BEIJING - Online articles have been suggesting collaborations between used car sellers and buyers that involve lawsuits over fake debts to circumvent the capital's license plate issuance limits.

The scheme goes like this: a secondhand car's buyer and its seller devise an imaginary debt the vehicle's seller "owes" the buyer for which the car is "collateral". They go to court, which orders the "debtor" (the car's seller) to hand over the car to the "lender" (the car's buyer). Along with the transfer of the car's ownership comes its already registered license plate.

Risks include stains to one's credit record, being banned from applying for a license plate for three years, and fines and detentions.

The scheme is a response to strict limits adopted in December on the number of vehicles Beijing drivers can register - only 240,000 new cars will legally be added to the roads this year - to ease traffic congestion. A monthly lottery determines who gets the rights to register new vehicles. But 10 out of every 11 applicants lost the first lots drawn in January.

Zhu Xingdong, a senior staff member of the people's court of Beijing's Huairou district, said the court has not yet heard such a case but has received many calls from the public warning them about the scheme.

"It's a typical false lawsuit. If it is found to enable people to get around the lottery to obtain license plates, there will be a surge in these cases," he told China Daily on Tuesday.

Beijing's new car registration rules require prospective drivers to acquire the license before purchasing a vehicle. But they make exceptions for the registration of cars' ownership transfers through court adjudications, or property transfers related to marriages and inheritances.

"Such stipulations provide loopholes for used car buyers to avoid legitimate channels," Zhu said.

He explained it would be difficult for courts to determine debts' authenticities in such cases, because the two parties would have collaborated on affirming the debts and reimbursement agreements.

However, Zhu said, his court will intensify scrutiny of debts and the rationality of appeals in such cases.

The new restrictions have also made Beijing's used car sales stagnant.

Chi Yifeng, general manager of Yayuncun Automobile Trade Market, told China Daily on Tuesday his market's secondhand cars sales slumped by nearly 94 percent between December and January. "The city's secondhand vehicle market is experiencing a difficult time," he said.

China Daily

(China Daily 02/16/2011 page4)