Page last updated at 10:47 GMT, Friday, 12 December 2008

Chinese car sales hit by slowdown

Japanese car worker
China's economic growth is slowing

Chinese car sales have plummeted and the country's retail sales have slowed as the global economic downturn hits the economy.

Car sales fell by 14.6% in November compared with the same month last year, a bigger drop than had been expected.

Overall retail sales growth slowed, but by less then expected, from 22% in October to 20.8% in November.

Last month, the Chinese government announced a huge investment plan to kick-start its slowing economy.

State aid

"This is a serious problem," said China's Minister of Industry Li Yizhon of the drop in car sales.

The minister called on the government to support the country's industrial sector with subsidised loans.

"Industrial growth is sharply declining and we have not seen a turning point yet. We feel a lot of pressure," he said.

Loan guarantees by the government to restore confidence would be key, he added.

Despite the poor economic data, Chinese government officials said they were confident that the country would hit its target of an 8% economic growth rate in 2008.

They believe that the economy must achieve this rate of growth to provide enough jobs for the country's rapidly expanding workforce.

"Stiff headwinds are undoubtedly ahead and we expect a further slowdown in the coming months, but fiscal expansion will likely buffer a rapid fall in retail sales," analysts at Merrill Lynch said.

Unlike the US, however, consumer spending does not account for the majority of China's economic activity.

China has not experienced single digit economic growth for six years, but the country's economy is still expanding rapidly as many western economies head into recession.

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