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China's Dream of Becoming a Strong Car-Making Nation - Let's Make it a Reality (PartII)

Date:07-31 08:48 Source:Internet Info Agency Authour:Li Anding

Let's Make the Dream a Reality

The people of China take great pride in the fact that China has become the largest automobile producer and seller in the world, and many believe that the goal of building a strong car-making nation is within reach. But I have to say that it will be no easy matter to turn that dream into reality - the Chinese auto industry still suffers from an array of shortcomings such as the lack of a down-to-earth attitude, too much attention on quick success and instant profits, ingrained practices, and systemic weaknesses.

Change is inevitable

To become a strong car-making nation, China has to meet at least three conditions – to possess a group of internationally competitive enterprises and world-renowned auto brands; to be a strong player in both international and domestic markets; to own all the key auto technologies and an insight into the future trends of the auto industry.

How far are we from meeting those three conditions? If we expect to achieve them in three or even five years based on a rallying cry by the government, one great surge of effort by the manufacturers, or the urging of so-called academics and enthusiastic netizens, I'm afraid the dream will remain just another pie in the sky.

The car has just celebrated its 125th anniversary, and only three countries can be called strong car-making nations - the US, Germany and Japan. Italy and France don't quite make the grade despite their large numbers of prestigious brands and long history, and South Korea is still making painstaking efforts to reach the goal. Becoming a strong car-making nation should be the target that China's auto industry sets itself in the next few decades.

The exceedingly high-speed growth of the Chinese auto industry that lasted 10 years came to an end in 2011.

Beijing's restrictions on car purchases were just the start, and other large cities will follow suit sooner or later. The central government has removed the auto industry from the list of protected sectors whose growth must be guaranteed, authorities and public opinion are intensifying their supervision and regulation of the auto industry, and emissions and quality standards are becoming extremely rigorous.

Consumers will no longer go easy on self-owned brands just because they are national symbols. The old approaches such as imitation, copycat and hyping up a paradigm will soon be abandoned by the market, and self-owned brands have to change accordingly.

Protection is a bad thing

It has been reported online that the 50:50 equity restriction in auto JVs will be lifted – a measure which has been criticized by many on the grounds that if the equity restriction is lifted and the protection umbrella is taken away, Chinese automakers will be devoured by their multinational counterparts. But in my opinion protective measures such as the equity restriction, that were formulated 20 years ago, should have long since been abolished.

The history of China's auto industry has proved over and over again that protection is a bad thing. Protection only fosters weak players while competition gives birth to strong ones. Every time the Chinese auto industry sheds its protective armor, whether voluntarily or under duress, it gives rise to a group of capable and competitive enterprises. Permitting auto JVs helped China's sedan industry to reach international standards, and breaking the access threshold for self-owned brands put independent innovation on the agenda. Had China not joined the WTO and competed and cooperated with multinational automakers in the global arena, it would not have become the largest auto producer and seller today.

Both the Chinese and global auto markets have undergone tremendous changes in the past 20 years. Lifting the equity restriction - even allowing wholly-owned foreign automakers – will not be the end of China's automotive industry. The assumption that foreign automakers will try to kick self-owned Chinese auto brands out of the market is misplaced. Dell, Siemens, Nokia and Ikea have all set up wholly-funded plants in China, but instead of being overwhelmed by them, China's computers, electronics, smartphone and furniture industries have become more competitive. Why on earth do we insist on a protective umbrella over the auto industry?

In the global market, Geely acquired a 100% stake in Volvo, but the Swedes never accused their government of betraying them. Now that China has joined the WTO, it is no longer playing in the domestic league but is poised to join the World Cup, where everyone has to follow the same international rules. We cannot try to prevent foreign automakers from scoring in order to let the Chinese team win.

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