China’s passenger car sales rose 48 per cent in June from the same month last year, consolidating a remarkable recovery that has catapulted China to top position in the world vehicle market so far this year, according to semi-official data released on Thursday.
The strength of China’s vehicle sales – total vehicles sales rose 18 per cent for the first half year to 6.1m from the same period last year – has surprised auto market analysts, government officials and even the country’s automakers, many of whom are scrambling to produce enough vehicles to meet demand. Some auto dealerships have reported shortages of vehicles and western automakers, such as Volkswagen and General Motors, have had to sharply increase production at their Chinese joint ventures to meet local demand.
Like other sectors of the Chinese economy, car industry growth this year was jump-started by the government, which in January announced tax breaks on small cars and subsidies for vehicle purchases in rural areas.
But car segments that were not targeted by tax breaks or subsidies also saw strong growth in sales, auto industry analysts said on Thursday.
High levels of bank lending are also believed to have helped spur demand. China on Wednesday announced that new lending in the first half was Rmb7,400bn ($1,084bn), up 201 per cent year-on-year and equal to 150 per cent of full-year lending in 2008.
Lending for car purchases had not risen – most Chinese buyers buy vehicles with cash – but higher levels of liquidity in general fed through to more corporate purchases of vehicles, analysts said.
General consumer confidence was also a strong factor in sales growth, said Mike Dunne, of the auto consultancy JD Power in Shanghai.
“The government is putting out a strong message that the financial crisis is concentrated in the US, but we in China are doing just fine. The world might be hurting, but not us,” he said.
He added that the impact of that message on car buyers “should not be underestimated”.
JD Power recently revised its 2009 forecast for Chinese passenger car sales to 7m, from 5.8m at the beginning of the year, and said that a further upward revision is possible.
Total vehicle sales rose 36 per cent in June year-on-year, the official Xinhua news agency said on Thursday, quoting figures from the China Association of Automobile Manufacturers.
It was the fourth month in a row that sales had exceeded 1.1m units.
The strength of the Chinese market is providing a rare ray of hope for western automakers already operating in China, and attracting companies like Fiat, long a laggard in China, to the market.
Earlier this week, Fiat signed a joint venture agreement with Guangzhou Automobile Group to make cars and engines in China from 2011. Fiat and GAC said the venture would have the capacity to produce 140,000 cars and 220,000 engines per year initially, but could later be expanded to produce as much as 250,000 cars and 300,000 engines annually.
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CHINESE manufacturing continued its growth momentum for the fourth straight month in June, reinforcing optimism that an economic recovery may be under way, two surveys showed yesterday.
The official Purchasing Managers Index, compiled by the China Federation of Logistics and Purchasing as a measure of the nation’s manufacturing activities, reached 53.2 last month following a reading of 53.1 in May and 53.5 in April.
The figure has been above 50 – the threshold denoting expansion – for four consecutive months.
In addition, the brokerage firm CLSA said yesterday its China PMI rose to 51.8 in June from 51.2 in May, the highest level since July last year and the third straight month for the index to record growth.
“After softening slightly in May, China’s official PMI improved again last month and showed sequential economic expansion. We take it as a signal that the green shoots of economic recovery have strengthened and are likely to blossom in the second half of 2009,” said Wang Qing, a Morgan Stanley economist.
“Continuity of accommodative monetary and financial conditions and follow-through in the implementation of the fiscal stimulus package should bring about robust growth in GDP in the second half of this year,” Wang said. “In addition, private investment will likely catch up, as the recovery in property sales remains strong and industrial profits recently registered significant improvement.”
Eric Fishwick, head of Economic Research at CLSA, said the PMI increases confirmed that growth was solidifying in manufacturing.
“Further improvement in export orders is a surprise, and domestic demand for manufacturing should continue to grow, as policy and the upturn in residential construction are gaining traction,” Fishwick said.
Both Wang and Fishwick expect the PMI to continue expanding in the coming months.
The production index under the official PMI strengthened to 57.1 in June from 56.9 in May, supported mainly by domestic demand, with new orders standing at 55.5 last month.
Economists said the decline in China’s exports should bottom out soon as new export orders reflected in the PMI rose to 51.4 in June, from 50.1 in May when they first entered expansionary territory.
The employment figure climbed back above 50 for the first time since last September, hitting 50.1 in June from 49.9 a month earlier, implying the country’s job-protection and creation policy is working.
China’s gross domestic product grew 6.1 percent in the first quarter from a year earlier, the weakest pace since at least 1992. Economists generally expect better performance when second-quarter results are posted later this month.
The main concern is weak external demand. China’s exports fell 26.4 percent in May from a year earlier, a record low in at least 14 years.
CHINESE manufacturing continued its growth momentum for the fourth straight month in June, reinforcing optimism that an economic recovery may be under way, two surveys showed yesterday.
The official Purchasing Managers Index, compiled by the China Federation of Logistics and Purchasing as a measure of the nation’s manufacturing activities, reached 53.2 last month following a reading of 53.1 in May and 53.5 in April.
The figure has been above 50 – the threshold denoting expansion – for four consecutive months.
In addition, the brokerage firm CLSA said yesterday its China PMI rose to 51.8 in June from 51.2 in May, the highest level since July last year and the third straight month for the index to record growth.
“After softening slightly in May, China’s official PMI improved again last month and showed sequential economic expansion. We take it as a signal that the green shoots of economic recovery have strengthened and are likely to blossom in the second half of 2009,” said Wang Qing, a Morgan Stanley economist.
“Continuity of accommodative monetary and financial conditions and follow-through in the implementation of the fiscal stimulus package should bring about robust growth in GDP in the second half of this year,” Wang said. “In addition, private investment will likely catch up, as the recovery in property sales remains strong and industrial profits recently registered significant improvement.”
Eric Fishwick, head of Economic Research at CLSA, said the PMI increases confirmed that growth was solidifying in manufacturing.
“Further improvement in export orders is a surprise, and domestic demand for manufacturing should continue to grow, as policy and the upturn in residential construction are gaining traction,” Fishwick said.
Both Wang and Fishwick expect the PMI to continue expanding in the coming months.
The production index under the official PMI strengthened to 57.1 in June from 56.9 in May, supported mainly by domestic demand, with new orders standing at 55.5 last month.
Economists said the decline in China’s exports should bottom out soon as new export orders reflected in the PMI rose to 51.4 in June, from 50.1 in May when they first entered expansionary territory.
The employment figure climbed back above 50 for the first time since last September, hitting 50.1 in June from 49.9 a month earlier, implying the country’s job-protection and creation policy is working.
China’s gross domestic product grew 6.1 percent in the first quarter from a year earlier, the weakest pace since at least 1992. Economists generally expect better performance when second-quarter results are posted later this month.
The main concern is weak external demand. China’s exports fell 26.4 percent in May from a year earlier, a record low in at least 14 years.
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CHINA will reduce or eliminate export taxes on nearly 100 categories of goods including some agricultural products and fertilizers starting next month in its latest move to help the country’s flagging trade sector.
The cuts are the first outright tax reductions since December 2008 and follow seven increases in export tax rebates since August.
While the policies give at least some relief to the nation’s struggling exporters, they contribute little to fixing the main problem: restoring external demand, industry analysts said.
The Ministry of Finance said yesterday that 31 types of goods such as wheat, rice and soya beans will be exempted from export taxes starting July 1.
Direct, effective
Large tax reductions will apply to another 60 categories of products, including fertilizer and chemicals. The tax on phosphate fertilizer, for instance, will be cut from 75 percent to 10 percent.
“The move, similar to the previous increases in export tax rebates, is an obvious bid to counter the falling trade,” said Xue Jun, an analyst at Changjiang Securities Co. “A tax cut is more direct and effective than rebates and enhances cash flow.”
A tax cut is immediate, while exporters have to wait to receive a tax rebate.
“The frequency of these moves illustrates that the Chinese government still attaches great importance to exports, though domestic demand is considered key to the country’s economic recovery,” Xue said.
China’s May exports fell 26.4 percent from a year earlier to US$88.8 billion, the worst drop in at least 14 years. Last month, China announced it would raise tax rebates on more than 600 types of exports, including machinery, toys, plastic products and steel. Total rebates amounted to 102.9 billion yuan (US$15.1 billion) in the first quarter, up 18.4 percent from a year earlier.
Vice Commerce Minister Zhong Shan said China will spare no effort to protect the country’s share of the global market.
“China’s trade will suffer a retreat this year and experience slow growth in the coming years,” Zhong said in an article published in the Economic Daily yesterday. “We should go all out to stabilize trade. The focal point should be to avoid losing share in the global market. It is of great importance to keep companies alive and make jobs available, which lays the foundation for the expansion of domestic demand.”
Despite falling volume, Zhong said it may be possible for China to raise its share of global trade.
He said Chinese exports last year accounted for 8.86 percent of the world’s total exports in terms of value, still below the level of export giants Germany and the United States, which each hold around 12 percent of global market share.
At a time when people are slashing spending, China should be able to benefit because the country sells more necessities than luxuries.
CHINA will reduce or eliminate export taxes on nearly 100 categories of goods including some agricultural products and fertilizers starting next month in its latest move to help the country’s flagging trade sector.
The cuts are the first outright tax reductions since December 2008 and follow seven increases in export tax rebates since August.
While the policies give at least some relief to the nation’s struggling exporters, they contribute little to fixing the main problem: restoring external demand, industry analysts said.
The Ministry of Finance said yesterday that 31 types of goods such as wheat, rice and soya beans will be exempted from export taxes starting July 1.
Direct, effective
Large tax reductions will apply to another 60 categories of products, including fertilizer and chemicals. The tax on phosphate fertilizer, for instance, will be cut from 75 percent to 10 percent.
“The move, similar to the previous increases in export tax rebates, is an obvious bid to counter the falling trade,” said Xue Jun, an analyst at Changjiang Securities Co. “A tax cut is more direct and effective than rebates and enhances cash flow.”
A tax cut is immediate, while exporters have to wait to receive a tax rebate.
“The frequency of these moves illustrates that the Chinese government still attaches great importance to exports, though domestic demand is considered key to the country’s economic recovery,” Xue said.
China’s May exports fell 26.4 percent from a year earlier to US$88.8 billion, the worst drop in at least 14 years. Last month, China announced it would raise tax rebates on more than 600 types of exports, including machinery, toys, plastic products and steel. Total rebates amounted to 102.9 billion yuan (US$15.1 billion) in the first quarter, up 18.4 percent from a year earlier.
Vice Commerce Minister Zhong Shan said China will spare no effort to protect the country’s share of the global market.
“China’s trade will suffer a retreat this year and experience slow growth in the coming years,” Zhong said in an article published in the Economic Daily yesterday. “We should go all out to stabilize trade. The focal point should be to avoid losing share in the global market. It is of great importance to keep companies alive and make jobs available, which lays the foundation for the expansion of domestic demand.”
Despite falling volume, Zhong said it may be possible for China to raise its share of global trade.
He said Chinese exports last year accounted for 8.86 percent of the world’s total exports in terms of value, still below the level of export giants Germany and the United States, which each hold around 12 percent of global market share.
At a time when people are slashing spending, China should be able to benefit because the country sells more necessities than luxuries.
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CHINA’S industrial output rose 5.2 percent year on year in the first two months of 2009, with growth slowing from December, the Ministry of Industry and Information Technology said in Beijing yesterday.
The figure was 0.5 percentage points lower than in December, dragged down by plummeting exports and high inventories, according to MIIT.
In February alone, however, industrial output expanded 11 percent from a year earlier, showing that the downtrend appeared to be easing.
Light and heavy industries grew 6.5 percent and 2.7 percent in the two-month period, 1.6 percentage points and 2 percentage points below the respective December figures.
Major industrial exports fell 17.1 percent to 896.8 billion yuan (US$131.3 billion). That represented a 31.9-percentage-point decline from the 2008 level, MIIT said.
Qi Jingmei, an economist with the State Information Center, told Xinhua the figures showed that the Chinese industry was still feeling the impact of the global downturn.
Figures from the National Bureau of Statistics also reflected the impact of the downturn. Profits of major industrial firms shrank 37.3 percent year on year during the first two months of 2009, the bureau said on Friday.
Falling exports also caused declines in light industries like textiles, which in turn affected the upstream sectors, according to Gao Shanwen, chief economist of Essence Securities.
But increases in fixed asset investment, new loans and retail sales in the first two months would help offset the slide in industrial output, Qi said.
Retail sales grew 15.2 percent in the first two months to 2 trillion yuan, while urban fixed asset investment rose 26.5 percent year on year to 1.027 trillion yuan, the bureau said.
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CHINA overtook the United States as the world’s largest auto market for the first time when it sold more cars, 735,500 units, in January, the China Association of Automobile Manufacturers said yesterday.
But the January figure was a drop of 14.35 percent year-on-year and this indicated that sentiment in China’s auto industry is still in a downtrend because of a global financial crisis. Analysts, however, agreed that the market showed signs of an early recovery with government support and lower fuel prices.
Vehicle sales in China rose 6.7 percent to 9.38 million units last year. Sales may grow 5 percent this year, the slowest pace since 1998, CAAM said earlier.
January vehicle sales in the US plummeted 37 percent to 656,693 as more auto makers closed down plants and laid off thousands of workers.
The association reports said China’s passenger cars dropped 7.77 percent to 610,000 units last month, following a 12-percent slump in December
But the slower drop in sales was helped by the central government’s measures such as cutting fuel prices and halving a vehicle sales tax on small cars to counter a slump in the automotive industry since August last year.
“The fuel tax reform and tax cuts work effectively as sales of vehicles powered by 1.6-liter engine or less enjoyed rapid growth from a month earlier,” Zhu Yiping, a director at CAAM, said. “This helped passenger car makers to cut inventory by 80,000 units.” He added that the overall stockpile of Chinese car makers also hit its 13-month low.
Selling commercial vehicles remained tough due to the economic situation as their sales plunged 36.46 percent to 125,100 units in January, CAAM said.
China announced a 4-trillion-yuan (US$586 billion) economic stimulus package and favorable policies including tax cuts and road-toll abolishment in January to spur demand.
However, most analyst cautioned that the sales pickup won’t last long and they remain skeptical that China would remain the world’s biggest car market for the year.
“We should not be too optimistic as the impact of favorable policies may be weaker as time goes on,” said Rao Da, secretary general of China Passenger Car Association. “Sales of vehicles with engines larger than 1.6 liters are not expected to boom and overall sales will still be hampered by a weak economic outlook and lower exports.”
Source: Shanghai Daily
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