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China’s Officials Forced to Sell Luxury Cars

Chinese car buyers check out the German automaker's new Audi A8, in Beijing 28 July 2003. Sales of passenger cars in China rose 89 percent to 739,046 in the five months to May compared with the same period a year earlier, as for the month of May alone, sales reached 159,872 units, up 69 percent from a year ago.
AFP | Getty Images
Chinese car buyers check out the German automaker's new Audi A8, in Beijing 28 July 2003. Sales of passenger cars in China rose 89 percent to 739,046 in the five months to May compared with the same period a year earlier, as for the month of May alone, sales reached 159,872 units, up 69 percent from a year ago.

Cash-strapped local governments in China have begun auctioning off fleets of officials’ luxury cars as part of efforts to bolster revenues hit by the country’s slowdown.

Wenzhou, a south-eastern coastal city hit hard by the cooling economy, sold 215 cars at the weekend, fetching Rmb10.6 million ($1.7 million). It plans to sell 1,300 vehicles – 80 percent of the municipal fleet – by the end of the year.

Government revenues from tax and land sales in Wenzhou have been declining after years of heady growth. With the city’s risk-taking businesses struggling to pay back debts, the burden has fallen on the local government to turn things around. State media noted the auctions would directly boost the city’s coffers.

Wenzhou is not alone. Across the country, from Kunming in the south to Datong in the north, officials have been tightening their belts, paring back on banquets, curtailing travel and trimming the fleets of tinted-window luxury cars that have long been standard issue – even in the middle ranks of government.

“It is a sign of the difficulties facing city finances,” said Tao Ran, a local government expert at People’s University in Beijing.

While government car auctions have been held before in China, such sales have increased in recent months and state media have urged more officials to follow suit. Cities have been told to keep police cars and ambulances, but to sell the chauffeured sedans that do not comply with government policy.

About one in every five Audis in China – the German car’s biggest market – is owned by the government, according to industry estimates. More egregious examples – of police driving Porsches, and even a Maserati with military plates – have also prompted Chinese citizens angry about official corruption to post pictures of the cars online.

In publicizing the auctions, the government is aiming to head off that anger – all the more important in a year when China embarks on a once-in-a-decade leadership transition.

Local officials, who have shown little sign of responding to past criticism of their car-buying habits, appear to be motivated mainly by the downturn.

The cooling property market has deprived them of land sales, which is traditionally a key source of cash, and fiscal revenue growth is nearly 20 percentage points lower than last year.

Official cars cost China about Rmb100 billion annually, and auctioning off the luxury fleets is one easy, if temporary, way to try to plug the gap in local finances.

Yulin, a city in Shaanxi province that until recently boomed from its coal mines, raised Rmb5.6 million on one day in June by selling 19 cars – an average of Rmb292,600 per vehicle, according to the Communist party newspaper People’s Daily. Up for grabs were black Audis, the car of choice for Chinese officialdom, though the hottest item was a Toyota Land Cruiser, much coveted on mining roads.

Other cities, including Changzhou and Nanchang, said they started auctioning cars last year. The trend is also spreading to poorer villages, with Yuan’an, a farming county in central China, boasting on its official website about a June 18 auction that netted Rmb220,000.

The municipalities say the auctions are their way of implementing a central government policy to root out misuse and illegal purchases of official cars. But despite policy being in place since 1994, the number of government cars has mushroomed.

“It’s not only about reform,” said Prof Tao. “Many are short of money.”

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