Blog: Dave LeggettChina's auto industry policy

Dave Leggett | 28 August 2003

Sounds like the Chinese are at last being a little more upfront about the way they'd like their auto industry to develop. The manufacturers present there must have always been aware of the risks or were just plain naive. Why would the Chinese let foreign makers dominate the market and make big profits ad infinitum? Sure, JVs and licensed CKD assembly are preferable to sucking in CBU imports and put something into the local economy, but the Chinese were never going to roll over in their own market. They want the technology and know-how to do things themselves - that's the number one reason for inviting in foreign partners: to learn (and miserly technology transfer ways partly explain the relatively lightweight presence of Japanese OEMs and suppliers).

It's also useful to remember that the Chinese still talk the language of 5-year plans and the latest policy document is nothing unusual - there have been lots of them before. But the Chinese are not stupid. They know that they need to be seen to be (ostensibly) abiding by WTO rules - their economy depends on that. It seems a fair bet though that the role of local makers with 'local' products will grow (plenty of ways to skin a cat without the need for laws... that's a shot across the bow). For foreign partners the challenge will be to hang on to as much market share and also share of the value chain as possible (whilst also keeping intellectual property issues under control). I read this as the Chinese stating their intentions and being a little more assertive and aggressive than their Western partners would like. Once it really started growing, the market was never going to be a straight carve-up for foreigners. Don't be silly.


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