Chinese auto sector to grow moderately
There were anxieties about the China's auto sector when the nation joined the World Trade Organization (WTO) three years ago. The auto industry was expected to be impacted negatively by the massive vehicle imports due to China's tariff cuts and the removal of quotas after the WTO accession. However, overseas-produced vehicles account for only a tiny slice of the domestic auto market. Analysts expect China's vehicle imports to reach 180'000 units this year from 72'000 units imported in 2001. In contrast to vehicle imports, automobile output in China is expected to exceed 5 million units this year against 2.35 million units recorded in 2002. In this situation, everything seems to be on track in China's auto industry. However, analysts attribute the survival mainly to government policies and rapid growth of domestic vehicle demand instead of China's automakers' own struggles. China reduced auto import tariffs gradually and allocated most of its import quota to spare parts to prevent the blow-up in overseas-produced vehicle imports. Tariffs have been declined to 43.8-50.7% in 2002, 38.2-43% in 2003 and 34.2-37.6% this year from 70-80% in 2001. The tariffs will be further reduced to 30% next year, 28% at the beginning of 2006 and 25% in the middle of 2006. The quotas for vehicle and spare parts imports will be also removed at the beginning of next year. China also encourages foreign automakers to cooperate with Chinese partners to accelerate local production in order to curb massive vehicle imports. Despite a slowdown in China's car sales growth, world's major automakers such as General Motors (GM), Ford, Toyota, DaimlerChrysler, Volkswagen, Honda and BMW, are expanding their investments in China. Despite the removal of import quotas and further tariff cuts, analysts point out that China's vehicle imports will not increase sharply next year.