Strict auto loans may affect consumption

The impact of tight bank liquidity has spread to the automobile financing business, as some commercial banks and auto financing institutions are slowing down the pace of auto loans' approval and issuance.

Currently, auto industry chains are under great pressure of high assets and liabilities. If tight liquidity continues in the banking sector, not only auto dealers and manufacturers will face severe financial pressure, but the newly emerging auto market will suffer in the long run, Chinanews reported.

Gao Shanwen, chief economist at Essence Securities, said the recent tight liquidity in the banking market will lead to extremely tight capital in the interbanking market, and then shock the shadow banking system. Finally, it will decrease the already tired and weak economic growth.

However, Luo Lei, deputy secretary general of the China Automobile Dealers Association, predicted that the tight auto loans would mainly affect auto consumption in first-tier cities because in third- and fourth-tier cities, auto consumption is still driven by individual savings. He believed that the tight auto loans would not influence the whole market as auto consumption by loans only account for 10 percent to 15 percent.