In addition to China Evergrande entering bankruptcy proceedings for its U.S. operations, real estate specialist Country Garden has also been reported to face management crises on a daily basis. There is no doubt that the Chinese economy is experiencing disruption at the very least. The real estate sector is a massive industry accounting for 30% of China's GDP. Despite being a communist state where land ownership is not permitted, the industry's scale is this large, which likely reflects the Chinese people's particular attachment to real estate (building) ownership.

　Following real estate, automobiles represent the second-largest category in individual asset ownership. Therefore, automotive data also serves as an important indicator for measuring the Chinese economy's pulse. This column explores trends in the Chinese economy, particularly consumer sentiment, through China's automotive sales data. Will the Chinese economy enter a full-scale recession period going forward?

■The Dark Side of Chinese Statistical Data: Nothing "True" Can Be Understood

　When conducting quantitative analysis of China, the first high barrier encountered is doubt regarding the credibility of statistical data. Our company operates in M&A Advisory services, but we have no track record with Chinese deals. While we have had initial consultations and discussions several times, we have declined to handle all of them. This is because there is "absolutely no" credibility in companies' financial figures. This is likely the same for Chinese authorities' economic statistics, and almost all of them should be considered figures representing not "facts" but "opinions (the Communist Party's intentions)." Therefore, when attempting to interpret China's consumer economy through automotive statistical data, careful handling of which figures to use and what to analyze is essential.

■Sales Volume Data in the Chinese Market Announced by Foreign Manufacturers Represents High-Quality Data That Is Difficult to Manipulate

　However, in China's automotive market, there are several perspectives that can ensure data credibility. Specifically, sales volumes in the Chinese market announced by foreign manufacturers (such as Toyota and GM) to China are difficult for Chinese authorities to intervene in and interpret. Toyota and GM are publicly listed in the Japanese and U.S. markets respectively, and high reliability is constantly required for the credibility of their disclosed data. If incorrect data circulates in the market and distorts investor judgment, there is even the possibility of massive damage compensation claims.

Therefore, our company considers that sales volumes announced by such foreign companies in the Chinese market have higher credibility than at least the sales volume data announced by Chinese manufacturers (Beijing Automotive, Chang'an Automobile, and BYD). Conversely, our company's stance is that sales volume figures independently announced by Chinese manufacturers are fundamentally of low credibility. There may be objections to such a perspective. China's automotive sales volumes, including all figures announced by Chinese manufacturers, have continued to maintain their highest levels in the past three years. If interpreted straightforwardly, this would suggest that the Chinese economy continues to perform exceptionally well. However, attempting to understand the pulse of China's consumer economy with such thinking may lead to significant judgment errors.

■Sales Volumes of Major Foreign Automotive Manufacturers in China Have Plummeted in the Most Recent Two Months
The graph at the beginning, based on such perspectives, shows the sales volume trends in China for leading foreign automotive manufacturers holding certain sales shares or higher in the Chinese market. Looking at this data, a declining trend in sales volumes can be observed in June and July 2023 compared to 2021 and 2022. 2022 was a year when China implemented intermittent Zero-COVID policies (complete isolation, prohibition of going out, etc.). These policies were intermittently implemented until early 2023. Nevertheless, during periods when isolation policies were relaxed (e.g., June-September 2022), automotive sales were strong. However, since June this year, sales volumes have rapidly fallen below these levels. Following the real estate market, significant changes may occur in the automotive market as well. Our company plans to regularly disseminate objective analysis of China's automotive market going forward.