China moved to transfer vehicle taxes to state tax departments from communications department Tuesday.

The move will take effect on January 1, 2005.

The State Administration of Taxation said China introduced the tax in 2001 to replace vehicle fees in a bid to improve its taxation system. The fee was collected by the communications department, which was commissioned to collect the tax between 2001 and October of 2004 by the central authorities.

By the end of last month, China had collected a total of 154.3 billion yuan (US$19 billion). Revenues from the tax are growing at an average of 30 per cent annually.

The money goes towards the country's road network, said a press release issued by the central government after an interdepartmental meeting yesterday.

Officials from the Ministry of Personnel, State Administration of Taxation, the Ministry of Finance and other ministries attended the meeting.

China has experienced fast growth in its vehicle output and trade since 2002.

In 2003, China turned out 2 million cars, an increase of 83 per cent over the previous year.

The figure made China the world's fourth largest car producer, behind the United States, Japan and Germany, according to figures released by China Automobile Technology Centre.

China had 24 million vehicles in 2003, half of which were privately owned, up from 9 million in 1994, of which only two million are private.

Individual buyers made up 70 per cent of car sales in 2003, supplanting purchases by institutions, including government departments and businesses.

The Economic Information Network under the State Information Centre noted that China's demand for cars is expected to grow by an annual average of 10 to 15 per cent between now and 2010.

By 2010, the country's annual car demand is projected to reach 8.8 million to 12 million, while the total number of cars is expected to reach 50 million to 55 million.