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China’s new leaders to support local brands

A major decision adopted earlier this month by the new Political Bureau of the Party Central Committee headed by Xi Jinping signals government support for local independent brands as far as government procurement and official fleets are concerned.

The eight-point regulation adopted on December 4 is meant to change the behavior of Party and government officials from extravagance, bureaucracy, empty talk, corruption and power abuse that have greatly tarnished the image of the ruling Communist Party and distanced Party and government officials from ordinary citizens.

The regulation, plus Xi Jinping’s low-profile and pro-citizen trip to Shenzhen riding in a light bus instead of a limousine, has sent a strong signal to all levels of governments for change. The visit to the bridgehead of China’s economic reform and opening up initiated by Deng Xiaoping also showed the resolve of Xi and the new leaders to continue with economic and political reform.

The key points of the regulation include no car fleets, welcome banner, red carpet reception and banquets for officials; no unnecessary ceremonies, celebrations and conferences and no empty and jargon talk; elimination of unnecessary government documentations; restriction of official overseas trips; avoidance of traffic controls for leaders; no PR stories on official activities; no publication of personal writings, letters, signatures or calligraphy; and strict compliance of regulations on official cars and travel accommodations.

The regulation, if implemented, will have a major impact on China’s future demand of luxury goods including upscale cars in the world’s largest new automobile market.

The stock price of China’s leading liquor maker of Maotai plummeted on December 24 at the news that China’s Central Military Commission, of which Xi is chairman, announced to prohibit serving liquor in all official reception in a 10-point regulation, losing ¥12.5 billion ($2 billion) in value on a single day.

The Gansu Provincial Party Committee announced a similar 10-point regulation on December 23 which includes a decision to “replace official car fleets with domestic independent brands.” All central ministries, commissions and provincial governments are expected to follow suit.

A recent weibo (China’s twitter on sina.com.cn) posted by an executive from state-owned Chang’an Automobile Group said: “Xi Jinping mentioned in the Political Bureau meeting about using independent cars, even mentioning the examples of Putin and the Cuban government. Applause! My proposal requesting government procurement of independent-branded cars may become a reality!”

With the new procurement standards in displacement and pricing of government fleet vehicles already adopted earlier this year, government procurement of official cars is expected to move towards local brands instead of foreign brands assembled in China.

If that happens, the behavior of the country’s hundreds of thousands of executives at state-owned companies and even owners of private businesses may also change accordingly because for centuries government officials have been role models in China and the automobile is still a status symbol.

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