China caps car sales in Guangzhou to ease jams

BEIJING (Reuters) - China's booming southern city of Guangzhou is limiting the number of new cars on the streets to ease traffic jams and cut pollution, state media said on Sunday, a move that could weigh on sales in the world's largest car market.

Guangzhou, the capital city of Guangdong -- the factory workshop of China and the world -- will only allow 120,000 new cars to be registered over a one-year trial period, or 10,000 cars a month, the official Xinhua news agency said.

The measure, effective Sunday, puts Guangzhou as the third Chinese city after Beijing and Guiyang to limit car sales in an attempt to improve traffic conditions and air quality.

Beijing started capping new car ownership at 20,000 a month in January last year to tackle the city's chronic traffic gridlock. The move slowed the pace of traffic congestion, and was cited as a drag on China's falling car sales.

China's once red-hot car market is slowing under the weight of a cooling economy, among other factors. It is expected to grow in a single digit in 2012 for a second year in a row, the slowest back-to-back years since its take-off in the late 1990s.

The average travelling speed of a car during peak hours in Guangzhou has slowed to 20 kilometers per hour, and is expected to slow further, Xinhua said.

Xian Weixiong, a traffic regulator in Guangzhou, was quoted as saying on the Guangzhou government's website that soaring car ownership has worsened traffic conditions. Guangzhou now has 2.4 million cars, the website said. (Reporting by Sally Huang and Koh Gui Qing; Editing by Greg Mahlich)