Options for the Development Pattern of China’s Aut

I. Why is China’s Automobile Industry Not Competitive? 本文来自

Automobile and electrical appliance industries, both belonging to processing, assembling and manufacturing industries, are similar in terms of technological and market structure, for instance, they both have a high demand for scale economy and develop into highly industrial concentration as a result of competition. However, auto industry has not shown the active development momentum and competitiveness like household electrical appliance industry. This is largely because the former has not experienced a full process of market opening and competition. From the view of policy, we should, in particular, reflect on and examine the strict policy on market access and the restrictive consumption policy. Due to strict limitation on market access, in addition to the restriction on the model, variety and specification of automobiles, the competition is not complete and limited, although China has more than 100 car plants. The restrictive consumption policy has prevented the existing market demand from being unleashed,

The development pattern of China’s auto industry under the new situation should proceed from the current domestic and international condition and be based on current and potential advantages. China should learn from the international experiences in the development of auto industry, especially those of the newly developed countries, for making options that conform to the law of development. We believe this pattern could be summarized by “establishing the competitive edge as a big country in the course of opening”.

This means, firstly, we should base ourselves on opening. To put it specifically, we should gradually integrate the auto industry into the system of international working division under the framework of WTO so as to adapt to and make use of, not reject, the trend of globalization of auto industry. As a rising developing country, China certainly needs some necessary protection over some of its industries. Instead of relying on the protection, it should take an active part in extensive and in-depth international competition and cooperation. Secondly, China should make full use of and cultivate its own advantages. At the present stage, the advantages of China’s auto industry include the overall capability of the manufacturing industry, labor cost and the large market in a big country. These advantages are the comparative advantages according to the theory of economics. But in many cases, comparative advantages are not equal to competitive advantages. The key is to adjust the system, strategy and policies under the opening policy in order to turn the realistic and potential comparative advantages to competitive advantages. Thirdly, the advantage of a large market in a big country is most important. First of all, China’s huge market will yield the effect of scale economy in various links of the auto industry chains. This will mainly be reflected in car assembling and production of some spare parts. And the demand for independent R&D that meets the need of Chinese market will therefore arise. Next, China’s domestic market can accommodate several strong transnational corporations. At the same time, it can also provide space large enough for a large number of domestic enterprises and enterprises with domestic capital. Finally, Chinese market is not only large, but also appears to be obviously multi-layered, which is conducive to the domestic enterprises that started late and are still developing.

To be specific, the new development pattern should include the following features:

1. Cultivating a domestic market with active and full competitive environment