China' Auto Industry Holds Great Potential

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Last updated at: (Beijing Time) Tuesday, June 17, 2003

China' Auto Industry Holds Great Potential

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Noted economist Joseph Stiglitz once said that all economic theories could be drawn from a car. And China is proving the truth of his statement as the huge auto industry helps drive strong economic growth.

It is believed that one yuan of auto output will give rise to two yuan of output in directly-related industry such as machinery,electronics, and petrochemistry, and five yuan output in other indirect industry.

With China's membership of the World Trade Organization, the auto industry will welcome the fastest and longest growth period in history and develop into a powerful industry in the next 20 years, according to a report newly released by the National Bureauof Statistics recently.

The automotive industry was the first to have an assembly line,which stretched from the production area to the consumption area.

As China joined the WTO, capital from overseas was allowed to enter China's auto service field, which will draw more huge capital and create more job opportunities, said Kenneth Hsu, vice-president of Ford Motor China.

In the course towards becoming a global manufacturing center, the auto industry has become the driving force for China's modernized industry. Statistics show that the automotive industry's contribution ratio to the whole economy rose significantly.

Since 1999, the growth of the auto industry was continuously higher than that of China's whole industry. In 2002, the contribution ratio rose to 11 percent and in the first quarter of 2003, the figure reached 13.6 percent. The auto industry, which was once a small industry under the machinery category, developed into one of the major businesses in China's national economy.

In all of China's industrial chains, the automotive industry surpassed one after another. The auto industry ranked 15th in 1990,and seventh in 2002.

In the first quarter of 2003, for the first time, the auto industry became the fifth pillar industry among the whole.

China's auto industry has entered a fast growth period, with scale effects beginning to appear, said Yao Jie, vice-chairman of the China Auto Manufacturers Association.

According to statistics, China's auto output exceeded one million in 1992, and 3 million in 2002. The output is expected to pass 4 million by the end of this year, overtaking France for the first time. China will then become the fourth largest auto maker in the world. By 2010, the output will surpass 10 million.

Consumption became the powerhouse of production in the market economic situation and provided the internal drive for the industry to grow. By the end of 2002, an average of 2.8 autos wereowned by 100 families, still lagging far behind most developed nations. So a huge market potential still exists.

Experts say a turning point will appear for families to own cars when the ratio between the price of cars and Gross Domestic Product per capita reaches two or three. The ratio in Beijing, Shanghai, Guangzhou and Shenzhen cities has nearly reached this level, so sales of private cars will increase in those cities.

In the circumstances of global economy, China's auto chain became more internationalized, said Bernd Leisner, president of Volkswagen in the Asia Pacific region.

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