Due in large part to U.S. President Donald Trump’s tariffs, China’s economic growth slowed to 6.0 percent in the third quarter, a record low in 27 years. Its new-car market has contracted for 15 straight months.
But whoever expects Beijing to inject a heavy stimulus into the economy and the domestic car market -- as it did ten years ago -- will be disappointed because the government hasn’t seen the need to do so.
In 2008, China’s economy and car market were in a much better shape than now. That year, the economy grew 9.7 percent year on year while new-vehicle sales in the country rose 6.7 percent.
Fearing that the global economic crisis would disrupt the growth of its economy and car market, Beijing launched a 4-trillion yuan ($567 billion) fiscal stimulus in November 2008 and halved the purchase tax on vehicles with engine sizes of up to 1.6 liters two months later.
The fiscal stimulus was timely. In 2009, the Chinese economy still grew 8.7 percent despite the deepening global economic woes.
And the tax incentive produced a quick effect: It sent annual new-vehicle sales across the country surging 46 percent that year, enabling China to surpass the U.S. to be the world’s largest auto market.
This year, China’s economy is widely expected to grow less than 6.0 percent in the fourth quarter, dragging down its annual growth to 6.1 percent from 6.6 percent in 2018.
Meanwhile, new-vehicle sales in the country are on track to post the second annual decline this year.
But Beijing appears to be unperturbed. Since last week, government agencies have organized press conferences to explain why there is no need to panic.
First, despite the slowdown, China’s economic growth -- at 6.2 percent for the first three quarters -- was still the highest among major economies in the world, the National Bureau of Statistics argued last week.
More importantly, the government has outgrown the stage of pursuing reckless economic growth, the National Development and Reform Commission, China’s central economic planning agency, pointed out this week.
The Chinese economy is transiting from “a high-rate growth phase to one of high-quality development” that focuses on job creation, increasing incomes of domestic residents, technology upgrade as well as ecological and environmental protection, the Commission noted.
Steady progress has been achieved in these areas, according to the Commission. For example, output of emerging industries such as the 5G telecommunication and artificial intelligence far outpaced the overall domestic industrial sector in the third quarter, and per capita disposable income kept rising, it said.
As long as progress continues to be made in all these areas, “economic growth -- whether it is slightly higher or lower – would be acceptable,” the Commission’s spokesman said.
One may question the creditability of the statistics released by government agencies. But at least one thing has become clear: While the domestic economy keeps losing pace, Beijing doesn’t think there is a need to roll out a multi-billion-yuan fiscal stimulus package or strong tax incentives for vehicle sales.
Now that the government plans to toughen it out, it is time for auto companies and their suppliers and dealers prepare to do the same.