China stocks tumble as U.S. auto bailout fails

China's stock market tumbled on Friday on the apparent failure to push a bailout bill for the U.S. auto industry through Congress, and after data this week showed China's economy was slowing more severely than expected.

The Shanghai Composite Index ended down 3.81 percent at 1,954.215 points, though it came well off an intra-day low of 1,932.272. Turnover remained active although it shrank moderately from Thursday's level.

Data over the past two days showed Chinese exports falling and the threat of deflation rising. Stocks extended their falls after the U.S. Senate majority leader predicted the auto bailout would not pass the Senate, saying 'it's over with'.

Fuyao Group Glass Industries, a supplier to Ford among other auto makers, dropped 7.06 percent to 4.61 yuan. Double Coin, a major auto tyre maker previously known as Shanghai Tyre & Rubber, slid 7.03 percent to 4.10 yuan.

'If the Big Three really go under, Chinese parts suppliers, like Fuyao Glass, will be most affected since they have more exposure to the U.S. market than local auto makers,' said Chen Qiaoning, analyst with ABN AMRO TEDA Fund Management.

SAIC Motor, China's biggest car maker, which has a major joint venture with General Motors, dropped 4.72 percent to 6.05 yuan.

But airlines stayed strong after China Southern Airlines and China Eastern Airlines earlier this week announced plans to issue shares to their parents in exchange for 3 billion yuan ($439 million) cash injections which each of the parents received from the government.

Also, Liu Shaoyong, chairman of China Southern, has been appointed chairman of China Eastern by the central government, sources familiar with the situation said.

The management reshuffle was seen as part of preparations for a possible takeover of smaller Shanghai Airlines by China Eastern, and it fuelled talk of merger activity in the industry in general.