 this year.

Mr Liu Shangxi an official with the MOC said "China launched the tax incentive policy in 2009 to boost domestic consumption amid the financial crisis. The policy needs to be adjusted now as the country has ridden out the crisis."

Boosted by tax incentives and other favorable policies, China auto market grew rapidly in the past two years.

Last year, China overtook the United States to become the world largest auto market by selling 13.65 million vehicles up by 46%YoY while production that year jumped 48 percent to 13.79 million units.

(Sourced from Xinhua)