YANG JIAN

Chengdu's booming economy bodes well for automakers

Yang Jian is managing editor of Automotive News China.

SHANGHAI -- Is the party over?

In the first seven months of 2011, China's car sales rose only 3.2 percent, a sharp slowdown from last year's 32 percent growth rate.

The downturn comes as China struggles with an inflation rate that hit 6.5 percent in June. Government debt has jumped; real estate prices in coastal cities are soaring, and labor costs continue to rise.

These persistent headaches will not easily be solved. Yet China's economy continues to grow at a 9.6 percent rate, generating enough wealth to allow the nation to tackle its economic problems.

Well, so much for the statistics. Now let me tell what I saw recently.

Last week I flew to Chengdu, capital of southwest China's Sichuan province. I was in town for the launch ceremony that General Motors' microvan joint venture held for its first passenger car.

As a second-tier Chinese city, Chengdu used to be slow-moving and underdeveloped, taking a back seat to prosperous coastal cities like Shanghai and Guangzhou.

But not any more.

Chengdu's downtown streets are lined with skyscrapers and shopping malls. And on its outskirts, I saw numerous construction sites for new hotels, office buildings and factories.

With all this growth, Chengdu -- and the entire province of Sichuan -- has become a booming automotive market.

In the first six months of 2011, Sichuan's vehicle sales surged 19.8 percent, easily topping the national average of 3.4 percent, according to the provincial government's Web site.

There was a time when China's domestic automakers laid claim to these inland markets. But Sichuan's rapidly expanding economy and its huge population of 88 million people have become a powerful magnet for international automakers, too.

Now, Chengdu has become a battleground for the entire industry.

Toyota, Volkswagen, Geely and Brilliance all have constructed assembly plants in the area. Volvo is building a new plant, too.

I arrived in Chengdu right after Standard & Poor's downgraded the United States' credit rating. Stock markets in the United States and Europe tumbled.

But Chengdu's bustling streets convinced me that China's economy -- and its auto industry -- is safe and strong. This is a relief for me, and it should be a relief for global automakers, too.

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