'Fragile' Auto Sector Needs Boost

China's auto industry is still too fragile to compete with multinationals both in technological development and investment capability, top government experts say.

The industry lacks development ability and its research and development facilities are withering away, said Chen Qingtai, deputy director of the State Council Development and Research Center.

The domestic market is limited by too many restrictive regulations, although millions of people are longing to own a car, he said.

Foreign auto producers should be encouraged to help the restructuring of the industry in China to improve home companies, Chen said.

Limits placed on foreign investment in auto joint ventures have made them reluctant to invest advanced technologies in China or promote exports.

The issue aroused heated debate during China's World Trade Organization (WTO) negotiations with the United States and the European Union.

Experts are increasingly urging the government to bring in more lenient policies regarding foreign investment to boost the domestic market.

"It is not pragmatic to stick to self-reliance in the auto industry when it is already lagging behind international standards," said Chen.

He warned it would be too late to take action to prevent the auto industry from suffering more if long-awaited guidelines to improve the situation did not come out soon.

Decisions are unavoidable. These include slashing tariffs on auto imports to 25 percent by the year 2005 from the present 80-100 percent.

An early opening up will help the country's car market face up to increased foreign competition expected when China enters WTO, Chen said.

"One of the advantages of becoming a WTO member is to have wider access to the global market," said Chen, "so we should also encourage foreign companies to invest more here."

More incentives for foreign investors will also ensure China has a chance to take part in the global distribution of technology by foreign auto giants.

This would help China benefit from economies of scale, which helps lower costs and prices so more people can afford cars, said Chen.

High prices for cars and other costs have meant many people are waiting for better choices after China joins WTO.

A consumption incentive package should come out as soon as possible, including reducing consumption taxes and lowering various kinds of fees for private buyers.

"More transparent guidelines relating to production and consumption trends should also be designed so that everybody knows clearly what to do next," said Chen.

It will help enterprises pursue a market-oriented development strategy and also help the public decide which type of car is more suitable for them.

China's annual auto output surged to 1.83 million units last year from 150,000 in 1978. Joint ventures made the lion's share, producing more than 570,000 sedans last year, according to official statistics.

(China Daily 11/27/2000)

In This Series

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Toyota moves into China market

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