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Changan saw only 3% rise in the first 10 months of 2011

December 07/2011

(Reuters)-- Chongqing Changan Automobile, China's No.4 car maker was one of the obscure winners of Beijing's decision to release a flood of cash into its economy during the darkest moment of the global financial crisis.

After car sales growth of 46 percent in 2009 and 32 percent in 2010, the maker of the squat Ben Ben mini car and Changan Star van saw a modest 3 percent rise in the first 10 months of 2011. It also watched its share price plunge.

"China's leaders understand that safeguarding growth is very important, but in 2008 the government had more policy tools they could use," said Liang Youcai, a senior economist at the State Information Centre, a top government think-tank in Beijing.

"They won't unveil a large-scale economic stimulus anywhere close to the 4 trillion yuan program."
Beijing has reasons to steer clear of big stimulus, including the need to avoid firing up inflation, which remains relatively high.
A local government debt crisis is an awkward side effect of the government incentives in 2008, making stimulus a loaded word.

And a looming 2012 political transition that will see top leaders step down, leaves policymakers aiming for stability, not a big fiscal injection of cash into the economy.

Furthermore, China may have the fiscal leeway to do enough for the economy anyway, with the "fine tuning" that Premier Wen Jiabao has said will keep its economic engine running smoothly, analysts say.

China's latest five-year plan set a conservative GDP growth target of 7 percent, widely regarded as giving the government political leeway to rebalance the economy without having to simultaneously maintain breakneck economic expansion.

So whether by design or by default, major stimulus seems decidedly unlikely this time around.
Of course that may not do much good for China's automakers, with the industry facing an uphill struggle next year.
"I am not optimistic about Q4, and Q1 next year could be similar," Changan's president, Zhang Baolin. "China's car market next year is likely to remain in a slow growing trend overall."

Tags:car components.
Category:General News
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