China's fledgling auto industry will open up wider to foreign
investment over the next five years to help it survive and grow.
Foreign investment
is indispensable for the country's auto industry, which is
short of funds and weak in product development, to survive
global competition after the country's accession to the World
Trade Organization (WTO), said Jia Xingguang, a senior expert
with the China National Automotive Industry Consulting and
Development Corp.
"The auto
sector must use more foreign investment and follow development
technology to sharpen its competitive edge within the buffer
period after the country's WTO accession," he said.
China will reduce
its tariffs on auto imports from between 80 per cent and 100
per cent level to 25 percent by mid-2006. Foreign automakers
will be free to choose models and types when producing automobiles
in China.
Jia urged the government
to further remove restrictions against foreign investment
instead of "koshering its auto sector."
"The vulnerable
auto industry has no ability to compete with global automakers
dependent on itself," Jia said.
Under the central
government's "umbrella," the auto industry has fallen
behind the world's levels.
"Foreign investment has played a decisive role in what
the auto industry has achieved, especially in sedan development,
since the country's opening up," Jia said.
Statistics from
the State Administration of Machine-Building Industry showed
that the industry has actually attracted a total foreign investment
of more than US$5.2 billion in more than 600 joint ventures
from 1981 to 1998.
The country's annual
auto output surged to 1.83 million last year from 150,000
units in 1978. Joint ventures took the lion's share of more
than 570,000 sedans manufactured last year.
"The auto
industry has benefited significantly from foreign investment
in upgrading its product development capability," said
Yang Hua, director of the administration's development and
planning department.
During the country's
10th Five-Year Plan (2001-2005), the sector aims to establish
its independent product development capability, Yang said.
To fulfill the
target, the industry will intensify its efforts in absorbing
more foreign technologies in its own product development when
using foreign investment during the period, Yang said.
"In addition
to setting up more joint ventures, the industry will explore
more channels to attract foreign investment, such as issuing
shares and bonds," Yang said.
Foreign companies
will be particularly encouraged to invest in the component
segment, which is more vulnerable than the auto industry when
facing WTO challenges, Yang said.
"A robust
component segment will lay a sound foundation not only for
promoting our auto development capability but for our engagement
in the global market in advance," Jia said.
Investment in the component segment accounted for less than
one-third of the total investment in the country's auto industry
from 1981 to 1995.
Eying the tremendous
potential of the Chinese market, global automakers are struggling
for a bigger presence in the country's auto industry.
Volkswagen will
add an investment of more than US$1.5 billion in coming years.
(China Daily 07/03/2000)
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