BEIJING, Jan 26 (Reuters) - China will tighten regulations over new energy vehicle (NEV) subsidies, and will incrementally phase out all subsidies by sometime after 2020, Finance Minister Lou Jiwei said in weekend comments carried by state media on Tuesday.
Recent illegal actions including the passing off of non-new energy vehicles as new energy vehicles and the reporting of false statistics by companies, cases which were reported by media, have forced the finance ministry to investigate fraudulent cases in the world's largest market for new energy vehicles, Lou said.
Last year, China's new energy vehicles numbered over 300,000, a large jump from fewer than 1,000 NEVs in 2011, making China both the world's largest manufacturer and consumer of NEVs.
In the last few years, the Chinese government has churned out preferential measures for NEVs including favourable tax policies, buyers' subsidies, government purchases, technology research and development, and re-charging subsidies, as a way to nurture the young industry.
But as the preferential policies are intended to nurture the young market, Lou warned it is easy for firms to be infected in the long-run with "reliance disease", leading them to slack in technology research and development and in their drive to advance their own products.
In such a scenario, the industry will "expand blindly with low standards" and "develop overcapacity," Lou said.
In seeking to target NEV subsidy fraud, Lou said the finance ministry will work with other ministries to increase the threshold for subsidies, and offer support for firms with higher performance. Firms unable to reach the industry's standard, on the other hand, will not be eligible for subsidies, Lou said.
"Counterfeits and deceptive actions to obtain subsidies not only violates the law and financial regulations, but it also destroys the market environment. We absolutely won't be softhearted. We will establish a black list of firms which have lost credibility, and seriously crack down on various deceiving and rent-seeking actions," Xinhua news agency quoted Lou as saying.
Last year, in an attempt to force firms to squarely adjust to market demand, the finance ministry announced that in 2017-2018 new energy vehicle subsidies will decrease 20 percent from 2016 levels, and will further decrease in 2019-2020 by 40 percent. After 2020, all subsidies will be phased out, it said.
Lou said the next steps in terms of government policy over NEVs include strengthening the oversight of funds, as well as curbing subsidy fraud and other rent-seeking behaviour. He added that the results of the ministry's investigation will be made public. (Reporting by Jess Macy Yu and Jake Spring; Editing by Sunil Nair)