China's Cabinet said Wednesday it will temporarilly cut the sales tax on small cars in half in an effort to stimulate the auto and steel sectors, the state-run Xinhua news agency reported.

Under the plan, the tax on cars with engines smaller than 1.6 liters will be taxed at 5%, down from 10%, effective Jan. 20 and continuing until the end of the year.

The State Council said the move was meant to shore up China's two "pillar industries," Xinhua said.