The Chinese government wants to boost car sales and thus the sluggish economy. Regions should be encouraged to increase their annual car-buying quotas, according to a statement released on Friday by 13 government agencies. At the same time, the sale of used cars is to be promoted.
That I of China With the post-pandemic economic recovery slowing, policymakers have identified the country’s auto sector as a key lever they intend to use to support growth. In June, they unexpectedly extended a tax break until 2027 for the purchase of alternative fuel cars.
But domestic consumer demand remains weak and the world’s largest auto market is grappling with a price war that began in January Tesla was triggered and has now expanded to more than 40 brands offering discounts on their vehicles.
UBS analysts doubt that consumption will increase
Economists therefore doubt whether the new measures will help the ailing economy. “It is unlikely that these supports will significantly boost consumption,” said the analysts at UBS. “People are still cautious as they lack confidence in the economic recovery.”
Investors also reacted cautiously to the government’s plans. The Chinese automobile index fell 0.3 percent at the end of the week, while the stock market barometer rose 0.1 percent overall. The electronics index also bucked the trend by 0.6 percent, although the government also announced plans to boost sales of electronics products.
Better urban development should also boost demand
At the same time, China’s cabinet on Friday passed guidelines to transform underdeveloped areas in megacities to boost the economy and demand. The rehabilitation would improve people’s livelihoods and increase domestic demand, state media reported, citing a regular cabinet meeting.
The one after the USA second-largest economy in the world are making meager exports, a sluggish consumption and the troubled real estate market to accomplish. The gross domestic product therefore only grew by 0.8 percent from April to June compared to the previous quarter. This clearly missed the result of the first quarter of 2.2 percent.
In view of the weak economy and record high youth unemployment, economists assume that the state will continue to spend more money to boost growth. The central bank is also likely to try to give the ailing economy a boost.