China's government is considering providing support for the country's struggling car makers after sales dropped 16 per cent in November.

"What we experience is not a slowdown but a negative growth, a decline, the problem is very serious," Li Yizhong, the industry minister, said on Friday.

"We should roll out policy incentives," he said.

Beijing is looking at cutting taxes, offering low-interest loans or forcing older, more polluting vehicles off the roads in order to spur sales in the world's second largest vehicle market after the United States.

Many car manufaturers had been hoping the Chinese market, which grew by 18.5 per cent in 2007, would provide some relief as sales have been hit by the global credit crunch.

But the announcement, coming as a planned $14bn bailout for US manufacturers collapsed amid differences over workers' wages and benefits, is likely to cause further concerns for global producers. 

Li also announced that the government would provide $2.2bn to help smaller companies, which have been hit by a decline in Chinese exports, improve technology to help combat the effects of the global economic downturn.

Beijing will encourage companies to improve technology and cut energy use by subsidising interest-free loans that it hopes will stimulate $44bn to $59bn in investment, he said.

The government said this week that exports fell in November by 2.2 per cent, the first drop in seven years. The slowdown has triggered a wave of factory closures and job cuts, leading to government fears of unrest.