On August 13, 2008, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) issued the Notification on Adjusting the Consumption Tax of Passenger Cars. The notification, which takes effect on September 1, 2008, lowers the consumption tax on passenger vehicles with a cylinder capacity of less than 1 liter and raises such taxes on passenger vehicles with a cylinder capacity of more than 3 liters.

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The government made these adjustments to promote the development of smaller-capacity, more fuel efficient engines to reduce emissions and to encourage energy conservation and environment protection. The move is part of China’s ongoing campaign to decrease major emissions by 10 percent and cut energy intensity by 20 percent between 2006 and 2010.