China\'s No. 3 Metropolis Moves to Limit New Cars

GUANGZHOU, China - It is as startling as if Detroit or Los Angeles restricted car ownership.

The municipal government of Guangzhou, a sprawling metropolis that is one of China's biggest auto manufacturing centers, introduced license plate auctions and lotteries last week that will roughly halve the number of new cars on the streets.

The crackdown by China's third-largest city is the most restrictive in a series of moves by big Chinese cities that are putting quality-of-life issues ahead of short-term economic growth, something the central government has struggled to do on a national scale.

The measures have the potential to help clean up China's notoriously dirty air and water, reduce long-term health care costs and improve the long-term quality of Chinese growth. But they are also imposing short-term costs, economists say, at a time when policy makers in Beijing and around the world are already concerned about a sharp economic slowdown in China.

“Of course from the government's point of view, we give up some growth, but to achieve better health for all citizens, it is definitely worth it,” said Chen Haotian, the vice director of Guangzhou's top planning agency.

Nanjing and Hangzhou in east-central China are moving to require cleaner gas and diesel. Cities near the coast, from Dongguan and Shenzhen in southeastern China to Wuxi and Suzhou in the middle and Beijing in the north, are pushing out polluting factories. And Xi'an and Urumqi in northwestern China are banning and scrapping cars built before 2005, when automotive emissions rules were less stringent.

“There's a recognition finally that growth at all costs is not sustainable,” said Ben Simpfendorfer, the managing director of Silk Road Associates, a Hong Kong consulting firm.

Facing public pressure to address traffic jams and pollution, municipal governments from across China have been sending delegations to Guangzhou. But the national government in Beijing is pushing back against further car restrictions because of worries about the huge auto industry, said An Feng, a senior adviser in Beijing to transportation policy makers.

“This has really become a battle,” Mr. An said.

Beijing's municipal government started limiting new license plates at the start of last year when the economy was in danger of overheating, but Guangzhou is the first city to act during the current slowdown. Faced with public dissatisfaction over traffic, Guangzhou has also built an extensive subway system in the last few years, along with large parks and a renowned opera house.

The local government initiatives are not the main cause of the Chinese economy's difficulties. The government clamped down on credit a year ago in a successful bid to rein in inflation, but starved many small and medium-size businesses of credit in the process.

Other broad economic problems have been building for years. These include industrial overcapacity and the monopolistic grip of many state-owned enterprises, as well as the inefficient allocation of loans.

But for now, the growing regulatory burden on business is reinforcing a trend toward slower growth, economists say.

“That's why I think the slowdown is likely to be a trend, instead of just a short-term cycle,” said Xiao Geng, the research director at the Fung Global Institute in Hong Kong.

Polluting factories being pushed out of increasingly affluent cities in southeastern China are being turned away by poorer cities in western and northern China unless they install costly, extensive equipment to control emissions, said Stanley Lau, the deputy chairman of the Hong Kong Federation of Industries, a trade group representing manufacturers that employ nearly 10 million workers in mainland China.

“There is no hint that these costs will be lowered because of the market slowdown,” he said.