By Anthony Rowley 
in Tokyo

AMID plunging vehicle sales worldwide, the China market continues to glow like a beacon of hope. Nissan said yesterday its China sales rose 38 per cent last year - while globally they plunged 25 per cent, led by falls in Japan, the US and Europe.

Chinese demand for compact cars and light trucks in particular helped Nissan and other Japanese auto makers last year. And a scheme announced by the Beijing authorities to subsidise rural people who buy certain types of vehicle is expected to give the market a further boost.

China's central government wants farmers to buy small cars, mini-vans and motor cycles, and said in January that it would make five billion yuan (S$1.1 billion) of subsidies available.

On March 15, it announced a 10 per cent subsidy for car purchases and 13 per cent for motorcycles. China and India are among the most promising markets for auto makers in the current global downturn, analysts say. Indian industrial giant Tata this week announced plans to build an ultra-compact Nano car costing less than $2,000, and a rash of competing models could soon appear in India and China.

Japan's biggest auto maker, Toyota, is rumoured to be preparing for an assault on the low-cost mini-car sector through its Daihatsu subsidiary, while Italy's Fiat is also said to be gearing up to enter the field.

South Korea's Hyundai - India's second-biggest car producer after Indian-Japanese joint venture Maruti Suzuki - has said it plans to produce a new small car costing around $3,500 for the Indian and Chinese markets. And Maruti Suzuki itself may also enter the market.

For the Japanese industry in general, the China market is helping to cushion the effects of the global recession, according to figures released this week. Overseas sales of Japanese manufactured goods fell in all regions and segments in 2008 - except China.

The China boost is badly needed by Nissan and others. Nissan said yesterday its sales in Japan in February slumped 35 per cent to 40,686 units.

Production also plunged. Nissan's global production in February fell 51 per cent year on year to 156,864 units. Production in Japan fell 69 per cent to 43,885 units, while outside Japan it slipped 38 per cent to 112,7909 units.

In the US, Nissan's production sank 53 per cent to 26,029 units, while in Mexico it dropped 30 per cent to 23,181 units. In Britain, it slid 41.5 per cent to 21,597 units, and in Spain, it crashed 86 per cent to 2,915 units.

The Japan Automobile Manufacturers' Association said yesterday it expects domestic sales of vehicles in the financial year starting April 1 to fall 8 per cent from the current financial year to 4,297,600 units.

This article was first published in The Business Times.