Despite a rise in monthly sales during August, the Chinese automotive industry has suffered a setback after the National Bureau of Statistics announced it had reviewed its forecasts for end-of-year car sales.

The bureau said that it needed to revise its predictions as sluggish domestic car sales hit home.

An original forecast of 2.82 million sales has now been scaled down to 2.39 million cars for 2004, marking a significant alteration.

Jiang Yuan, an official from the bureau, told China Daily that the car production growth rate for 2004 has now been lowered to 18 per cent from 40 per cent, which he ascribed to a difficult economic climate.

"The reduction on car output forecast this year is based on adverse car market conditions," he said.

"Most car makers in China cannot fulfil sales targets set at the beginning of this year,” Mr Yuan added.

The first eight months of the year have seen average monthly car output touch 171,900 units, reflecting a stagnation of growth in comparison with the figures for the same period in 2003.

Automotive manufacturer Volkswagen also acknowledged the changes, adding that its own sales target had been adjusted from 462,000 cars to be “in line with changes on the domestic market”.

Experts estimate that at as much as 30 per cent of car production capacity in China has proved superfluous in the last eight months, with the latest pronouncements from the National Bureau likely to cause jitters among the automotive industry - which has identified China as one of the key areas of growth in the world.