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Chinese government considers increasing automotive export support in five-year plan

18th April 2006

China became a net exporter of vehicles for the first time in 2005. The National Development Reform Commission reportedly estimates that China’s car industry can produce 2m more cars than are likely to be sold domestically, and forecasts that manufacturing capacity by 2010 could be 18m cars a year, representing a surplus of about 10m over forecast domestic demand. The Chinese government has targeted a 10% share of the global car market over the next decade.

However, as a member of the WTO, China may be constrained in supporting exports; Yale Zhang, an analyst at CSM Worldwide, told the FT that China’s car industry already received a rebate of sales tax on car exports.

- China’s largest car exporter to date, Guangzhou Honda, which makes the Jazz in China for European markets, has so far found it hard to source components of the requisite quality locally. Of the 120 suppliers it uses in China, only 17 are Chinese companies; the rest are either joint ventures or Honda subsidiaries, and the Chinese assembly plant building Jazz cars for export has achieved 60% local content, against 90% for the plant that builds the same car for domestic Chinese consumption.

The need to import parts and the relatively small scale of the Guangzhou plant mean that making the Jazz in China has not been cheaper than making it in Japan, where some of the European exports are still sourced, despite assembly labour costs being only 10% of those in Japan.

(www.ft.com/autos, 17 April)
Chinese are not ready for export.
 
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