Surprise! China's Thrifty Consumers Drive Mercedes and GM to Sales Records 

The Chinese apparently did not get the memo about their general absence from the consumer market and the global slowdown in auto sales. In March, they gave Mercedes-Benz its "best month ever" — a 50% gain over the same month in 2008 — and they bought nearly 23% more vehicles from GM, according to The Wall Street Journal.

Those numbers, of course, run counter to the slowdown in global auto sales and the propensity of Chinese consumers to save their money rather than spend it. Many China watchers have noted that the Chinese economy would not be feeling such a shock from the global recession if it didn't have to depend almost entirely on Western consumers to buy its goods.

In an interview for a Knowledge at Wharton article about China's economic challenges, University of Pennsylvania political science professor Jacques DeLisle said that the real barrier to raising domestic demand in China is over-saving by Chinese workers, who sock away about 40% of their income because of the absence of a reliable safety net for social security or health care. "Until the government can get people to start spending income, there will be limits to increasing domestic demand. What they really need is consumer demand, which will remain weak as long as people feel compelled to save at a high rate."

So what happened?

"China is back," Mercedes-Benz (China) chief executive Klaus Maier told The Journal. "Entrepreneurs in China are positive and are in a good mood." Maier said he expects China's auto market to grow 6% this year, and the luxury auto segment to grow in the double-digits. He said Mercedes-Benz aims to grow faster than the market, but didn't provide details.

Auto sales in China had declined for five out of six months before rebounding 25% in February, according to the China Association of Automobile Manufacturers. March sales figures will likely be released in the next week, The Journal said.

A month or two of sales gains does not necessarily point to a turnaround, but consider this, too: March sales at GM's commercial vehicle joint venture, SAIC-GM-Wuling Automobile Co., rose 38.1% from a year earlier to 90,784 units, also a monthly record, GM said.