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WTO entry has nurtured China’s auto industry, but challenges and problems remai

BEIJING – China’s entry into the WTO has helped nurture the country’s automotive market over the last decade, but many challenges and problems remain, according to several industry experts and government officials who spoke at a forum in Beijing on October 31 as China will soon celebrate the 10th anniversary of its entry into the WTO.

The Forum on the Internationalization of China’s Automotive Industry was held in conjunction with the 2011 Beijing Imported Auto Expo, both held by the China Europe Association for Technical and Economic Cooperation and the China Automobile Dealers Association (CADA).

Yu Xiaosong, deputy director of the China WTO Research Committee and chairman of its Competition Sub-Committee, said that the potential is huge for the market to grow even further. “China’s per-capita ownership of automobiles still has not reached international levels, there are still hundreds of millions of vehicles in demand,” said Yu.

Indeed, China’s share of global automobile production has increased from 3.5 percent in 2000, the year before China joined the WTO, to 23.5 percent in 2010, according to Sun Zhenyu, director of the China WTO Research Committee and China’s first Ambassador to the WTO.

“China’s private automakers have become the leading force in automobile export over the last decade, and despite the final vehicle import tariff fixated at 25 percent, China’s auto industry has flourished thanks to several years of grace period for tariffs reduction,” said Sun.

Sun believes that for China’s automakers to continue to go global, independent development, innovation and participation in international competition are a must. “Automakers should turn to overseas assembly or mergers and acquisitions, rather than just simple goods trading when it comes to export. At the same time, exporters should actively cope with challenges from trade protections,” said Sun.

Yao Jingyuan, former chief economist and spokesperson of the National Bureau of Statistics, said that of the stock market, real estate market, and the auto market, the Chinese general public is most satisfied with the auto market. “Why? Because that is the only market where prices have come down, thanks to China’s WTO entry,” said Yao.

The problem, said Yao, is that China was not prepared for the unexpected market surge. “Even though China’s automobile ownership per 1,000 people is around 60, less than one-tenth of that of developed countries and half of the world average, traffic congestion has become a problem not only in the big cities, but also townships,” said Yao. “There is no doubt that all citizens have the right to own an automobile, but it is time that growth should be focused on quality and innovation rather than quantity.”

Speaking of quantity, Huang Luming, deputy director of the Economic Consulting Center at the State Information Center, gave a series of data reflecting five major changes in the market in the 10 years since China became a WTO member.

First, China’s vehicle demand grew at an annual rate of 24 percent from 2000-2010, higher than the 14 percent average over the previous decade. The same numbers for passenger vehicles and commercial vehicles are 33 percent versus 19 percent and 15.3 percent versus 13 percent, respectively.

Second, locally assembled vehicles have dominated the market, maintaining a market share of 90-95 percent in the last 10 years.

Third, independent passenger vehicle brands last year accounted for 75, 41.5, 31, and 14.2 percent of the A00-, A0-, A- and B-level segments.

Fourth, all multinational brands have enjoyed growth in the market, with brands such as Hyundai and Toyota achieving sales in 2010 that were 431 times and 387.5 times their levels in 2000.

Finally, the volume of imported automobiles increased from 50,000 units in 2001 to 770,000 units in 2010, and is expected to top 1 million units this year. In fact, in the first nine months, China imported 712,000 automobiles, up 33 percent year-on-year, according to Ding Hongxiang, chairman and president of China Automobile Trading Co., Ltd. “But growth has slowed by the quarter,” said Ding.

Huang said that over the next decade, the overall market will continue to grow at an average annual clip of about 1.5 times the GDP growth, which is expected to remain at 9 percent per year.

Auto industry expert Jia Xinguang believes that if the market grows at that rate, China’s automobile parc will hit 250 million units in eight years. “There is no other country like China when it comes to opportunities and potential for growth,” Jia said.

But plenty of external and internal problems remain, said Jia. External problems include trade protection through technology barrier, higher tariffs levied by the BRIC countries and turmoil in the Middle East and North African regions. Internal problems include factors restraining market growth such as traffic congestion, energy crisis and environmental protection.

“When China’s automobile parc reaches 250 million units, they will consume about 800 million tons of petroleum. That will be about what the U.S. is consuming right now,” said Jia.

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