China’s Stimulus For Autos & Electronics: Market Unimpressed

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Despite measures to boost auto & electronics sales, the market remains skeptical.

This Friday, Chinese authorities presented strategies aimed at boosting sales in the automotive and electronics sectors. The objective? To bolster a lagging economy. However, the market response has been lackluster, with investors seeking a more potent stimulus.

China’s plan involves increasing annual car purchase quotas and promoting second-hand vehicle sales, according to a joint statement by 13 government bodies, including the National Development and Reform Commission. Amid a slowing post-pandemic recovery, China sees the automobile sector as a growth engine.

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However, consumer demand has remained low, and the auto market, the world’s largest, is in the throes of a price war initiated by Tesla earlier this year. An industry body in March even pleaded for authorities to temper the ‘price-cut hype’ to ensure industry stability. Friday’s announcement reflects this sentiment, calling for the avoidance of ‘vicious competition’.

In parallel, a statement on electronics sales support said authorities would urge research institutions and market entities to harness domestic AI technology for enhancing electronic products’ intelligence levels.

Despite these measures, markets were underwhelmed. Chinese auto shares fell by 0.3 percent, and electronics shares dipped by 0.6 percent against a 0.1 percent benchmark index rise. “These supports will unlikely significantly boost consumption when people lack confidence in the economic recovery,” noted UBS.

China’s economic revival relies heavily on these new measures. But with a market awaiting stronger stimulus, it’s clear that the road ahead is still long and winding. As investors hold out for the upcoming Politburo meeting, the world waits with bated breath. Will China deliver the stimulus punch its market craves?


 

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