Chinese Domestic Demand Slowing
A number of economic factors have combined to cause a slowing of demand for new vehicles in the Chinese market. On 20 June 2008 the Chinese Central Government lifted the price of petrol by 16.5%. On top of this, the steep decline in the Chinese stock market has affected the availability of funds and the desire to purchase new vehicles. 10% of the Chinese population is reported to have investments in the stock market. This year the Shanghai stock market has dropped by close to 49%. As a consequence of these factors, many people are no longer able to afford or willing to purchase new vehicles. However, despite a drop in domestic demand, Chinese manufacturers are still increasing production. The result of this is likely to be an increased surplus of vehicles which will need to be exported. Consequently, decreased domestic demand may lead to a greater effort by Chinese manufacturers to develop export markets.
