Foreign automakers are being warned not to rely heavily on exporting to the fast-growing Chinese market in the wake of the country's entry into the World Trade Organization (WTO).

According to the China Trading Center for Automobile Imports, the nation imported 39,405 vehicles during the first five months of this year. Last year, China's vehicle imports totalled just 72,000 units.

Ding Hongxiang, deputy general manager of the center, attributed the growth to China's auto tariff cuts at the beginning of the year, allocation of new quotas to importers in April and increasing demand for imported vehicles in the domestic market.

"However, those foreign automakers who want to depend on exporting to China will ultimately fail on the market," Ding said.

The Chinese auto market is so big that it cannot depend primarily on imports, he said.

The government will continue to control vehicle imports and protect local manufacturers through non-tariff measures, he said.

"The imperative for foreign automakers is to increase investment in China and swiftly bring new products into their Chinese joint ventures," he said.

Coveting huge potential on the Chinese market, foreign automakers have recognized the increasing importance of investing and local manufacturing in China.

German auto giant Volkswagen Group, which controls more than 50 percent of the Chinese passenger car market through its two joint ventures, has announced that it will invest US$2.5 billion more over the nation in the next five years.

Germany's BMW will soon get the green light from the Chinese Government to set up a manufacturing joint venture in China.

DaimlerChrysler, which has a jeep joint venture in China, announced last week that possible passenger car projects with Mercedes-Benz in the nation "could not be ruled out."

Italy's Fiat Auto has also planned to bring three new models into its Chinese joint venture by the end of 2003.

Domestic manufacturers appear not to be greatly influenced by increasing imports.

During the first five months of this year, sales of domestically made vehicles amounted to 1.28 million units.

The State Economic and Trade Commission (SETC) said last week that profits of China's 15 key State-owned automakers increased by 10.60 percent year on year to 6.21 billion yuan (US$750.7 million) during the first five months of this year.

China's passenger car imports from January to May amounted to 23,551 units, according to Ding.

China imported 22,408 vehicles from Japan and 5,580 units from Germany during the period.

Among the total imports during the period, 18,214 vehicles came with 1.5- to 2.5-litre engines.

In January, China cut its tariffs on auto imports from as high as 80 percent to as low as 43.8 percent.

Under WTO obligations, the tariffs will decline to 25 percent by mid-2006.

(China Daily July 1, 2002)