• Dec 27th 2006 at 10:04AM
  • 1
Not so long ago, the Chinese government was encouraging automotive manufacturers as a way to stimulate the country's economy. Now, however, the National Development and Reform Commission has hit the brakes with new rules dictating how China's burgeoning automotive industry can expand. "Signs of overcapacity have already appeared, and could worsen," read a statement from the commission.
The commission's rules will dictate minimum sales targets for SUVs, trucks, vans and buses. Foreign automakers looking to invest in China must show a need for increased production capacity by proving it has exceeded 80% of its previous years' capacity.

At first glance it looks like Chinese economic planners are trying to ensure their newly found automotive gold mine doesn't run dry any time soon, leaving empty factories and unemployed workers across China. A BizChina report seems to address the issue from another angle. BizChina says the intent is to "curb vicious competition through price cuts." So maybe it's not over capacity China is trying to avoid, but instead cutthroat business practices practiced by its domestic industry.

[Source: Reuters via The Auto Channel, and BizChina]

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      • 8 Years Ago
      After WW II, the British realized that there wasn't enough steel and a few other raw materials for all it's car manufacturers to resume pre-war production levels. There also weren't enough customers that could afford new cars in Great Britain, so the government tried to spur car companies into exporting what cars the "locals" weren't able to buy. If you didn't "produce" customers for your cars...the government cut back on it's allotments of raw materials to your company.

      I almost wonder if this isn't also an attempt to get Chinese companies to develop vehicles for export markets. Yes, there are a lot of Chinese who want to buy a car, but I imagine the Chinese government would love a steady supply of foreign currency to prop up (indirectly) the undervalued Chinese currency.
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