Asia Times: China's highway to success


	July 12, 2001	atimes.com

Special Reports

China's highway to success

BEIJING - China will continue to open up its automotive industry to the outside world while at the same time boosting independent development capabilities. Further, it will step up readjustment and upgrading of product mix with production of parts and components as the foundation, and economy cars as priority.

These are key cornerstones in the country's 10th five-year plan (2001-2005) for the development of the automotive industry, as made public by the State Economic and Trade Commission. Other elements include:

Market demand
1. Cars: Cars will become the mainstream of automotive demand, and more and more families will have cars. The demand for medium and high-grade cars will remain steady, but the market share will drop as ordinary cars, especially economy cars, will dominate the market.

2. Trucks: The development priority will be on heavy-duty, light and mini types. The demand for heavy-duty trucks will grow remarkably while the demand for medium-duty trucks will shrink. The demand for light trucks will rise steadily, and that for mini trucks will become stronger.

3. Buses: The demand for large and midsize buses will increase in the coming five years. With the development of holiday economy and the tourism industry, the demand for luxury and middle-grade buses will be on the rise. The rapid development of urban construction and extension of urban roads will make the urban public transit system busier and the demand for large, midsize and light buses will be growing steadily. The implementation of the country's urbanization strategies will boost the demand for light and mini buses in rural areas.

4. Motorcycles: The market demand will slow down and competition will continue to be fierce, with focus gradually shifting from price to multiple factors including quality, variety (especially environment-friendly products), brands and after-sale service. In recent years, China's export of motorcycles to Southeast Asia and South America has risen, indicating a growing demand in the above markets. The total number of motorcycles in registration is expected to reach 95-100 million units by 2005, while the demand will be at 12-13 million.

Development targets
General targets The total output of motor vehicles will reach about 3.20 million units by 2005, of which 1.10 million will be cars. The added value of the automotive industry will increase to 130 billion yuan (US$15.72 billion), accounting for about 1 percent of the GNP, and the domestic production of automotive products will basically satisfy the needs of the home market. Export of automotive products will make up about 8 percent of the total sale of the industry. By 2005, the output of motorcycles will be about 13 million, and the export will take up 15-20 percent of the total sale.

Readjustment of organizational structure

The industry plans to form two to three large automotive enterprise groups to compete on the world market, establish an automotive sale and after-sale service system of international standards and snatch more than 70 percent of the market share at home. It will give support to 5 to 10 large automotive parts enterprises with a strong edge over the competition, with the top three to have their market share increase to 70 percent domestically, and the export of auto parts and components will account for 20 percent of the total sale. It will have three or four motorcycle enterprise groups competing on the international market.

Readjustment of product mix

The readjustment of product mix will focus on raising the proportion of cars in the total output of motor vehicles and the proportion of heavy and medium-duty trucks and special-purpose vehicles in truck production. The proportion of diesel trucks and light diesel buses will also increase, while all medium-duty vehicles will use diesel engines. The industry will start to produce diesel cars and mini vehicles, and increase production of gas-powered public transport vehicles and taxi cabs. By 2005, the proportion of the following vehicles will reach:
Cars: from 29.2 percent in 2000 to more than 35 percent
Diesel vehicles: from 29.7 percent to about 35 percent
Vehicles using alternate fuels: to more than 2 percent

The industry will also raise the proportion of block serial automotive parts supply, block supply capacity, high-tech and high-added-value products and supply to international auto market. The production of carburetor cars and vehicles using the CFC-12 air conditioner will be stopped during the 2001-2005 period, and the production of carburetor gasoline vehicles will be stopped by 2005.

The guiding principles for the development of automotive industry in the five years will be:
* To persist in opening up to the outside world while boosting independent development capabilities;
* To step up readjustment and upgrading of product mix with production of parts and components as the foundation, and economy cars as priority;
* To optimize the organizational structure of the industry and realize economies of scale with large enterprise groups as the main body;
* To step up construction of state-level technical center and strengthen capacity of technical innovation and product development;
* To improve market environment, reinforce legislation and promote fair competition, and;
* To display comparative advantages to participate in international division of labor, and sharpen the competitive edge.

Policies and measures
Standardizing and fostering the automotive market

* To draw up a unified national automotive consumption policy;
* To study readjustment of the structure of auto consumption taxes and lower the general taxation level;
* To work out unified national standards for auto purchasing and various charging items, and abolish various unfair charges;
* To implement fuel tax policy and further improve auto credit consumption, and;
* To study and draw up concrete measures to lower purchasing taxes on economy cars

Promoting legal management

* To make full use of various means suitable to market economy such as technical laws and regulations, documents and standards to direct the development of automotive industry and manage access of automotive products;
* To work out and issue certification of technical regulations concerning automotive products, draft and implement auto emission control standards will become more and more strict, formulate the state technical rules on energy saving for motor vehicles and establish step by step an appraisal system for auto energy conservation, and;
* To step up reform of management of automotive products and a start certification system for automotive products.

Directing and promoting establishment of large groups

* To utilize various support policies of the state toward key enterprises to focus support on strong enterprises such as the First Automotive Group, the Dongfeng Motors Group and the Shanghai Automotive Industry Corporation;
* To encourage and support strong enterprises to take the path of diversified development by merger, recapitalization and absorbing social funds, and to carry out readjustment of product mix and expand product series by using social stock resources;
* To support the enterprises in shedding their social function and reducing burdens;
* To start the authorized management system of the state assets and support strong enterprises to operate theirs assets;
* To give priority support to technical transformation projects that are in conformity with the national development plan of the automotive industry and conducive to the readjustment of structure in direct financing, and encourage and support the establishment of a modern system of development, production and marketing, and;
* To simplify project approval procedures, and give large enterprise groups the right, after their long and medium-term development plans approved by the state, to examine and approve concrete measures for implementation independently.

Strengthening independent development capacity

* To study and establish a fund for the development of automotive products, and select key issues and common technology concerning economy cars to organize joint work in production, research and study, and;
* To direct and encourage large parts, buses, special purpose vehicles and motorcycle enterprises such as the First Automotive Group, the Dongfeng Motors Group and the Shanghai Automotive Industry Corporation to set up state-level research and development centers and give them preferential treatment.

Promoting development of automotive parts industry

* To encourage strong automotive parts enterprises to conduct independent development and strengthen competitiveness;
* To encourage various economic sectors to take part in the development of automotive parts industry and direct funds from local, departmental, foreign and non-governmental sectors to inject in the automotive parts industry;
* To continue to give financial support to automotive parts projects, which can be used by various kinds of vehicles and supplied to both;
* To direct and support realization of multi-form merger, association and recapitalization of automotive parts enterprises with the big ones as the main body, and direct small and midsize enterprises to focus on specialization and display economies of scale, and;
* To formulate and announce a product catalogue of key parts and components and make timely readjustments of the guiding catalogue for foreign investment.

(Asia Pulse)

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