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Manufacturers, Exporters, Wholesalers - Global trade starts here.

Auto Industry Facing Challenges

The development of the automobile industry in China has become a hot topic drawing both nationwide and worldwide attention, Christoph Stark, president and CEO of BMW Group Greater China Region, quoted Secretary-General of the Boao Forum for Asia (BFA) Long Yongtu as saying.

"World Trade Organization Director-General Supachai Panitchpakdi used three words, 'change, change, and change,' to summarize the present circumstances of world trade when talking about the prospects of the new round of negotiations of the WTO this noon," said Stark. "I feel the same thing applies to the auto industry in China, too."

Stark was chairing a panel session Sunday afternoon on the nation's auto industry at the annual BFA, which concluded Sunday evening in Boao, Hainan Province.

Lin Xiaogang, president of Huachen Automotive, predicted that China's auto market will provide many opportunities for the global auto industry in the next 20 years.

China's auto market has been growing at an astonishing pace. A significant change occurred in 2002 in the global pattern of auto production. That year's auto output in the Asia-Pacific region -- 21.9 million units -- exceeded the figures for Europe and America, and China's net increase in vehicle manufacture reached 1.2 million units, with a growth rate of over 36 percent.

"Last year China sold more than 5 million vehicles, becoming the world's third largest auto market," said Lin.

However, the continued development of the auto industry is beset with difficulties.

So far, multinational corporations have invested an estimated total of US$9.4 billion in China's auto manufacturing, for production capacity of 2.7 million vehicles annually. Last year these multinationals vied with each other in lowering sales prices, and the price war affected the domestic auto industry, Lin said.

The renminbi issue is also creating uncertainty within the industry, he said. To maintain the overall stability of the nation's economy and domestic companies' competitive power, the Chinese government has stated adamantly on several occasions that it will not appreciate the currency. However, with increasing pressure from Western countries, the possibility remains.

The US government has carried out a gradual devaluation policy for a long time, and when the RMB is allowed to appreciate the price of imported vehicles will fall further, which in turn will lead to a drop in general car prices in the Chinese market, said Lin. The appreciation of the currency would put the domestic auto industry into a very disadvantageous situation.

Bernd Leissner, president and CEO of Volkswagen (China) Investment Co. Ltd., listed four challenges to the sustained development of China's auto industry: environmental protection, safety, transportation and, in particular, energy conservation.

Noting China's increasing reliance on imported oil during the past 10 years or so, Leissner suggested that the auto industry focus on reducing fuel consumption.

Lin said that domestic companies should remain self-reliant, make full use of available resources, while simultaneously taking proactive steps to seek international cooperation.

To maintain and strengthen the competitive power of made-in-China brands, he suggested that domestic companies draw on the experience of foreign counterparts, introduce their advanced techniques and mature market sales strategies, and integrate domestic consumer demand with that of the global market.

Following its WTO entry, China's economy has become an open economic system whose sustained, stable growth is a significant driver of regional economic development in Asia. The auto industry is of vital importance to the future of the Chinese economy, deserving of close and careful attention, Lin said.

(China.org.cn by staff reporter Shao Da, April 25, 2005)

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