According to a report in China Daily the Chinese central government has no plans to slash a tax on vehicle purchases this year.

Earlier media reports had said that China may reduce the tax on purchasing cars with engine capacities between 1.8-2.0 litres.

In January, China halved the purchase tax on cars with engine capacities below 1.6 litres to 5 percent till the end of this year.

That gave small car sales in China a boost.

Between January and May, sales of domestic passenger cars with engine capacities below 1.6 litres accounted for nearly 70 percent of total sales.

China will continue its tax reduction policies for such cars in the next two years, the report said.

According to the automobile industry development plan issued by central government this March, China aims to increase both production and sales of cars by 10 percent each year from 2009 to 2011.