China's local car manufacturing industry will face its toughest challenge in the coming months as the 'financial tsunami' arrives, a state economist said Wednesday.

Xu Changming, information resource department director of the State Information Centre, told a forum on the sidelines of the 6th China (Guangzhou) International Automobile Exhibition that external factors are hard to tackle.

''The appreciation of the yuan, rising raw material cost and the global economy downturn will weaken the overseas consumption markets,'' Xu said in remarks reported by Kyodo.

''The coming few months will be worse for the industry.''

While what Mr Xu said may not surprise, the fact that he, as a state representative has said it, will be seen as significant and evidence that the Chinese government is concerned. Observers will be wondering what the government may do to counteract a severe slowdown in the sector.