China's high auto inventories threaten capital flows

As of the end of July, auto inventories in China almost hit 1.5 million, approaching the warning line, which marks where dealers and producers will experience shortages of capital flows, according to the latest statistics with China Automotive Technology and Research Center.

The statistics show that a total of 9.7 million autos were produced between January and July in China and 8.2 million were sold, up 39.4 percent and 28.6 percent, respectively, year on year.

Auto dealers say that if the inventory coefficient, meaning the ratio of inventory quantity to sales per month, is over 2, capital flow problems will appear. And according to the data, the coefficient in China reached 1.93 in July.

Because of sales reduction and overstock in auto companies, the auto inventory was greatly increased, said Zhao Hang, director of the China Automotive Technology and Research Center.

Based on the projected trend of continually increasing auto inventories, Zhao Hang said that all the auto manufacturers should start to adjust production capacity to fit the market.

By Zhao Chenyan, People's Daily Online