China's top economic planner denied proposing to reduce car purchase tax by half on Thursday but said that there is a lot of room for development for the auto industry.

"We have not studied or made the proposal of reducing the auto purchase tax to five percent," said Meng Wei, spokesperson for the National Development and Reform Commission, at a press conference.

While declining car sales have put auto firms under pressure, they also force companies to increase competitiveness, eliminate backward production capacity and drive industrial upgrading, according to Meng.

China's auto sales dropped for the fourth month in a row in October, down 11.7 percent year-on-year, data showed.

Meng attributed the decline to a higher base in the same period last year, previous tax preferences and the changing international and domestic economic situation.

China's auto output and sales neared 30 million units annually, topping the world and making it hard to sustain rapid growth for such a big market, according to Meng.

However, she pointed to positive aspects to the figures, such as relatively fast growth in auto exports and surging new energy vehicle sales, while highlighting China's below average level of vehicle ownership.