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ZHIGANG TAO

RESTRUCTURING OF CHINA¡¦S AUTOMOBILE INDUSTRY AFTER CHINA¡¦S ENTRY INTO WTO

On November 10th 2001, 13 years of effort came to fruition, and China finally became a member state of the World Trade Organisation (WTO). For China’s economy, the accession to WTO not only represented a significant opportunity, but also a challenge. More so for the automobile industry, which had enjoyed protection of tariff barriers for a long time.

China’s automobile industry went through a period of reorganisation since 2001, dealing with emerging challenges like gradual reduction of tariffs, increase in import quota, the entry of foreign automobile giants and diversification of competitors. The decade also saw the emergence of “3+X”, referring to three big groups – First Automobile Workshop (FAW), Dongfeng Motor Corporation (DFMC) and Shanghai Automobile Industry Corporation (SAIC) – plus a host of companies including Guangzhou Honda Automobile Co. Ltd, Chongqin Chang’an Automobile Group, Beijing Automotive Industry Corporation, Shenyang Huachen, Nanjing Fiat and Zhejiang Jili.1 Mergers and joint ventures strengthened the state-owned automobile enterprises with 3+X accounting for 90% of China’s sedan output. However, other serious problems plagued the automobile industry, such as insufficient technology, low cost effectiveness and lack of own brands. Was scale enhancement sufficient to improve the overall competitiveness of the industry? As more global automobile giants introduced new products, technologies and modern management skills to China, its automobile industry would face even bigger challenges. Was the 3+X geared to deal with such challenges?

Development of China¡¦s Automobile Industry

If we retrospect the development of the [China’s] automobile industry, it can be divided into four stages, the initial stage (1953-65), the growth stage (1966-80), open market stage (1981-90) and comprehensive development stage (since 1991).
- Hu Xinmin, Honorary Chairman of China Association of Automobile Manufacturers2
1 Yang Jun (2002). ”Emergence of ‘3+X’ Pattern in Chinese Automobile Industry”, Beijing Morning Post, December 9th 2002.
2 Hu Xingmin (2003) “Retrospect History and Look into Future”, [www document] www.caam.org.cn, (accessed July 4th 2004).
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