China's threshold for investment in new auto projects is to rise to curb emerging overcapacity, the National Development and Reform Commission (NDRC) announced on Tuesday.

To set up new plants, automakers must be able to sell at least 80 percent of the annual production capacity registered with the government.

Other automakers must sell 100,000 sedans or 50,000 sports utility vehicles (SUVs) or 50,000 multi-purpose vehicles (MPV) annually.

The country's production capacity reached eight million units by July 1, 2005, and was expected to hit 10 million in 2007. But demand was only 71.5 percent of capacity in 2005.

Capacity will far exceed demand in 2010, said a NDRC source.

By the end of the year, China will overtake Germany to become the world's third largest auto manufacturer after the United States and Japan, according to the China Association of Automobile Manufacturers (CAAM).

During the first 11 months, production reached 6.59 million, up 27.92 percent from the same period last year, while sales grew by 25.49 percent to 6.45 million.

Editor: Donald