Hu Maoyuan, Chairman of Shanghai Automotive Industry Corp., predicted that the year-on-year growth might dip into negative territory later in 2010.

But the prospect may not be as dim as expected, said Qin Xuwen, a senior analyst with Shanghai-based Orient Securities Co. Ltd.

There are still strong pent-up demands in smaller cities and the promotional offers will also provide an effective cushion, said Qin.

Financing SMEs

The Industrial and Commercial Bank of China (ICBC), the country's largest commercial lender, said it provided 55.01 billion yuan ($8.05 billion) from January to April in trade finance for small and medium-sized enterprises (SMEs) in China.

By the end of April, the balance value of the bank's trade finance for SMEs totaled 77.43 billion yuan ($11.3 billion), up 34.35 percent from the start of this year.

Commercial banks usually consider small businesses larger risks. The poorly developed credit guarantee system makes it even more difficult for them to access financing.

"These loans have effectively soothed funding shortages of the small companies and added fuel to trade between them," ICBC said.

In addition, the bank has kept a vigilant eye on risks. Its bad loan ratio of such services stood at a minimum 0.14 percent, much lower than the industrial average.

ICBC is currently the world's largest lender by market value. Its net profit in the first quarter rose 18.2 percent year on year to about 41.73 billion yuan ($6.1 billion).

Steel Prices

For the first time since November 2009, Baosteel Group, a major Chinese steelmaker headquartered in Shanghai, announced to cut prices of its products for July delivery by up to 1,300 yuan ($190) per ton, or 17 percent, given tumbling demands.

The steelmaker reduced the prices of some steel products used in automobiles. Analysts think it's due to the slowdown in the auto industry.

This move is intended to protect its market share and at the same time mount pressure on iron ore miners to lower prices, said Yang Lei, a senior analyst at the Beijing-based Shihua Financial Information Co. Ltd.

Many other companies are expected to follow suit as demands for steel are set to remain low until the fourth quarter, said Yang.

"Baosteel will face the most difficult time in the third quarter and is braced for a dent to its profit margin," said Xu Lejiang, Chairman of the Board of Baosteel.

Some smaller manufacturers may already be swimming in red ink again, taking cues from both lower prices and higher iron ore prices, said Luo Bingsheng, Vice Chairman of the China Iron and Steel Association.

Collective Buying

Group shopping websites are sprouting up across the country, allowing individuals to group together in their hunt for bargains ranging from massage discounts to gym memberships.

The websites topped 400 in May, and are expected to witness sales of nearly 1 billion yuan ($146 million) this year, said a report by the Beijing-based Analysys International Consulting Co. Ltd.

Riding the wave was Lashou.com that has expanded its presence to more than 10 major cities with more than 300,000 users in less than three months. On May 25, the company announced it had broken even, the first website in the industry to do so.

Its business model resembles that of the famous U.S. site Groupon.com. It deals with local businesses in each city and offers a deal a day. It usually sets a time limit on the offer and requires a certain number of people to activate the discount. The site takes a portion of the revenue generated by the deal.

The emerging industry has caught the attention of venture capitalists. 24quan.com said it obtained several million yuan of investment from the Business Angel, and Lashou.com also tied up with Daily Deal, the largest group shopping site in Europe.

But the concern of the moment is that the sector is getting increasingly crowded as its low capital threshold appeals to start-up entrepreneurs, said Su Huiyan, a senior analyst with iResearch Consulting Group.

"As competition heats up, many smaller players may end up in bankruptcy unless they can significantly improve services and secure a reliable source of financing," said Su.