Wayne Xing, editor of the new English language publication China Automotive Review, has noted in an editorial that a recent policy directive banning restrictions on the use of small-displacement cars, could have a major impact on the development of China's vehicle market.

Currently vehicles with engines under 1.0L are banned on two of Beijing's major roads, ostensibly to alleviate traffic. However the real reason, says Xing, is that large cars are a government status symbol and that driving small cars in the city centre damages the country's image. There are similar restrictions in 80 other cities.

As the Chinese market becomes more dependent on consumers rather than institutions for its customers, demand for small cars is increasing. In contrast government institutions tend to generate demand for larger, luxury cars. A lengthened version of the Audi A6 is currently the 'official sedan' for senior government officials.

The policy directive also appears to be addressing the fact that energy consumption has become a major issue for a country increasingly dependent on oil imports, and environmental protection is on the agenda in preparation for the 2008 Olympic Games in Beijing.

Xing adds that the measure would benefit China's domestic OEMs such as Geely and Chery, and possibly lead to the emergence of more local Chinese brands.

The test of the policy will be its enforcement. Local authorities may be reluctant to lift restrictions.