Now that inflation appears to be under control, the glass half-fullers say, look for the Beijing to turn on the fiscal taps once more. With more cash sloshing around the financial system, car demand is bound to rally. The skeptical view, on the other hand, holds that the roots of lethargy in today's car market run much deeper; that China is feeling the effects of the global financial crisis and its own forms of irrational exuberance. China today is beset by a diving stock market, an appreciating currency (which hurts exporters), rising gas prices and higher car taxes. Even with more liberal fiscal policies, there will be no quick resumption of the head-turning demand that has been China's trademark in recent years, they say. Which read is the more accurate one? It is hard to bet against the optimists. Chinese people are crazy for cars and save aggressively to afford their own. More than 80 percent of new cars are still bought with cash. Intense competition means that prices continue to fall, month after month. There have been countless predictions about a slowdown in Chinese car demand since 2000 and each one of them has been proven ridiculously off the mark. And yet, this time things feel a little different. Both camps acknowledge current market weakness. Official wholesale data released this week indicate that August sales fell 7 percent when compared with the same month in 2007. This is the first monthly sales decline since 1998, during the height of the Asian Financial Crisis. This drop is no one-month aberration, attributable to the Olympics or late-summer buyer indifference. Since April, fewer people have been entering showrooms to buy new cars. Dealers are carrying unprecedented levels of inventory. Even luxury brands like Audi, Lexus and BMW are offering price discounts and other incentives as never before. Aside from Toyota, Hyundai and Suzuki (each up more than 20 percent), the other 48 other brands produced in China are either growing modestly, flat or down. If it is true that China's economy thrives on exports and strong consumer confidence, the Middle Kingdom will need to see two turnabouts before we can expect a resumption of strong demand for cars. On the export front, the Chinese currency (RMB) probably needs to stem appreciation against the Euro and the U.S. dollar. Given the weakness in the West, it will be difficult to tamp down the relative strength of the RMB. Consumer confidence has, no doubt, been affected by the Shanghai Stock Exchange's dismal performance this year. The market is barely holding above the 2,000 mark, down from 6,000 last October. A strong recovery seems unlikely amidst the global worries about banks and business. To be sure, no one is predicting an abrupt decline. And demand for cars in China still looks very attractive for the long term. But for the remainder of this year, car demand probably will be weighed down by that invisible but powerful force called uncertainty. Autos Insider columnist Michael J. Dunne is Managing Director -- China for J.D. Power and Associates.