CHINA: Policy makers ready to tackle overcapacity
Chinese automotive policy makers are considering measures to curb capacity expansion during the 11th Five-Year Plan period, which runs from 2006-2010, according to China Automotive Review.
28 provinces, municipalities and autonomous regions have reportedly applied for central government approval of new automobile assembly plants in their plans, and this is of concern when current capacity utilisation is just 55%, according to one government source.
Policy measures may include market entry barriers such as technological innovation, environmental protection and independent brands.
One of the schemes under consideration is that if a foreign joint venture expands capacity in a new location, it would not be able build a new model from the foreign partner there. Instead the model would have to be locally developed.
Another policy being considered is that private capital for vehicle assembly will only be allowed where there is some acquisition of a state-owned enterprise.
But the article also questions the validity of statistics that show the high level of over-capacity. China Automotive Review analyst Jia Xinguang notes that many OEMs have not been able to keep up with demand because of a shortage of supply. Another expert notes that much of the overcapacity is due to local protectionism.