State Ensures Health of Auto Market

2004/06/15

The new policy said total investment in any new auto project should stand at 2 billion yuan (US$241 million) or more.

Such a project must include a product research and development organization with an investment of no less than 500 million yuan (US$60.4 million).

"The government hopes to use these regulations to cool overheating investment and overcapacity in the auto industry," said Yale Zhang, a Shanghai-based manager of CSM Worldwide, a US auto industry consulting firm.

"Plans of many non-auto enterprises in China, especially privately owned firms, to enter the industry will be derailed by these regulations."

The auto industry is widely seen as one of the overheated industrial sectors in China, thanks to massive investment from foreign automakers, and domestic, State and privately owned enterprises.

Total investment in building new auto-making capacity will amount to 216.6 billion yuan (US$25.5 billion) by 2007 in China, according to figures released by the commission earlier.

Annual auto manufacturing capacity will total almost 15 million units in China by then. Sales of domestically made vehicles grew by 34 per cent to 4.39 million units last year.

The new policy also aims to foster a national united and open auto market mainly depending on private consumption.

All local governments will be forbidden to take discriminatory action on vehicles produced in other regions, the policy said.

"The State will carry out a national unified vehicle registering and checking system, and local governments cannot do likewise in their own ways," it added.

The Shanghai municipal government still imposes much higher charges on private car buyers than in the other regions in China by auctioning car plates in an effort to control car sales and prevent traffic jams in the city.

Average charges for a car plate in Shanghai stood at more than 34,000 yuan (US$4,100) last month.

A senior official from the Ministry of Commerce claimed around 10 days ago that Shanghai municipal government s action "violates related clauses of the law of road transportation security".

But the municipal government said it would not change its ways any time soon.



	Article featured in Business Beijing, June 2004 Publication sponsored by Information Office of the Beijing Municipal Government, Beijing Municipal Bureau of Commerce, Development & Reform Commission of Beijing Municipality, China Council for the Promotion of International Trade (Beijing Sub-Council)