China's auto industry has reported a rapid growth in exports in the first seven months of this year. Meanwhile auto sales on the Chinese mainland have fallen for two consecutive months, affected by the slowing economy. But now some industry watchers say they expect them to pick up steam again.

Our reporter Tu Yun has more.

Reporter:

According to statistics from the China Association of Automobile Manufacturers, China exported more than 160,000 sedans between January and July, an increase of nearly 86% year on year.

In July, the export volume rose more than 48 percent compared with June.

Chery Automobile Company, China's largest exporter of domestically made vehicles, says it plans to build another seven foreign manufacturing plants by 2010. It already has seven overseas plants in such countries as Russia and Ukraine.

Xu Changming, director of the State Information Center, says more domestic automakers have started to expand overseas. They have also outlined a series of strategic plans to develop business in foreign markets.

"Our home-brand autos have high international competitiveness, largely based on their prices."

Industry insiders say foreign markets have become the primary growth channel for China's domestic automakers, given the fierce competition and shrinking profits in their home market.

But analysts also say low-end markets in Africa and the Middle East are the main export regions for Chinese passenger vehicles.

While Chinese auto exports continue to grow, car sales in the country have dropped over the last several months.

According to the China Association of Automobile Manufacturers, the sales of passenger cars in August fell year-on-year for the first time in the last five years.

Xu Changming says the government's tight monetary control policies have led to shrinking consumer demand. He adds some consumers avoided purchasing cars in August when the Beijing Olympics were held.

But auto sales rebounded during the National Day holiday earlier this month.

Guo Yong, a car salesmen in Beijing, says sales at his company surpassed his expectations during the weeklong holiday by at least 50 percent over the same period last year.

Guo says he is even more confident about future sales because of the recent interest rate cut by the government.

"By adjusting the interest rate, the country is going to promote economic development. Though it's not likely to reflect on the auto market immediately, the macroeconomy will do well, which will finally lead to the development of auto industry and stimulate consumer demand."

China's central bank on Thursday cut key interest rates by 0.27 percentage points to boost the domestic economy as worries continue to grow over how the global financial crisis will play out here.

Tu Yun, CRI news.