China’s government has decided to distribute 5 billion yuan ($731 million) in subsidies to encourage vehicle purchases in rural areas. This adds up to as much as $1,170 per vehicle.
China’s fiscal stimulus has aimed to concentrate on the impoverished rural areas that house half of its 1.3 billion population. This is good policy as vehicles can aid farmers with production and distribution of their products. Shanghai GM previously forecast sales growth of less than 3% but has upped this to between 5% and 10% to reflect the new policy. The stimulus packages aim to boost consumer spending and revive the staggering economy at a time when exports to other nations are faltering.
My Opinion: The auto industry is one that is comprised of thousands of specialized manufacturers. This policy reflects good judgment as increased vehicle sales will indirectly support all of these small producers, but will also boost the efficiency of farmers who don’t yet own a vehicle to help produce and sell their agricultural goods. Consumers are trading in their old trucks and bikes for vans that can carry goods from their farms to the market, thus providing an indirect boost to the agricultural sector as well. Policies like this also boost confidence and morale amongst consumers, thus helping boost consumer spending.
China has the largest population in the world. An increase in consumer spending can offset the current slump in exports and put the economy on the track to growth.
Related Posts
- Chinese Researchers Confident of 8% Growth (01/07/09)
- Chinese oil demand expected to increase 5.7% … (08/13/08)
- Chinese Government Enacts Forceful Policies to Combat Downturn (03/06/09)
- Chinese Companies Set For Overseas Expansion (03/16/09)
- Chinese deflation at 3.3% in January (02/10/09)
{ 4 comments… read them below or add one }
Nice Site layout for your blog. I am looking forward to reading more from you.
Tom Humes
Larry Edelson Reply:
March 26th, 2009 at 5:07 pm
Thank you!
Hi Larry, I’ve been reading your blogs for some time and I have to say
that your predictions are bold and right many of the times. It’s always
important to be 1 step ahead of the market regarding crude oil and financials.
I’m thinking crude oil will rebound for summer while financials will regroup
slowly in the coming days. I’m expecting important messages from the govt
that will help the stock market…..I’m thinking Dr. Weiss is a bit pessimitic
compared with you.
Thank you for sharing your insights with us and GL with trading.
hero
Larry Edelson Reply:
March 26th, 2009 at 5:10 pm
Thanks!
Do you do blogroll exchanging? If you want to exchange links let me know.
Email me back if you’re interested.
Larry Edelson Reply:
March 26th, 2009 at 5:15 pm
No, we don’t do blogroll exchanging.
Hello Larry-
I was in Shanghi last week and am a veteran of over 50 visits there. The China auto stimulus may have a hard time reaching the farmers. It is quite a stretch to go from a bicycle to a Buick (the actual limousine of choice in much of China, and much of the country).
Excellent presentation- thanks.
PS I travel Asia and the rest of the world (40 countres in three years). Let me know if I can help you in any way.
Respects,
Bill
Larry Edelson Reply:
April 27th, 2009 at 8:28 pm
Thanks for the compliment, Bill.