China's accession to the World Trade Organization is expected to significantly drive the development of its floundering auto industry in a market-driven economy.
According to Lu Zhiqiang, deputy director of the Development Research Center under the State Council, the WTO accession will be "a positive catalyst" for the advancement of the industry.
"Despite increasing competition from foreign rivals, the WTO accession will create a much fairer environment for both domestic and foreign carmakers," Lu told an industry forum in Beijing yesterday.
China, which became an official WTO member on Tuesday, will cut its tariffs on auto imports to 25 per cent by 2006. The current tariffs range from 70 to 80 per cent.
Lu said: "The WTO accession will tap the tremendous potential of the Chinese auto market because it will make domestic car prices more reasonable and help form a national unified market, paving the way for the motor industry's fast development."
Many Chinese-made cars - such as the Accord produced by Guangzhou Honda and the Passat made by Shanghai Volkswagen - are much more expensive than similar models on the world market. However, the prices will decrease with the expected tariff cuts.
Scott W. Reno, of General Motors' China operation, told the forum - organized by the Beijing Evening News - that China would be the world's third-largest car market after the United States and Japan by 2010.
"The Chinese auto market will reach the current size that of the United States -16 million units a year - by 2025," Reno said.
Lu said China's WTO entry would make the motor industry speed up its shake-up.
Currently, more than 120 motor manufacturers in China produce 2 million units a year. Few models are independently developed by Chinese manufacturers.
Liu Weidong, deputy general manager of Dongfeng Motor Corp, based in Central China's Hubei province, said it was necessary for the industry to form big groups to enhance competitiveness.
Dongfeng, one of the country's top three motor manufacturers, announced earlier this year that it aimed to merge or tie up with two or three less competitive counterparts by 2005.
Lu said the WTO accession would help draw more foreign investment and cutting-edge know-how into the motor industry.
Almost all of the world's car giants such as Ford, General Motors and Toyota have set up motor-manufacturing joint ventures in China.
(China Daily December 13, 2001)