Chinese authorities unveiled new measures on Friday aimed at bolstering automobile and electronics sales to stimulate the sluggish economy. However, investors expressed disappointment as they had been hoping for more robust stimulus to counter the economic slowdown.
According to a joint statement published by 13 government agencies, including the National Development and Reform Commission, regions will be encouraged to increase their annual car purchase quotas. Efforts will also be made to support the sales of second-hand vehicles to revitalize the automobile sector.
China’s post-pandemic economic recovery has been losing momentum, prompting policymakers to focus on the automobile industry as a critical driver for growth. In June, they unexpectedly extended a purchase tax break on new energy vehicles (NEVs) until 2027. Despite these efforts, domestic consumer demand has remained weak, leading to a price war among car brands since January, triggered by Tesla, with over 40 brands offering vehicle discounts.
To address this, the government issued a statement in March, urging the auto industry and authorities to cool the “price-cut hype” and ensure the healthy and stable development of the sector. The recent Friday statement echoed this sentiment, urging localities not to implement protectionist policies or engage in vicious competition.
In addition to boosting car sales, a separate statement was released to support electronics sales. The authorities announced their intention to encourage scientific research institutes and market entities to actively apply domestic artificial intelligence (AI) technology to enhance the intelligence levels of electronic products.
Despite these measures, the market response was underwhelming. China’s automobile index witnessed a 0.3 percent drop, and the electronics index fell by 0.6 percent, while the benchmark index rose by only 0.1 percent.
Analysts from UBS commented that these measures are unlikely to significantly boost consumption, as people are still generally reluctant to spend due to their lack of confidence in the economic recovery.
Investors are disappointed with China’s weak second-quarter growth and are eagerly awaiting stronger stimulus. Some are pinning their hopes on the upcoming Politburo meeting later this month, expecting more substantial economic measures to be announced.