China's auto industry is suffering as a result of government lending curbs, according to new figures from the national statistics bureau.

Car sales are slowing, having risen 76 per cent in 2003, as the government's policies make it harder for consumers to obtain loans and falling prices deter people from buying.

Price cuts by General Motors and Volkswagen have also "created an expectation among China consumers that prices will fall further, so they decide to wait," according to Lawrence Ang, executive director of Geely Automobile.

General Motors previously reduced prices on Buick cars and wagons by an average eight per cent in May.

The news comes alongside the publication of new figures showing that China's industrial production rose in July at its slowest pace in a year, a trend also linked to the lending curbs in Bloomberg reports.

Production rose 15.5 per cent from a year earlier following a 16.2 per cent climb in June. Meanwhile, growth in auto output slumped to 5.4 per cent from 20.4 per cent,

It is now hoped that the slowdown may ease pressure on the Chinese central bank to raise interest rates for the first time in nine years.

Calls have been made for such a measure in an effort to cool the economy where manufacturing is still growing three times faster than US production.