The government's stimulus plan is pushing up auto sales across China's vast rural regions and giving the country's auto industry a shot in the arm.

The government halved purchase tax on vehicles with engines of 1.6 liters or less, which make up more than half of the market, in January.

Another stimulus policy, which runs from the start of March to end of 2009 and is worth 5 billion yuan, subsidizes farmers replacing three-wheeled vehicles or outdated trucks with small, 1.3-liter or less engine vehicles.

Chinese farmers and other rural residents who buy a new minivan or light truck can also get a subsidy equal to 10 percent of the purchase price, up to a maximum of 5,000 yuan.

Rural drivers who replace an existing light truck or minivan with a new one can get a further 3,000 yuan.

"It's really a favorable policy for China's homegrown auto brands," said Jia Xinguang, an auto analyst based in Beijing. "And it will definitely boost auto sales in China's hinterland."

Local governments are following the central government. The Hunan provincial government said it is promoting rural vehicle sales by negotiating discounts with automakers and through governmental subsidies and interest-free loans.

"We will cut the price of our multi-purpose vehicle from 72,800 to 59,800 yuan (in Changsha City, in Hunan)," said Pan Huiqiang, general manager of Changfeng Motor Co.

The Changsha county government will provide a 5,000-yuan subsidy for each farmer who wants to buy vehicle. Local rural credit cooperatives will also provide 1 to 2-year loans with interest paid by the provincial government.

"A farmer can get a 70,000 vehicle with a 27,000 yuan down payment," said Pan.

"We will eventually spread the model to all of Changsha City then the rest of Hunan Province," said Wen Shuxun, vice mayor of Changsha.

Changfeng had originally planned to sell 100 units of vehicles during the policies' test period but then sold 131 units in the first ten days.

"The success in Changsha county make it a good example to follow. I've receive phone calls from other counties, such as Liuyang, Wangcheng and Yongzhou, asking when we will take these policies there," said Li Jianxin, board chairman of Changfeng,

Harbin-based Hafei Automobile Group, a company dedicated to producing small cars, aims to build 200 dealerships in counties this year to boost rural sales.

Jilin Province, home to China's auto giant FAW Group said in February it would spend 100 million yuan to help stimulate rural auto sales.