Entrepreneur advocates speeding up M&A of auto enterprises

13:38, March 09, 2010      

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Although the overall size of China's auto industry is big, it is not strong and has low concentration. Vice General Manager of China South Industries Group Corporation (CSGC) Yin Jiaxu said this March 9, 2010. He also suggested that the state should increase policy support to encourage auto enterprise mergers and reorganizations, so as to make China a strong auto power.

Last year in October, CSGC and Aviation Industry Corporation of China signed an agreement to reorganize the Chang'an Automobile (Group) Co., Ltd, becoming the largest strategic restructuring in the automotive industry among the central stated owned enterprises.

Yin told reporters that the automotive industry is an important pillar of national economic development. In 2009 China has become the world's largest car producer, but it is not strong. There are a lot of automobile manufacturers, but China lacks a world-class automobile enterprise. China's largest automobile company Shanghai Automotive Industry Corporation (Group) sold 2.7 million vehicles in 2009, of which a large number are joint venture products cooperating with foreign brands, and China's own brands sold only 1.18 million cars, while the world's second-class automaker Suzuki sales in 2009 reached 2.308 million cars.

Yin Jiaxu thinks China must speed up the merger and reorganization process to optimize auto industrial structure, and enhance the competitive edge. In recent years, China have been advocating and encouraging auto companies' mergers and acquisitions through the market mechanism, but the actual effect is not obvious, and progress is slow.

One reason for this is that China's booming auto market provides large living space for auto companies, and the role of market regulation is limited. To rely only on market forces to promote corporate merger and reorganization will result in a huge waste of resources. Secondly, the biggest obstacles in promoting the domestic automobile enterprises to merge and reorganize are that it is difficult to balance the interests among local governments and departments, thus there is lack of an M&A momentum.

Yin recommended that China develops policies and measures as soon as possible to encourage car makers' merger and reorganization. There also needs to be corresponding policy support in personnel placement, debt disposal, tax relief, social functions and transfer tax allocation, the disposal of assets and integration, as well as credit.

By People's Daily Online
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