China's automobile industry has identified four major problems holding back its further development, even if it is experiencing a period of high prosperity and rapid growth, according to Yang Hexiang, director of the Industrial Department of Industry Development Research Institute under the National Development and Reform Commission. He was speaking at the 2005 Outlook Liuzhou Forum held from November 26 to 27 in Nanning, capital of south China's Guangxi Zhuang Autonomous Region.

Yang said the industry's rapid development partially tackles the challenges created by China's entry to the World Trade Organization, but this should not be allowed to obscure the fact that contradictions and problems still exist. He identified the four major problems as follows:

·Saturated industry

Currently, there are 27 provinces and regions developing and manufacturing automobiles, 21 of them manufacturing passenger cars. There are 2,443 automobile enterprises in the country, including 115 assembly plants, 551 refitting factories, 154 motorcycle manufacturing plants, 56 engine producers, 1,567 auto and motorcycle spare parts factories, and 168 related industrial entities.

Yang said the current annual car manufacturing capability was 5.5 million and this was expected to rise to more than 15 million by 2007, when supply would far outstrip demand.

·Weak development capability

Yang said the domestic car market was now dominated by foreign brands. In 2002, only 32 percent of vehicles were independently developed by domestic companies, and only 10.5 percent of which were cars. Currently, China develops most of its new car models based on imported technologies and joint Sino-foreign or foreign investment.

Technically, the Chinese automobile industry is merely an assembly workshop of big auto-manufacturers, and its market is led and controlled by multinational firms.

·Scattered and disorderly domestic industry

Special steel and spare parts required by many domestic joint ventures still have to be imported. Due to the low efficiency rates of the domestic railway system, steel and spare parts cannot be delivered on time, and this increases transportation and stock costs.

The cost of manufacturing one automobile in China is 18 percent higher than that in high-developed countries, Yang said.

·Consumption challenges

Car ownership has seen a phenomenal rise in the last few years, leading to massive traffic jams and parking shortages in major cities. Rising international oil prices have also driven prices up. Further, financial support services continue to be inadequate compared to demand. All these factors taken together will severely hold back potential consumption, thereby slowing the industry down still further, Yang predicted.

(China.org.cn by Li Jingrong, December 1, 2005)