An official with the State Economic and Trade Commission (SETC) warned yesterday that a price war may erupt in the second quarter, sharpening already fierce competition.

"Some local governments are currently very keen on building automobile parks and factories, which may have a negative impact on the industry," said Zhu Hongren, head of the division of operation co-ordination with the Bureau of Economic Operation under SETC.

Zhu told the 2003 China Electronic and Information Industry Forum yesterday that relevant departments will tighten regulations on construction of automobile projects - initiated mainly by local governments.

The official also pointed out that the launch of new automobile models and an expansion of production capacity may spark a price war.

But he remained confident the industry will enjoy growth of over 20 percent this year.

Zhu believed an enhancement of competitiveness of the First Automotive Works, Dongfeng and Shanghai Automobile Industrial Corporation would help the industry maintain high growth.

He said the release of government regulations to encourage automobile consumption and more focused consumer demand would also play a key role.

He predicted sales of automobiles would reach 3.6 million units this year, including 1.3 million cars. The figures for 2002 were 3.48 million and 1.06 million respectively.

Prospects for textiles and light industry were also bright this year, Zhu said.

Industrial output of textiles will reach 1.1 trillion yuan (US$133 billion), rising 10 per cent. Exports would be US$6.2 billion - 3 per cent higher than last year.

Industrial output of light industry will amount to 2.5 trillion yuan (US$302 billion).

But he warned that some countries may erect technological barriers and take anti-dumping measures against Chinese exports.

He also pointed out that the growth of the coal industry might slow down after a buoyant 2002.

"Last year's rapid development of the coal industry was mainly due to increased demand and resumption of production after the closure of some coal mines," said Zhu.

But it will slow down this year," said Zhu.

(China Daily January 17, 2003)