China to become a big producer of auto parts

Long Yongtu, former Vice Minister of China's Ministry of Foreign Trade and Economic Cooperation and Secretary-General of the Boao Forum for Asia, recently participated in the China (Xingsha) Corporate Culture Forum in Changsha, Hunan Province. As a key figure in China’s WTO accession negotiations, he reflected on the challenging process of negotiating automobile-related clauses. His expression revealed a sense of helplessness, as he admitted that many of their efforts at the time had not yielded significant results. “We greatly underestimated the development potential of the Chinese auto industry,” he said. The pressure to protect the domestic auto industry was immense. Long recalled the intense negotiations over car imports, where foreign countries were particularly interested in China’s vast automotive market. The automobile sector became one of the most contentious issues during the WTO accession talks. Three years after joining the WTO, it became clear that the earlier protective measures had not been as effective as expected. He explained that the industry had grown faster than anticipated, proving its ability to compete globally. One major point of contention was when to abolish import quotas for cars. Many stakeholders pushed for extended protection, with some insisting that the quotas should remain until 2010. At the time, the value of these quotas was extremely high—worth tens of thousands of yuan. This made it difficult for officials to let go. However, after long and arduous negotiations, the decision was finally made to eliminate the import quota system on January 1, 2005. That day marked the end of both the WTO textile import license and the car import quota in China. Interestingly, Long noted that by the time the quotas were abolished, they had lost much of their value. “It seems like January 1, 2005 wasn’t worth fighting for,” he said. “Now, the car import quotas are just pieces of paper.” He also expressed relief that the cancellation would put an end to corruption tied to the quota system. After China joined the WTO, the reduction in auto import tariffs led to a sharp drop in car prices, making car ownership more accessible to ordinary Chinese citizens. More importantly, the domestic auto industry experienced rapid growth. China is now becoming a major producer of auto parts and components. Looking ahead, Long emphasized the importance of understanding the auto industry within the context of economic globalization. Two major trends have shaped China’s development: the relocation of global industries to mainland China and the migration of rural populations to urban areas. The automotive industry has been a key part of this shift, integrating China into the global supply chain and enabling companies to operate on a global scale. China must not merely be an assembly hub but also a center for high-value auto parts production. This will allow the country to establish a stronger position in the global automotive market. To achieve this, strategic partnerships with global automakers are essential. These collaborations can help build China’s own R&D capabilities and production expertise. During the WTO negotiations, China also insisted on maintaining a minimum 50% stake in joint ventures, ensuring that Chinese companies retained control. This helped maintain a voice in international alliances and fostered long-term development. Cars play a crucial role in China’s urbanization. With millions of rural residents moving to cities, the auto industry is vital for driving industrialization, modernization, and economic restructuring. Highways connecting cities and rural areas serve as the arteries of this transformation, with cars playing a central role. Long pointed out that the U.S. automotive industry supports 5% of total employment, and China could see similar job creation if its auto sector continues to grow. With a projected urban population of 250 million, the auto industry could generate 10 million jobs. In this way, the auto industry can significantly contribute to employment and economic growth. In conclusion, the future of China’s auto industry looks promising. As cities develop around automobiles, new service industries will emerge, creating opportunities for millions. From retail and insurance to maintenance and parts supply, the automotive sector has the potential to reshape China’s economy and society.

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