For many weeks, China had appeared to weather the fallout from the war, a view reinforced by fairly strong economic data through March. But with the war in its ninth week with no clear end, cracks are beginning to show.<\/p>\n
\u201cThe economy is decelerating,\u201d said Alicia Garc\u00eda-Herrero, chief economist for Asia Pacific at Natixis, a French financial firm. China may struggle to meet this year\u2019s growth target of 4.5 percent<\/a> or more, she added.<\/p>\n One of the clearest signs of emerging weakness is in car sales and production, often considered early indicators of trouble. Cars are the second-largest purchase for many Chinese households after apartments, and the industry drives demand for steel, glass and other materials.<\/p>\n China\u2019s retail car sales plunged 26 percent in the first 19 days of April from a year earlier, according to the China Passenger Car Association. While part of the drop reflects weaker electric-vehicle<\/a> sales after tax incentives expired in December, gasoline-powered cars fared worse, falling by nearly 40 percent.<\/p>\n Falling sales have left dealership lots crowded with unsold cars, triggering production cutbacks. Chinese car factories made 27 percent fewer cars in the first two weeks of April than a year earlier, a sharp pullback even as exports rise.<\/p>\n At first glance, the economy still looks resilient. But a closer look suggests underlying weakness.<\/p>\n This month, China said that its economy grew at an annualized rate of 5.3 percent during the first three months of this year. But most of the strength was in January and February.<\/p>\n Retail sales decelerated in March, rising just 1.7 percent from a year ago. The China Federation of Logistics and Purchasing said inventories of unsold goods continued to build. Michael Pettis, a Beijing economist, said rising inventories could drag on future growth.<\/p>\n On Monday, industrial profits data showed continued strength through March, offering a possible buffer against a downturn. But much of that gain came from chemical and energy firms cashing in on a one-time windfall from higher oil and gas prices after stockpiling cheaply before the war.<\/p>\n China\u2019s strategic oil reserves and huge refineries leave it far less exposed than its Asian neighbors. China has also shielded consumers from the full brunt of rising fuel costs<\/a>, permitting its state-controlled oil companies to pass along only half of any increase in oil prices.<\/p>\n The picture is grimmer in the toy industry.<\/p>\n Thousands of workers who lost their jobs took to the streets last week in southern China, staging daily protests to demand back pay and compensation from several toy factories that abruptly closed on April 20.<\/p>\n
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