The Ministry of Commerce recently released a Revised Draft of Provisional Regulations for Investigation and Penalty on Improper Behavior of Keeping Exports Low-Priced, (hereinafter referred to as the Draft) so as to further restrict and prevent disorderly competition in auto exports.
Low-priced competition in auto exports
Statistics show that China’s exports for cars and SUVs in the first quarter of this year reached 16,813 and 565 units respectively, with an increase of about 458 percent for cars and 334 percent for SUVs over the same period of last year. However, the export values for the two vehicle types increased slowly, at 302 and 120 percent, indicating that these vehicles were being exported at cheaper and cheaper prices.
China’s exports for motor vehicles and auto parts also grew rapidly in the past two years. In 2005, the total value for these exports rose to $1.58 billion for whole vehicles and $8.89 billion for auto parts, up by 158.4 and 20.9 percent compared to the previous year. For the first time China’s automobile exports outnumbered imports by 11,000 units.
Most of the exported Chinese vehicles went to developing countries in Asia, Africa, the Middle East, and Latin America. The limited market and overlapping customer groups in these areas have intensified the competition among Chinese automakers.
“I’m very much worried that China’s auto exports will lead to vicious competition among the domestic enterprises just as the motorcycle exports did in the past,” commented an executive of a Chinese auto exporter.
Calling for orderly competition
About 11,000 Chinese auto and parts makers exported their products in 2005 with an average export value of less than $1 million for each company. The price war of exported products has caused much confusion within the industry.
Many domestic automakers including Great Wall, FAW, Dongfeng, Jianghuai, and Chery Automobile have expressed their concern and dissatisfaction, calling for fair and orderly competition in auto exports.
At the National People’s Congress held in March, Zuo Ya’an, chairman of Jianghuai Automobile, submitted a motion entitled “Some Suggestions on Standardizing Foreign Trade Order.” He stressed the importance of setting industrial regulations to prevent excessive internal competition. Otherwise, he predicted, auto exports will most likely share the fate of being anti-dumped by foreign companies, similar to what happened to China’s textiles and electronic appliances exports.
So far China’s auto industry has been involved in eight cases of foreign anti-dumping investigations, causing heavy losses to the country. In 2003, for instance, Canadian SPT filed an anti-dumping lawsuit over automotive fuel tanks made in China. And in 2004, India, Peru, and Turkey all launched anti-dumping surveys against Chinese-made tires.
The Draft escorting auto exports
According to the regulations in the Draft, China’s auto exporting business must be conducted in an orderly fashion, and those who violate these rules shall be severely punished.
In addition, the import and export trade commissions and industrial associations should play a positive role in maintaining foreign trade orders, all members of which should be self-disciplined in doing exporting business. These organizations are obliged to investigate anyone who disobeys these rules.The Draft will likely replace the old regulations made 10 years ago by the now defunct Ministry of Foreign Trade and Economic Cooperation (MOFTEC). Witman Liao