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Post-WTO Competition to Boost Auto Industry

China's auto industry, although not as efficient as its big foreign competitors, will be able to survive the challenges it will face when the country enters the World Trade Organization (WTO).

Lu Zhiqiang, deputy director of the State Council-affiliated Development Research Center, said the WTO entry was not a "gate to hell" for the auto industry.

Lu made the remarks yesterday during the 2001 Auto Industry Summit in Beijing.

His remarks eased many people's fears that the domestic auto industry could be flattened by cheaper imported vehicles after China joins the world trade club.

Lu said there are many advantages for the industry, such as unmatched domestic market potentials, to deal with global challenges.

"But we do not have enough time to establish an internationally competitive auto industry by ourselves,'' he said. ''We have to increase our competitiveness while we are opening up to our foreign counterparts."

There is little possibility of setting up an integrated and independent auto industry within one country under the ongoing alliances and acquisitions in the world auto industry, he said.

Domestic automakers must deepen co-operation with foreign companies and engage more strongly in the world market to deal with the WTO challenges, he said.

China will cut its tariffs on auto imports from the 70 to 80 percent level to 25 percent by mid-2006 according to a Sino-US WTO agreement.

Domestic automakers have significantly increased their competitiveness through co-operation with foreign companies over the past 20 years. Most cars in the country are currently being produced by joint ventures.

Lu was echoed by Chen Jianguo, an industrial official from the State Development Planning Commission, who said joint ventures are part of China's auto industry and that it should not reject foreign investment.

It is wrong to think that China must establish an "independent national auto industry," Chen said during the auto summit.

"We should give more development opportunities to all forms of automakers including joint ventures and exclusively foreign-funded enterprises," he said.

More automotive joint ventures may possibly be launched in China over the next years, he said.

Zhang Xinye, president of the China Automotive Engineering Society, said joint ventures and Chinese automakers are in "the same boat" when it comes to meeting the WTO challenges.

However, Lu said: "We have no reason to give up the auto industry, because it has made great achievements over the past two decades and it is an important part of our national economy."

The industry is widely seen as a growth engine for other related economic sectors and can create many jobs. And the Chinese government has listed it as one of the pillars of the national economy.

Lu said the Chinese auto market could provide enough room for all world auto giants to compete.

In the next 10 years, the market is expected to grow considerably, especially for small-sized cars for Chinese families, he said.

Other advantages for the industry to tide over global competition include its cheap labor costs and relatively strong manufacturing sectors, such as steel and machine-building, Lu said.

(China Daily 04/23/2001)

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