China’s car stimulus could help industry but it’s no panacea for stalling economy
Move seen as part of switch from infrastructure investment to consumer spending
A new round of subsidies for rural Chinese who wish to purchase a passenger vehicle could help briefly boost the mainland’s flagging economy, analysts say, and potentially lead to further tax incentives in other areas of consumer spending.
Media reports about the new policy emerged early this month, but there has been no official confirmation from the government despite requests for clarification from Chinese carmakers.
Analysts say that if the policy is introduced it could help reinvigorate China’s economy, which has already seen strong growth in retail sales late this year.
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“I think it would be an effective measure, you know the propensity of this market for vehicles [to surge] any time you offer any sort of incentive,” OANDA senior trader Stephen Innes said.
“It’ll be a big bonus especially for people who haven’t had cars and I think that’s the target they’re looking for, to add more people to the market. I think this kind of fiscal measures is a big factor on the economy.”
Media reports said the new subsidies would cover vehicles with engines smaller than 1.6 litres, mini-commercial vehicles and light pickup trucks.
We saw a pickup in car sales in the last few months and that’s starting to feed through to the industrial sector
If implemented, the stimulus measures would not be the first time measures to encourage rural Chinese to purchase vehicles have been introduced – they were initially rolled out in 2009 before being cancelled a year later.