A new policy states that each vehicle purchased for government use cost 180,000 yuan (US$28,300) or less and have a maximum engine size of 1.8L.
The new policy is meant to cut the government's expenditure on vehicles and it may lead to a reduction in the number of luxury cars used for public affairs or law enforcement, representatives of the National People's Congress told the Beijing Times.
The policy was issued on Friday by the Ministry of Industry and Information Technology and the Government Offices Administration of the State Council.
It was issued after a report by the Chinese Ministry of Finance revealed in June that the country's total expenditure on vehicles, hospitality and receptions reached 9.47 billion yuan last year. Of that, 6.17 billion yuan was spent on vehicles.
The new policy would prevent the government from purchasing SUVs and other luxury vehicles as most have an engine size larger than 1.8L and often cost more than 180,000 yuan, said Ye Qing, a deputy of the National People's Congress.
Ye told the newspaper the policy would be good for domestic car manufacturers as under the new regulations, government facilities may have to purchase cars made by Chinese automakers, which are usually cheaper, rather than imported cars.
Ye also said the new policy could save the country 800 million yuan to 1 billion yuan each year
But he warned that purchases be supervised properly to ensure no government facilities violate the policy, the newspaper said.
Previously, the limit was 200,000 yuan per vehicle.