Article China: "Cash for Clunkers" Programs

(Oct. 1, 2009) On June 1, 2009, the General Office of China's State Council announced a plan for an automobile and electronic appliance “old swap new” program, which was formulated by the National Development and Reform Commission and four other ministries and approved by the State Council (Guo Ban Fa [2009] No. 44 ). The plan provides RMB4 billion (about US$586 million) to fund the automobile “old swap new” program. On July 13, 2009, the Ministry of Finance (MOF) published the implementing measures of the program for automobiles (Cai Jian [2009] No. 333) (Measures).

Under the Measures, China's “old swap new” program is effective from June 1, 2009, to May 31, 2010. During this period of time, trading in a specified old or “yellow label” vehicle for a new vehicle is subsidized by up to RMB6,000 (about US$879). Vehicles that fail to meet certain emissions standards, generally the Euro I standard, would be issued a yellow label. Passenger cars with yellow labels are covered under this program and will qualify for the highest RMB6,000 subsidy. (Text of the plan [in Chinese], Central People's Government official website,; text of the Measures [in Chinese], (both last visited Sept. 24, 2009).)

The automobile “old swap new” program, however, is not the only program currently available in China providing monetary incentives for the scrapping of specified old or high-pollution vehicles. At least two other programs are offering vehicle scrapping incentives: the RMB1 billion (about US$146 million) “Scrapping and Renewal” program and the RMB5 billion (about US$714 million) “Automobiles to the Countryside” program. It appears that passenger cars were not covered in the previous two programs.

“Scrapping and Renewal” (bao fei geng xin) Program:

This is an existing program from a 2001 State Council regulation. On June 16, 2001, the State Council promulgated the Administrative Regulations on the Recovery of Scrapped Automobiles. It was established in the Regulations that the state encourages scrapping vehicles in order to improve road traffic safety and to protect the environment (art. 1). The State Economy and Trade Commission (whose responsibility in this regard has latterly been assumed by the Ministry of Commerce, MOFCOM) and the MOF were authorized to formulate the detailed stimulus policy (art. 4). (State Council Order No. 307 [in Chinese], June 16, 2001, Central People's Government official website, available at

In 2002, the two ministries jointly circulated the Interim Measures on the Subsidies Provided for Vehicle Scrapping and Renewal (Scrapping Measures), which stipulated that the state would grant subsidies to vehicle owners who scrap certain types of old vehicles. A list of eligible vehicles and the standards for the subsidies were to be formulated and published once each year. (Scrapping Measures [in Chinese], Cai Jian [2002] No. 742, Dec. 20, 2002, XINHUANET, available at

Under the 2009 Scope and Standards of Vehicle Scrapping and Renewal Subsidies (2009 Standards), the subsidies for scrapping various vehicles are:

· RMB10,000 (about US$1,429) for a rural area passenger bus registered in 2001-2005;

· RMB5,000 (about US$714) for a 7 to 9 year-old bus, semi-trailer, or cargo vehicle above standard size or weight, registered in 2000-2002; and

· RMB10,000-15,000 (about US$1,429-2,143) for a 7 to 9 year-old city bus, and replacing it within the same year with a city bus complying with certain national emission standards.

The purposes of the program, as indicated by the government statement with regard to the 2009 Standards, are first to accelerate the scrapping of old vehicles and therefore boost the country's manufacture and consumption of automobiles and second to reduce the pollution of the environment. In 2009, the central government will arrange a total of RMB1 billion to fund this program. (2009 Standards [in Chinese], MOF & MOFCOM, [2009] No. 20, Apr. 13, 2009, available at Central People's Government official website,

“Automobiles to the Countryside” (qiche xia xiang) Program:

This program was officially launched on March 16, 2009, to encourage automobile sales in the countryside. According to the plan, the state will reimburse up to RMB5,000 of a farmer's purchase of a minivan or light truck, in addition to subsidizing the scrapping of old vehicles, and up to RMB650 (about US$93) of the purchase of a motorcycle, effective between March 1 and December 31, 2009. (See also Laney Zhang, China: New Cash for Clunkers Plan, GLOBAL LEGAL MONITOR, May 26, 2009, available at

As the comments above illustrate, China's “cash for clunkers” programs are generally found in a string of administrative regulations, rules, and normative documents issued by the administrative authorities, instead of in a single piece of legislation approved by the National People's Congress.

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