BEIJING - CHINA will spend 15 billion yuan (S$3.3 billion) to help smaller companies improve technology to cope with the global economic crisis and will try to boost plunging auto sales, the industry minister said on Friday.

'Since we are now going through a market downturn, we have to investment more in business technology upgrading so that we will make the most of the upcoming economic upturn,' Li Yizhong said at a news conference.

The investment measure is the latest in a string of government initiatives that includes a 4 trillion yuan economic stimulus package unveiled last month to help shield China from the global downturn.

Beijing will encourage companies to improve technology and cut energy use by subsidising interest-free loans that it hopes will stimulate 300 to 400 million yuan in investment, Mr Li said.

Mr Li said the measure will target smaller companies, which have been hit hard by a decline in Chinese exports. He acknowledged that small entrepreneurs are largely shut out of China's banking system, forcing them to borrow from informal lenders at high interest.

He said steel makers will be among those targeted for interest-free loans but he gave no details of other industries that might benefit.

'If we are able to provide this support, it will be critical to our response to the global financial crisis and the worldwide slowdown,' he said.

The subsidies are meant to support investment to develop higher technology products, cut energy use and improve pollution control, Mr Li said.

Chinese companies are suffering the dual blow of a collapse in trade growth and a slump in domestic industries ranging from real estate to steel to auto sales. The government said this week that exports fell in November by 2.2 per cent, the first drop in seven years.

China's economy is still expected to grow by about 9 percent this year. But the export slowdown has triggered a wave of factory closures and layoffs, fueling government fears of unrest. Labour protests have occurred in Guangdong, the south-eastern province near Hong Kong that is the heart of the country's export industries.

Auto sales suffered a sharp drop of 16 per cent in November, Mr Li said.

'This is a serious problem,' he said.

The decline reported by Mr Li was even sharper than the 10.3 per cent decline reported this week by state media. It was a sharp reverse for China's automakers, which saw sales grow by 18.5 per cent in 2007.

China is the world's second-largest vehicle market after the United States, and the slump is a blow to global automakers that hoped it would drive revenues as sales in North America and elsewhere weakened.

Beijing is considering ways to revive sales by cutting taxes, offering low-interest loans or forcing older, more polluting vehicles off the road, Mr Li said. But he gave no indication any measures had been decided or when they might take effect.

'We should roll out policy incentives,' the minister said. -- AP