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Boeing and Airbus can give up any hope that Chinese demand might help offset their global sales slump. The country's aviation industry regulator has advised mainland airlines to cancel or postpone aircraft deliveries in 2009, as carriers struggle with a decline in air travel demand. Clamoring for government handouts, the airlines will listen, though they may have a hard time extracting concessions from suppliers.

The Civil Aviation Administration of China released guidelines Wednesday advising airlines to cancel or delay delivery of purchased aircraft in 2009. It also asked airlines to retire old aircraft and said it will not consider any new airline applications until 2010, according to a statement. The regulator encouraged further alliances and consolidation.

The once booming Chinese airline sector is suffering from overcapacity amid a slump in travel that started in the second half of 2008 as the economy began to cool. The airlines also have suffered from a wave of steep fuel-hedging losses, as oil plunged below $50 a barrel from over $140 a barrel during the summer.

Despite the government's encouragement, it is unclear how many aircraft orders can be canceled or postponed. "I don't think too much flexibility will be given to the airlines because Boeing and Airbus are also facing declining orders" in the U.S. and Europe, said Kelvin Lau, Hong Kong-based airline analyst for Daiwa Securities. "If they allow one airline to defer delivery, many more will want to do the same."

But Boeing (nyse: BA - news - people ) might allow more leeway than its archrival Airbus, a unit of EADS (other-otc: EADSY - news - people ), as the U.S. giant is facing difficulty meeting delivery schedules due to a labor strike that ended in November, he added.

Guotai Junan Securities analyst Martin Wang said the regulator's announcement may not have much impact without incentives, and noted that the commercial decisions remain in the airlines' hands. Delivery cancellations can also be expensive, as airlines typically put up in advance up to 30% of the purchase price, Lau said. Wang estimated penalties for contract changes may run 5% to 10% of the contract price.

Chinese airlines are on course to lose big this year. Beijing injected 3 billion yuan ($437.0 million) in November into China Southern Airlines (nyse: ZNH - news - people ), which Wang expects to post a loss of nearly 1 billion yuan ($145.7 million) for 2008. Wang and Lau expect China Eastern Airlines (nyse: CEA - news - people ) to get a similar government aid package--Wang estimates it is on track to post a loss of over 3 billion yuan ($437.0 million) for the year. Air China (other-otc: AIRYY - news - people ) is in the best shape of the three big Chinese airlines and may get by without aid.

Chinese automaker Geely reported sales for October dropped 7.4% from last year.

As China's economy boomed during the past few years, dozens of Chinese companies jumped into the car business, setting up factories to produce autos for the growing middle class. Thanks to those new automakers, many of them backed by local governments, today there are more than 100 Chinese auto manufacturers with a combined production capacity of over 9.6 million vehicles, according to Changjiang Securities. Problem is, Chinese purchased only 8.8 million vehicles last year, according to official figures.

Now, with the global credit crisis cooling China's economy, demand for cars is growing even weaker. Growth in auto sales is expected to be just 5% this year, compared with 22% in 2007, estimates the China Passenger Car Assn. On Nov. 11, Geely reported sales for October had dropped 7.4% from last year. Last month, SAIC Motor reported quarterly profits dropped 78%, to $38 million; the Shanghai automaker's stock price has dropped 78% this year, compared with a 62% fall in the Shanghai stock index.

With sales in the doldrums and investors shunning their stocks, some of the leading Chinese automakers are taking a page from General Motors (GM), Ford (F), and Chrysler's handbook and calling for China's government to support the auto industry. However, talk of a bailout seems to be wishful thinking. Beijing failed to include any measures to help the industry in the $586 billion stimulus package announced earlier this month. And most of the largest automakers in China, including Dongfeng Automobile, SAIC Motor, and Tianjin FAW Xiali Automobile, are still profitable.

No Life Preservers

That's why the government seems to be taking a hands-off approach. It's not providing assistance to the country's automakers, but it's not forcing a much needed consolidation, either. "It's not like in the U.S. where they are going to get a lot of help with their business," says Henry Li, head of exports at BYD Auto in Shenzhen, which has halved its 2008 export target to 10,000 vehicles in light of the crisis. "The government does not provide financial support. The only thing they can do is help organize fairs to increase domestic consumption."

With an eye on long-term sustainability, Beijing is encouraging the auto industry to develop more fuel-efficient cars. For instance, in September the government raised the consumption tax on luxury cars, which had been 20%, to 40%. Chen Jianguo, deputy head of the industrial coordination department at the National Development & Reform Commission, said earlier this month that the government was considering slashing the sales tax, which accounts for one-tenth of a car's price, on alternative-energy vehicles to boost demand. Beijing is also likely to levy a gas tax, offsetting a possible fall in gasoline prices, in a step toward allowing the market to set prices instead of the state.