Automotive
General Motors to Register Joint Venture
"Unofficial" notification has been given to General Motors that it will now be allowed to register its planned $1 billion joint venture with the Shanghai Automotive Industry Corp. This, however, is only a first step as it must also be followed by a submission of the projects feasibility study and partners' contract to the central government for final approval. General Motors intends to transfer component technologies to SAIC, and to manufacture and sell a domestic variant of GM's Buick sedan.
Business China (U.K.), 09/16/97
US Firm to Supply Auto-Emissions Controls
Engelhard Corporation has signed a letter of intent with China Petrochemical Corp. (Sinopec) to establish a research and development program for auto emissions control. The program will include a testing center and possibly the eventual joint production of related products. One of the current problems with auto emissions control in China is the prevalence of leaded gasoline vehicles, which cannot use auto emission control systems. However, in order to reduce automobile pollution, China is moving to use unleaded fuel. A Sinopec official has said that unleaded gasoline will be supplied to Tianjin, Shanghai, Beijing, and the SEZs in 1998, and to the whole country by 2000.
China Economic Information (PRC), 12/17/96
More Individuals Purchasing Imported Cars
According to the Deputy General Manager of the China Trade Center for Imported Automobiles, the number of individuals, as opposed to enterprises and government institutions, buying imported cars is increasing. AS an example, he cited the sale of 315 Ford Tempos this year. 60% were bought by enterprises, and 33% were bought by individuals. The rest were bought by governments and institutions. Recently, another 300 Tempos were sold to Guangzhou, of which about half were bought by individuals.
China Economic Information (PRC), 12/25/96
Imported Lubricating Oil Takes Slice of Market
According to statistics from related departments, imported lubrication oil has taken 20 percent of China's market. In one year China now imports 400,000 tons of the oil. At the present time automobiles in China generally use SC grade engine oil. SB grade is also still used in China, especially by CA and 66CC diesel engines. As a result, Imported oil will continue to have a market in China for a long period of time.
China Economic Information (PRC), 01/10/97
Overseas Car Makers May Have Miscalculated China's Auto Industry
A recent report by the Economist Intelligence Unit suggests that foreign auto manufacturers may have misread China's car industry. It said there was increasing evidence that foreign companies "have invested far too much, far too soon." Experience from other developing countries have suggested that GDP per capita has to reach $4,000 to $6,000 before the purchase of automobiles on a large scale takes place. The EIU report called Multinational Companies in China - Winners and Losers, said that China's per capita GDP now stands at $660. It suggested that there may be a deep seated problem for foreign car manufacturers - a basic shift in Chinese government policy away from the auto sector. "Despite potent evidence to the contrary, the world's leading car makers, having convinced themselves that China is a must-invest situation, are finding it difficult to change their minds," the report said.
The South China Morning Post (Hong Kong), 01/16/97
China's Market Potential for Electronics to Top $120 Billion
By the year 2000, the market potential for the electronics industry in China is expected to be over $120 billion. A national meeting of the electronics industry that opened this week in Beijing forecast that China has a potential for an annual growth rate of 30 percent. The Ministry of Electronics Industry said that China will prop up the development of large-scale integrated circuits, computers, software, computer networks, mobile telecommunications, digital program-controlled switchboards and large-screen televisions. The electronic products associated with medicine, education, automobiles, energy, transportation and machinery should also have bright prospects.
CBNet (PRC), 01/23/97
Industry Profile of Mobile Phones in China
The number of mobile phones has been doubling every year in China to reach a total of six million users by the end of 1996. The state-run analog network in China utilizes the British TACS standard with phone sets primarily from Motorola and Ericsson. Originally the two protocols were incompatible so that many provinces had to divide the frequencies into two systems of A and B. In January of 1995 Motorola could troll over 21 provinces and Ericsson could link over 15 provinces. However, phone calls between the two systems had to be linked manually. In January of 1996 this changed as automatic linkage between the two systems were adopted to begin nationwide linkage of the country's analogue mobile phones. Digital cellular communications began only recently. In January 1996 a pilot network using GSM standards provided automatic roaming service to major cities in 15 provinces. Large scale construction of digital cellular networks is now underway in 30 provinces. The entire project should be completed early this year. Many foreign telecom companies are optimistic over the mobile phone market in China. Mobile phones now account for about 19 percent of the conventional phones in China.
China Economic News (PRC), 01/27/97
Chrysler Corp to Continue Investing Millions in China
Chrysler Corp officials said that they expect to continue investment in China's Beijing Jeep Corp after a 20-year contract expires in 2004. It plans to spend $230 million over the next five years on technical renovation and product development, according to the China Daily. The company plans to develop a successor to its older, domestically-designed, military style jeep, that will come out of the factory in 1999 or 2000. Last year, Beijing Jeep was the sole auto manufacturer that did not cut prices last year during slumping sales. Beijing Jeep sold 71,000 Cherokee and BJ2020 jeeps last year.
Reuters (U.K.), 02/13/97
China's Trade Statistics for 1996
The General Customs Administration recently released figures showing that China's import and export value totaled $289.9 billion in 1996, a 3.2 percent rise over 1995. Exports totaled $151.07 billion and imports totaled $138.83 billion, an increase of 1.5 percent and 5.1 percent respectively over 1995. There was a $12.24 billion trade surplus. Last year, China imported $61.4 billion worth of machinery and electric parts, up 3.6 percent and accounting for 44 percent of total imports. Items of note over $1 billion were textile machinery, metal processing machines, plastic and rubber processing machines, integrated circuits, aircraft, automatic data processing equipment, automobile parts, transport and loading equipment. Japan, the United States, Hong Kong and the EEC remained the country's largest trading partners. Sino-Japanese trade was recorded at $60.1 billion, up 4.5 percent, $30.9 of which was Chinese exports and 29.2 percent, imports. China recorded Sino-U.S. trade at $42.8 billion, an increase of 4.9 percent; 26.7 billion being exports from China and $16.1 billion worth of imports into China from the U.S. (According to the way it is calculated in China).
China Economic News (PRC), 02/03/97
Overall Economic Forecast for China This Year
The pace of economic expansion is slowing down in China. Many sectors see a weak demand which has resulted in the build-up of many unsold goods like automobiles and consumer durables. A pick up in economic growth may occur later this year due to more available credit in some sectors of the economy. As a result, GDP growth may be somewhat slower this year. Inflation for consumer prices has recently been falling and inflation pressure may more downwards.
FERI China, 01/01/97
State Investment in Key Sectors During Ninth FYP
Key sectors such as agriculture, light industries, pillar industries, basic industrial construction and the tertiary industry will be listed as preferential sectors in China's Ninth Five Year Plan (1996-2000), according to Chen Jinhua, head of China's State Planning Commission. State investment will reach $1.08 trillion with $614 billion going to the national seven key sectors. The state will increase investment in agriculture in the construction of water conservancy facilities, develop agricultural technology, develop the national fertilizer industry and upgrade the forestry industry. The investment scale for agriculture will be $34 billion, $24 billion of which will go towards water conservancy. In the energy industry, emphasis will be placed on the utilization of electricity and coal. State investment will increase to $241 billion, equal to the total investment of the previous decade. The country's transportation capacity will be improved significantly over the period. Communications will also be improved. The state will invest $137 billion in the development of these two sectors. The investment scale for the petrochemical, automobile, electronic and machinery industries will reach $55 billion, $33 billion, $54 billion and $60 billion respectively.
China Business and Investment (PRC), 02/01/97
Open Door Policy of Auto Industry Analyzed
Zhang Xiaoyou, director-general of the Ministry of Machinery's automobile department, said that the open policy for China's auto industry should continue in spite of the debate among Chinese about foreign participation in car projects. He said that China's policy remains consistent and has not changed. The one billion dollar automotive manufacturing JV between Shanghai Automotive Industry Corp and General Motors was recently approved by the State Council. Moftec is expected to endorse the license registration soon. Mercedes-Benz is also planning a one billion dollar plant in the south. However, Zhang said that Chinese auto makers will also fortify their own research and development independent of foreign-funded joint ventures. This is because many government officials, industry insiders and researchers believe it is necessary to create an auto industry that is independent from foreign capital and technology.
Xinhua News Agency (PRC), 02/15/97
Joint Venture Project With GM
The General Motors Corporation and the Shanghai Automotive Industry Corp. are setting up a joint project to manufacture 100,000 Buicks annually in Shanghai. The plant is to be situated in the Pudong Development Zone involves an investment of $1.52 billion with input from both partners. The project includes the manufacture of 100,000 transmissions and 180,000 engines annually as well as the establishing of a research center for similar technology.
China Daily (PRC), 02/25/97
Misperception of the China Auto Market
As a result of several misconceptions of the China automotive market, the promise of big returns could turn out to be illusory, according to the EIU's The Emerging Automotive Markets of Asia Pacific: Prospects to 2005. Most outsiders tend to believe that the market is growing rapidly. There was a period where it was but since that time it has slowed dramatically. From the beginning of 1994 to 1996, the vehicle market grew only 1.7 percent and in reality, the market for cars decreased. Now, as the government has taken measures to reduce inflation and slow down vehicle imports, demand for cars is not expected to increase for quite some time. Other ideas that people believe is that China represents an incredible opportunity of foreign vehicle manufacturers, but many companies have found that this is not the case. Nearly all of the major world auto manufacturers have gained entry and have made huge investments, but are having little or no success. Western desperation and a mystical idea of China appear to have blinded investors to the risks involved. This century has seen incredible turmoil in China both ideologically and socially. Economic progress has come for many people but even more have been ruined. Deep division still exist in the society as well as an anxiety of what will happen in the future.
EIU Electronic (U.K.), 02/21/97
New Policies May Help Auto Industry
According to Lu Fuyuan, vice minister of the machine-building industry, China's auto industry is now in a position to become an important part of the national economy. He said that the sector will be able to reach the goals that the State Council set for it in 1994. Production of nearly all kinds of vehicles have increased sharply in January and experts are advocating a rapid growth in the industry. Several long-awaited policies will be issued this year to enable the industry to rescind the restrictive regulations that have been imposed upon it. It is predicted that this will help the industry tap market potential, which originally attracted most of the world's major automakers.
Cbnet (PRC), 02/25/97
Beijing's Mobile Phone Users Increase
By January of 1997 Beijing has reported more than 300,000 mobile phone subscribers. Local officials say that 140,000 of these were users that were added from last year. Around 100,000 of these were digital mobile phone users. Due to a digital phones automatic roaming feature, Beijing is now linked to 200 Chinese cities and several foreign countries.
Cbnet (PRC), 02/25/97
Passenger Car Sales Have Declined
According to the EIU's The Emerging Automotive Markets of Asia Pacific: Prospects to 2005, the market for passenger cars in China is not growing. In fact, since 1993, the demand has dropped by 6 percent. It was first thought that the decline was due to austerity measures that were carried out in the early 1990s, but now, although prices have fallen, demand has not picked up. The report reasons that it is because the Chinese average incomes are still too low to afford cars. Many dealers say that they face bankruptcy unless their sales increase and inventory is cut. Sales are also being impacted by legislation to reduce traffic in big cities. Although this is the case, demand for cars is predicted to grow more quickly after 1998. This is because new car prices should decrease, austerity measures will likely be eased and average incomes will rise significantly. Those eager to purchase cars may then be able to do so. However, even with the lowering of prices, these cars will remain expensive by world's standards. This will result in only 500,000 units a year in 2,000 and then double to 1 million units in 2005. As incomes rise, China has great long term potential.
EIU (U.K.), 02/21/97
Peugeot Likely to Bail Out of Unprofitable China Venture
Amid reports that Peugeot will pull out of its unprofitable joint venture in Gunagzhou, executives will travel there to hold talks with their joint venture, said Chen Yan, secretary to the venture's manager. Another executive asking not to be identified said that top managers will agree to pull out of the venture. Other sources in Hong Kong also said that Peugeot would withdraw. This would create a huge bidding war between the big automakers for a foothold in China's market. At the same time it expresses the difficulty in setting up large industrial projects in the country. Denway Investment Ltd, who holds 46 percent of the joint venture said it was currently holding talks with possible replacements, including Daimler-Benz AG, Bayerische Motoren Werke AG and Opel AG, a unit of General Motors Corp. Patricia Hawkins, GM's director of affairs in Beijing said they are talking about doing business in Guangzhou.
Bloomberg News (U.S.), 02/25/97
Volkswagen to Take Control of Sales in China
Concerned that its mainland partner lacks the experience and business savvy, Volkswagen intends to take control of its sales network in China. As car sales are growing by 20 percent annually the auto maker would like to open its own dealerships across China, a company spokesman said. VW already has 61 percent of the market even before making the move. Other foreign car companies will probably keep a close eye on these plans. VW has complained that its partners needed to make a better sales pitch and emphasize the cars' quality and resale value. Up to now, the Chinese dealers merely cut the sticker prices at the request of the government. While sales in China are increasing, they are rising much slower than in the past. Production of passenger cars increased 20 percent in 1996, down from 50 percent several years ago. The company sold 239,388 cars last year in China, up 9.1 percent from 1995, according to their own figures. This week VW will sell its millionth vehicle in the country.
South China Morning Post (Hong Kong), 02/27/97
China to Use Example of Big 3
In order to meet the challenge of overseas competition in the auto industry, China's top 20 auto manufacturers will regroup into three or four enterprise groups by 2000. General Motors, Ford and Chrysler also evolved from nearly 140 auto plants in the early 1900s. China intends to use the same model in developing its own car industry. There is an urgency to establish competitive groups as China makes a bid to join the World Trade Organization. One of the key issues of discussion at WTO talks will likely be the auto industry. If China entered the WTO it would mean lowering its trade barriers and eliminating slash tariffs on imports. The plan of the Chinese government is to have money-loosing plants declare bankruptcy, selling their assets to larger firms and merge them with big enterprises. Most of the auto industries' $17.7 billion investment for the 1996-200 period will go to large, promising enterprises. Lu Fuyuan, vice minister of the Machine Industry said that the Chinese car industry's annual investment as a whole is equal to only one Western company. Therefore, if there were three or four large auto companies in 2000, China's motor industry may have a future, he said. It would otherwise be a hopeless situation.
China Daily Business Weekly (PRC), 03/02/97
Beijing's Family Car Program
The Chinese "family" car program is progressing at a pace more rapid than most suspected. After it was originally announced a few years ago not many heard about the program and rumors suggested that it had stalled. The original announcement lured many major foreign auto manufacturers, but very few have a role in the project now. The surprise is that now there is not only one vehicle under development but several and that these cars are now set to launch in 12 months time. The Lucky Star uses a 90 percent localized version of the Suzuki engine and chassis with a new body and only had marginal involvement from foreign manufacturers, a surprise in itself.
EIU Electronic (U.K.), 03/03/97
Consumers Buy Record Numbers of Cars
Despite registration fees and high taxes which were intended to keep ownership of automobiles down, Chinese families purchased more cars than ever last year. Vice Minister of the Ministry of Machine Building Industry, Lu Fuyan, said that 3 million passenger cars were sold in 1995 and 1996 and over half of these were bought by private individuals. This is a seven percent increase over 10 years ago when most vehicles were purchased for work units or for military purposes. The lower prices and growing prosperity among urban residents is beginning to put cars within reach of average people.
UPI (U.S.), 03/03/97
China to Invest Billions in Auto Industry
China will invest $12 billion over the next five years in eight major auto-manufacturing enterprises that specialize in sedans and mini-cars, according to the Automobile Department of the Ministry of Machine Building Industry. The purpose is to develop the auto sector so that in the 21st century it will have an annual output of $120 billion. This financial support should benefit the following eight enterprises: Shanghai Volkswagen Auto Company, No.1 Auto Group's Volkswagen Automobile Plant, the Shenlong Automobile Plant, Beijing Jeep, Tianjin Daihatsu, Guangzhou Peugeot, the Chang'an Automobile Plant and the Yunque Automobile Plant. These eight enterprises will be encouraged to merge so they will be entitled to tax exemptions and concessions as well as special loans.
China News Agency (PRC), 03/01/97
General Motors Venture Approved by State Council
A one billion dollar car manufacturing joint venture between General Motors and the Shanghai Automotive Industry Corp has been approved by China's State Council. Now the joint venture only has one more barrier to cross: the final approval from Moftec.. The planned output from the GM plant will begin with 100,000 mid-size Buick Saloons a year with engines of 2.5 and 3.0 liters, and then eventually rise to 300,000 annually. "We expect to control 50 percent (of the mid-size car) market share in 2000," said GM vice president Rudolph Schlais.
Cbnet (PRC), 03/10/97
China's Auto Supply Continues to Outpace Demand
China's automotive production figures last year, although high, masked the fact that there was a huge slump in sales as the country's austerity program dried up demand. Officials predict that vehicle prices could drop as much as 10 percent in 1997 while supply is much higher than demand. The sector appears to be set for a few tough years. If current plans are carried out, China's production capacity in 2000 will be 2 million cars. Sales are not likely to come near this figure. The government forecasts has risen slowly to 1.2 million at the end of the century. A.T. Kearney predicts a more realistic figure as being 860,00. In spite of this, domestic companies are pushing ahead with expansion. In another development, Zhang Xiaoyou, director of the Ministry of Machine Building Industry's automotive department, said that China's current foreign investment policy in the sector would not be changed. This was in response to concerns raised by domestic auto manufacturers who felt they were losing ground to foreigners.
EIU Business China (U.K.), 03/03/97
Overproduction and Protectionism in China's Auto & Refrigerator Industries
One of China's major small cars, the "xiali", and the refrigerator market are facing a domestic overproduction crisis which has resulted in huge price reductions. In the last couple of years there has arisen a situation of domestic protectionism in China's auto market. One city may produce a certain brand of car and that city government will often impose restrictions on cars made in different regions. For example, Volkswagens produced in Shanghai is supported as the car Shanghai uses for taxis, while Tianjin's "Xiali is not permitted to be used as a taxi in the city.
China Watcher (PRC), 03/14/97
China's Fledgling Vehicle Sector Hurt by Oversupply
Although China's economy grew an annual 9.7 percent last year, sales of cars only increased 1 percent. Similar figures are expected this year. The auto industry in China has weak prices, an excess capacity and a high inventory. Since car production fever began in 1994 production has stagnated because of weak demand and storage of 95,100 vehicles by the end of 1996, a 26.48 percent rise over the previous year. This has also been a factor in poor foreign auto sales because legal imports dropped to 75,362 last year from 158,114 in 1995 and 281,425 in 1994. Industry analysts believe that imports will only make up six percent of the entire market in 1997. New plants continue to be built in spite of the government restrictions. Car production is profitable for local governments because of taxes and fees. Many cars cost three times what they would cost overseas, most of which goes to the local government. Senior economist with the State Planning Commission, Wang Jian, said that local governments were defying the national car policy and the central government in building new plants. Transition toward a more rational market may take several years.
Sunday Morning Post (Money), 03/23/97
Auto Maker to Limit Production This Year
According to executives at China Motor Corporation in Fujian Province, only 5,000 commercial vehicles will be produced this year, half of the joint venture's capacity. The reason for the move is because of worries about China's purchasing power as the country just finished having three years of tight credit, says Yu Peiling, a supervisor in the JV's corporate planning department. "Because of the austerity program, people's buying power is still limited," says Yu. However, over the long term the Taiwan company has huge plans for the China market. It will begin building a $1 billion auto factory on the outside of Fuzhou, the capital of Fujian Province. It is expected to begin production in June 1998 and after two of the first four phases are completed it will have an annual production capacity of 150,000 vehicles. The long term projection is to manufacture 300,000 vehicles a year but no timetable was provided.
The Asian Wall Street Journal (U.S.), 03/25/97
U.S. Multinational Companies in China
An increasing number of multinational corporations from the United States are coming to China. A recent survey revealed that the first 30 of the 500 largest American enterprises have invested in China. Of these 30 enterprises, 19 have invested in 122 projects and 10 of the remaining 11 are engaged in services. The first 19 enterprises each have a total investment of $100 million or more. The survey also revealed that U.S. multinationals show more interest in oil refinery than their counterparts in other countries. Other industries that American companies have tended to focus on are chemicals, rubber, telecommunications equipment and automotive industries.
China Economic Information (PRC), 03/27/97
China Offers Automotive Concession for WTO
As a concession to membership to the World Trade Organization, China recently offered to accelerate the abolition of non-tariff barriers on auto imports. According to a Japanese trade official, the compromise was offered at the latest meeting in Geneva between WTO members and Chinese trade officials.
South China Morning Post (Hong Kong), 03/27/97
China's Auto Makers to Merge
The Ministry of Machine-Building Industry, which oversees the auto industry said that a restructuring of the industry is imperative. Their plan is to group China's top 20 auto makers into three or four big enterprises in order to face oversees competition. The need is becoming more pronounced as negotiations for China's entry into the World Trade Organization are being sped up. This is because as a WTO member it would have to reduce protectionism and import tariffs as well as abolish the licensing system. In order to speed up the grouping process, the ministry will take 30 small, money-losing plants and have them seek help from big enterprises or file for bankruptcy. Also the ministry will cancel the production licenses of auto makers that fail to make money within a limited time.
China Economic News (PRC), 03/24/97
Call for Halt on New Investments in Overcrowded Auto Market
Several Chinese auto makers are calling for a moratorium on new investments in the sector, as they are worried that China's auto industry already is at over capacity. There are too many provinces that hope to get involved in the auto business, says Geng Zhaojie, the president of Chinese car maker, First Auto Works. The auto industry in China has an annual market of 350,000 cars but has the capacity to produce 850,000.
Business China (U.K.), 04/08/97