Will Beijing go the extra mile to keep its car industry humming?
That question will be center stage at the Guangzhou Auto show this week, as car makers hope Beijing will renew strong economic incentives that propelled China's car sales to record levels this year even in the face of the global downturn.
After a turbo-charged year in 2009, China's auto market, which this year passed the United States to become the world's largest, could return to more normal growth next year if incentives aren't renewed, industry watchers said.
"The market can grow roughly 10 percent on its own next year. It's a pretty solid growth as the comparative base has become impossibly high," said John Zeng, analyst at IHS Global Insight.
Automakers are hoping Beijing will continue its generosity that boosted the market by 45 percent in the year through October, making China a rare bright spot for beleaguered global giants like General Motors GM.UL and Volkswagen.
Passenger car sales in the country jumped 76 percent in October alone to 946,400 units, after topping the 1 million level in September for the first time ever.
GM Chief Executive Fritz Henderson said last month he expected auto sales in China, where the U.S. automaker has hit a string of monthly sales records since January, will continue to grow at a "significant" pace.
GM China chief Kevin Wale said he believed Beijing will take additional steps to support its auto industry after the year-end expiration of current incentives, which include aggressive cuts in sales taxes on small cars and subsidies for buyers in rural areas.
Wale could be right as several Chinese officials, including Zhu Hongren, a spokesman for Ministry of Industry and Information Technology, were quoted by local media as saying lately that Beijing may extend the incentives to prop up the industry, a major contributor to its economy.
"The government has played its hand. With property prices at record levels, automobile is the only big-ticket item they can count on to lift consumption," said Zeng.
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