One of China's most industrialized cities has put a cap on sales of new cars with residents only permitted to acquire a new vehicle either by lottery or auction.

Shenzhen, a city of more than 10 million located next to Hong Kong, has imposed the restriction as of Monday 6 p.m. local time. The action was triggered by concerns over congestion and pollution and is expected to further flatten car sales in the country.

The city becomes the eighth in China to adopt such policies according to Xinhua news agency. Shenzhen follows in the tracks of Beijing, Shanghai, Guangzhou, Tianjin, Shijiazhuang, Guiyang, and Hangzhou.

Chen Huigang, deputy director of the city's traffic and transport commission, said 100,000 new plates will be allocated per year including 20,000 for electric cars. The allocation will be split evenly between an auction and the lottery.

Currently, there are just over three million vehicles in Shenzhen, a major manufacturing centre. Some of the country's biggest technology companies call it home including Huawei, BYD, Dingoo and Netac.

APTOPIX China Pollution

Vehicle emissions are the second biggest contributor to smog in China after coal. (The Associated Press)

The trend for limits on car sales will pressure car makers to expand their reach into smaller places in China, according to McKinsey management consultancy, which has forecasted that more than 20 Chinese cities will be imposing such restrictions by 2020.

Vehicle emissions are the second biggest contributor to smog in China after coal, according to the Chinese Academy of Meteorological Sciences. China is also the No. 1 producer of greenhouse gases in the world says the World Health Organization.

A study by MIT in 2005 said lost labour and health care costs associated with pollution cost the Chinese economy $112 billion.

In 2013, the Chinese government announced plans cut pollution emissions by at least 30 per cent in heavy-polluting industries by the end of 2017,

With files from Reuters