China’s Stimulus Package Helps GM

This Bystander always takes heart from stories of windfall successes for globalization. Bloomberg is reporting how Beijing’s efforts to stimulate domestic demand and spread growth into the countryside is helping the troubled U.S. auto giant, General Motors.

GM increased its sales of the minivans it makes in China with SAIC by 32% in the first two months of this year. This follows a cut in sales taxes on small vehicles and the introduction of 5 billion yuan in subsidies to auto sales in rural areas. Farm households which buy a first new minivan or light truck can get up to a 5,000 yuan subsidy, those replacing an existing vehicle can get up to 3,000 yuan.

GM has now upped its sales growth forecast for China to 5%-10% for this year, from 3%, not enough to offset the shrinkage of its home market, of course, but sufficient to have some American car industry executives to suggest China’s direct subsidies to car buyers should be replicated in the U.S.

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