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Car Sales in China a Victim of Tightening

July 9th, 2010 Michael McDonough

In a sign of China’s slowing economy passenger car sales in the country grew at the slowest pace in 15 months, moving off historic highs stoked by the country’s unprecedented fiscal stimulus. As the attached chart highlights, the spike in car sales was highly correlated to strong consumer lending growth catalyzed by the government’s stimulus package—bad news for the sector, and expectations of Chinese economic growth exceeding 10%. The Chinese government has already started, and is expected to accelerate, implementing tighter fiscal and monetary policies, which will have an adverse impact on new lending, auto sales, and general economic growth.

Chinese Car Sales vs. New Consumer Lending

Source: Bloomberg

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