The problem, as every Potemkin village comes to realize sooner or later, is that one can only pretend for so long and eventually the stimulus money runs out. And in the case of China, the stimmies have almost run out.

According to Reuters, at least six cities and municipalities across China have suspended trade-in subsidies for car buyers in June, which could grind to a halt most if not all new car sales in the world's second-biggest economy.

Notices from governments in Zhengzhou and Luoyang blamed the subsidy pause on the first round of funding allocated by Beijing for the program running out, while Shenyang and Chongqing said the suspension was due to adjustments to improve capital efficiency.The northwestern region of Xinjiang issued a similar suspension.

Chinese retail sales data for May released earlier this week surprised on the upside... but economists quickly realized that subsidies were the main reason for the higher-than-expected 6.4% growth.

There is yet hope that the stimmies running out won't crater ground zero of China's deflationary exports, the EV industry: and that is even more stimmies! While there was no official announcement about when more funds from the central government will be released for programmes, China's National Development and Reform Commission and Ministry of Finance have said the subsidies would continue throughout 2025, leading analysts to expect new funds for the third quarter to be made available from July. Good luck.

Official media in China's Henan province, where Zhengzhou is the capital, last week reported that China's central government had taken note of some loopholes in the subsidy schemes and would look to make adjustments.