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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (1253)	11/6/2003 7:26:28 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

China's upcoming auto policy under fire By Richard McGregor in Shanghai Published: November 6 2003 13:42 \| Last Updated: November 6 2003 13:42 China's much-anticipated auto policy, which has been portrayed as a potential threat to foreign multinationals, is coming under attack in China for its measures impeding new investment by local private companies. The policy, now awaiting final approval by the central government, is expected to set high barriers for local entrepreneurs to enter a market tipped to exceed its counterpart in the US within two decades. The latest draft of the policy says Beijing will not approve any new manufacturing ventures but rather will encourage existing players to expand through mergers and acquisitions. "The policy smacks of central planning," said Zhang Wenkui, a senior researcher at the state Development and Research Centre. "The core of the new auto policy is its approval system and it favours those [state-owned businesses] with a vested interest in keeping out competitors." China has only one fully fledged, private car manufacturer, the Geely group, based in Ningbo, south of Shanghai, but other non-state enterprises have been rushing to get into the business this year. Private companies which have acquired controlling stakes in existing state-owned manufacturers in recent months include BYD, the Shenzhen-based battery maker, Chongqing Lifan, a motorcycle producer, and the Huaxing group in Ningbo. Many more private and state-owned companies, especially in the consumer electronics sector, have also been rushing into the auto parts industry, raising the spectre of the kind of "price destruction" that has occurred in other manufacturing industries in China. The central government has said little publicly about the auto policy, except to confirm that the current requirement for foreigners to be part of 50:50 joint ventures will remain. The JVs are exclusively with state firms. The draft policy also says half of the intellectual property of cars built in the country should be of Chinese origin by 2010, a controversial measure that is worrying for foreigners but too vaguely defined to cause panic. Whatever the policy says on its release, other analysts contend the central government will be too weak to prevent private investment in the industry, just as it is struggling now to enforce dictates to control the steel and aluminium sectors. "Theoretically, the government can do anything it wants to do, but in industry policy, [Beijing's] track record is not very good," said Paul Gao, of McKinsey in Shanghai. Mr Gao said with about 100 existing vehicle production licences in China, many of the held by loss-making state enterprises the government wants out of the industry, "it would be hard to stop private companies getting in". The Chinese vehicle market has maintained a hectic pace of growth this year with sales in September setting a new monthly record of 200,480 units. In the nine months to September, total vehicle sales were 1,454,522, up 69 per cent on the same period last year, on top of market growth in 2002 of about 40 per cent. news.ft.com