Honolulu, March 29:

Concerned about rising oil consumption and deteriorating environment, China has decided to promote use of energy-efficient small cars.

The government will introduce a new consumption tax from April 1 that could mean a bumpy ride for many of the upwardly mobile middle class in that country.

“To dissuade people from buying cars with large engines, the central government is

restructuring the consumption tax on auto purchases.

They have broadened the tax from three categories with an eight per cent ceiling to six categories topping out at 20 per cent,” said ZhongXiang Zhang, a senior fellow at the East-West Center here.

ZhongXiang pointed out that the new tax structure went hand-in-hand with a government order enacted earlier this year to lift all restrictions on small cars. “Since the early 1990s, many Chinese cities have put restrictions on small vehicles, usually those with engines of less than 1 to 1.3-liter displacement,” he says.

“Local authorities view small cars as slower, less reliable, more polluting and less attractive for their city’s image.”

But the road ahead may be a bumpy one. ZhongXiang pointed out that that 84 cities in 22 Chinese provinces had restrictions on small cars. “The central government is having trouble implementing its policy because the lifting of all restrictions on small cars involves dealing with competing interests between the central and local governments.

The economic reforms over the past 26 years have shifted control over resources and decision making to local governments and enterprises.”

About the new consumption tax rates, ZhongXiang did not see them curtailing the purchasing habits of China’s wealthier middle class. “Those with money, and there are many, will not worry about the tax. They will still want their bigger, more powerful cars. The only thing the new rates may actually do is open the door to car ownership to even more people exacerbating the traffic and pollution problems in Chinese cities.”