Editor's Note Even when Chinese and foreign car companies signed contracts, the participants all laughed. However, during the negotiations, the struggle for interests did not have too much warmth. "Devil" is hidden in "details."
After China joined the WTO, the negotiating officials finally won a “protection period†for the Chinese auto industry for three years. In 2006, it was the year that the Chinese auto industry fully fulfilled its WTO commitments. Although the fragile Chinese auto industry has not completely retreated as pessimists thought, it is a big step forward that must be both cautious and unrelenting.
Sino-European automobile trade friction behind the scenes
Our reporter Ning Ping Guangzhou reported that when South Korean farmers gathered in Hong Kong for a demonstration, the EU warned that China should further open up the auto market.
On December 12th, the European Union’s vice chairman of business and industry, Günter Verhoegen, announced at the European Union headquarters a final report titled “The 21st Century European Automotive Industry Competitiveness Improvement Program†(Cars21 for short), demanding that China To further open up the market to European automakers, otherwise it will face the EU's legal complaint in the World Trade Organization (WTO).
Ironically, the day before, EU Trade Representative Mandelson had already set a tone for the 6th ministerial meeting of the World Trade Organization in Hong Kong, and the EU is not prepared to make new concessions on agricultural trade barriers.
Question upgrade
The delegation of the European Commission to China provided the reporter with an English electronic text called the final report of Cars21. In this 72-page report, China’s “lucky fortune†was focused on “taking careâ€: not only is it the only international market that has been named, but it also provides a separate section on the Chinese market.
The report cited the "seven sins" of the Chinese market: favoring domestic manufacturers, restricting the proportion of investment, discriminating against the import of whole vehicles (domesticized requirements and import restrictions of key components), and seldom consulting European automotive companies investing in China in the field of industrial legislation; Cooperation with the United Nations Economic Commission for Europe, weak protection of intellectual property rights, delays in legislation, and potential problems with sales channels and other business arrangements. The report suggested that the European Commission “continue to closely monitor China’s business and regulatory developments, and consider that if the current situation does not improve, it will assess whether the eventual recourse to the WTO Dispute Settlement Committee is likely to succeedâ€.
As early as November 7, Mandelson’s spokesperson, Stephen Adams, publicly declared that the EU may complain to the WTO about China’s auto import mechanism on the grounds that “China’s auto parts import mechanism†violates WTO rules. Adams said that if the EU and China cannot resolve these issues through bilateral negotiations, the European Commission will decide whether to submit this issue to the WTO after December 12. The basis for the decision is the Cars21 report.
The matter was initiated by the “Administrative Measures for the Import of Auto Parts that Constitute the Characteristics of the Vehiclesâ€. In this approach that was implemented from April 1, 2005, it is stipulated that imported auto parts with the characteristics of the entire vehicle will be regarded as vehicles. In taxation, there is a tax rate difference of up to 15%.
For European automotive companies that have long relied on imported key components in China and have a low proportion of localization, this means a substantial increase in costs. European luxury car manufacturers such as Mercedes, BMW and Volvo have taken the lead. The production volume of luxury cars is small, and only by adopting centralized purchasing methods at the headquarters can they have scale advantages, so they are not willing to establish supporting systems locally.
Not only luxury cars, although the European automobile companies represented by the public have invested in China for many years, but in terms of localization, the overall level of European automobile companies is still lower than that of Japanese and Korean companies. A notable example is that the Peugeot-Citroen Group’s joint venture in China, Shenlong, suffered huge losses last year, a large part of which came from exchange rate risks caused by imports of key components. Dai Lin, chief representative of the European Automobile Industry Association’s representative office in Beijing, also stated that the European automakers investing in China have difficulties in achieving the localization rate of parts and components required by the Chinese government. They hope to have a two to three-year transition period.
Take offense
The question of import tariffs on spare parts has been extended to 7 issues. Does the EU really want to upgrade this matter? “Europe’s auto companies have different interests in China. This time throwing 7 issues is the overall appeal of European auto companies in China’s interests. But on the other hand, this has played down the tit for ta The real purpose of its color is likely to be to grow its momentum and force the Chinese government to sit with them at the negotiating table. After all, resorting to the WTO dispute arbitration mechanism is a laborious task for both parties.†China WTO Research Society Related person analysis.
The European Union has put out a tough stance that does not hesitate to fight an auto trade war with China. To a certain extent, it is out of fear of losing the Chinese market. What is more important is that the output value of the EU's exports of auto products to China has dropped significantly, which has exacerbated the EU's trade deficit with China. From January to September this year, the European Union’s trade deficit with China reached 49.02 billion U.S. dollars (37.04 billion U.S. dollars for 2004), and it has long served as an automotive product that balances the trade deficit with the “destination needle†in the EU-China trade relationship. Disappearing.
For European car manufacturers, China is both their immediate concern and their far-sightedness. The near-term concern is that with the increasingly fierce competition in the Chinese auto market, the original advantages of European auto companies have been replaced. Far-sightedness is that European auto companies are afraid that the auto products from China will impact the European market like Japan and South Korea.
“From leather shoes to textiles to automobiles, Europe has a deep fear of price competitiveness for Chinese products.†A European automotive company’s representative in China told reporters: “Japanese cars have taken 15 years to open the European market. It took South Korea 10 years to use cars. They are concerned that Chinese cars will only take about five years.†And George Ma, executive general manager of the European Union Chamber of Commerce in China, also predicted that the time for Chinese-made cars to enter the European market on a large scale is “not earlier than five years. Will not be later than 10 years."
According to the data listed in the Cars21 report, the automotive industry accounts for 3% of the EU's GDP and 7% of the total manufacturing value. The EU’s auto industry directly provides more than 2 million jobs and supports 10 million indirect jobs, which is equivalent to 7% of the total European manufacturing employees.
Just as Mandelson declared before the Hong Kong WTO ministerial meeting that he would not make greater concessions, the EU warned that further opening up the automobile market in China is also a strategy of taking offense. Next, will Mandelson be able to sit back at the negotiating table with the Minister of Commerce of China, Bo Xilai, as he wished? (Reporter Luo Yi also contributed)
China-European Automobile Dispute: We Are Just Empty Propaganda
The quarrel between China and the EU on strict control of imported assembly vehicles in China has continued for more than a year. Although the EU Economic Commission claimed to file a lawsuit at the WTO level, it has never been implemented. After the officials of the National Development and Reform Commission went to talks in Europe this fall, they only said “returning from research and study†and even gave Beijing Mercedes-Benz a one-year tariff concession for imported assembly vehicles. It seems that they have no intention of keeping tough.
The mutual support of interests is the main reason why China and the EU are not willing to tear their skin.
The incident originated from the “Imported Parts and Components Characteristics of Vehicles Management Regulations†formally implemented on April 1, 2005. As a result of this approach, all domestic new cars assembled from all CKD parts must be paid according to the tariffs of the vehicles, and in accordance with customs regulations, this Batch import of large assembly parts must be implemented tax. As a result, it will become uneconomical to put imported vehicles on wheels and sell domestic cars because imported parts only have to pay a 15% tariff, and if they are paid by the whole vehicle, they will reach 30%. The EU immediately shouted "unfair" after learning
Officials from the National Development and Reform Commission said: "From the very beginning, they strongly objected to the EU's view that it was setting a double standard in China, namely exporting loose and importing strict." At the end of September this year, Germany exposed the Jiangling Landwind "crash gate" incident and concluded that it was riding. Similar vehicles "have no life" after a collision. The EU believes that in this situation, China’s policy of supporting exports is a clear double standard and it proposes to submit it for discussion in the WTO. The National Development and Reform Commission’s Industry Department said in its negotiations that “the case is not sufficient to support the facts. The EU should indicate that the specific Chinese government’s actions violate the WTO agreement.â€
In the first three quarters of this year, luxury cars still accounted for the largest proportion of vehicles imported from the European Union, including some of the BMW 5 Series cars assembled in China. Considering that Mercedes-Benz and Volvo brands will be exported to China in 2006, Assembled, the EU can not suppress China too much for the benefit of its own industrial workers.
Under the premise that China is unwilling to make more concessions, the newly-entered luxury brands will be able to enjoy the preferential treatment of imported assembly vehicles to pay part tariffs within a buffer period, and then persuade the EU’s powerful trade unions to China’s Behave at a glance and close your eyes so that you do not lose out. Because if China adds any non-tariff barriers, European cars will be at a disadvantage in competition with Japan and the United States.
In fact, there is no need for China to impose extra punishment on the taxation of luxury brands, because its scale is not high in itself. "It does not matter whether CKD or localization, as long as it is a total tax on imports, we don't care." This attitude of the National Development and Reform Commission makes local governments more comfortable because no matter whether it is Changchun, Shenyang, or Beijing, Chongqing, The luxury brand localization projects such as Audi, BMW, Mercedes-Benz and Volvo have a direct interest in enhancing the image, increasing employment, and guaranteeing fiscal revenue. To this end, Minister of Commerce Bo Xilai and Mayor of Beijing Wang Qishan repeatedly discussed relevant project progress with related ministries and commissions. Wang Qishan even said "Beijing Ben" silently. They do not want the state's policy to scare these wealth gods away.
China and the European Union are vacillating on the issue of automobiles, but there will be no real guns falling because everyone is afraid of hurting themselves.
Image of car industry after customs duties are in place
Reporter Jiandong Jiang reported recently that a Guangzhou car dealer consulted experts in the industry: “How can I get the right to sell imported Toyota cars in China?†The expert advised him to abandon this idea because “the future imports The market opportunity for cars is running out."
According to China’s commitment to join the WTO, tariffs on imported cars will be reduced from the current 30% to 28% on January 1st next year; on July 1st, it will be further reduced to 25%. Although affected by multiple factors, the imported auto market has recently caused a hoarding wind, but the data show that China's auto imports as a whole showed a downward trend.
Tomorrow's yellow flower
On November 11, 2001, the head of the Chinese delegation and former Minister of Foreign Trade and Economic Cooperation Shi Guangsheng submitted to the WTO Director-General Michael Moore’s “China’s WTO Ratification Letter†to win a valuable 3 for the disadvantaged Chinese auto industry. Year transition period. From 2002 to 2004, the quota license management of automobile imports continued to be implemented. The import quota for automobiles and their key parts was increased by 15% per year on the basis of 6 billion US dollars in 2000. At the same time, auto import tariffs have been reduced year by year, and the import quota management of auto products has been abolished in 2005. Insiders have summed up this process as a four-step process: introducing wolves into the room, learning from wolves, dancing with wolves, and surpassing wolves.
Affected by tariff reductions and increasing import quotas year by year, the entry into the WTO's early stage of the Chinese auto market has indeed led to a situation in which imported cars “groups of wolves dance togetherâ€. However, in the past two years, the prosperity of the imported car market seems to be insufficient.
In 2004, China imported a total of 177,100 complete vehicles (including spare parts), an increase of 2.6%. Imported cars accounted for 3.37% of the domestic car market, a decrease of 0.42 percentage points from 2003. In the first 11 months of 2005, China's imports of automobiles fell by 9% year-on-year. For the first time, the imported car market did not rise or fall.
Not only is the quantity of imports decreasing, but with the localization of the “wolves of wolvesâ€, the living space for imported cars is further compressed into the relatively high-end segments of the luxury market and the relatively small segments that satisfy individual needs.
The leader of the current imported auto market “characterâ€, whether it is Mercedes-Benz S-class, or BMW's 7-series, is now more to bear only the responsibility of establishing the brand. Of course, at a deeper level, they also shoulder the responsibility of balancing trade transactions between countries and reducing trade frictions.
New opportunities
With the arrival of tariffs, many factors that affect the development of the domestic auto industry are also becoming increasingly clear. Jia Xinguang, chief analyst of the China Automotive Industry Research Institute, said that during the past three years, "it has happened," and 2006 is a landmark transition period. The next step is to look at the domestic auto companies themselves.
"After joining the WTO for more than four years, we did not expect the impact to emerge. The real competition comes from among domestic enterprises," said Zhu Huarong, vice president of Changan Automobile Group.
The open attitude, while bringing in foreign capital, has enriched the models and has directly induced the “blowout†of domestic auto consumption demand.
With the implementation of tariff policies, multinational auto groups have begun to work tirelessly to localize and transform. A related person from Ford China, who was interviewed by reporters recently, said: “Localization not only means that local manufacturing, but also research, procurement, etc., should be led by the Chinese as much as possible.â€
In addition to pressure from the living environment in the international market, transnational automobile groups that have entered China have also become more and more "big." General Motors has set up an R&D center in China, Volkswagen has cooperated with SAIC to develop a joint-venture company's own brand “Ling Yuâ€, and the crystal B53 of Citroen and Dongfeng will be born next year...
“Opportunities and challenges are always present. The key is how to treat them.†Teng Bole, secretary general of the China Automotive Industry Advisory Committee, believes that the Chinese automobile industry that has already ended the transition period needs greater “wisdom, courage and tacticsâ€.
What needs to insist on what can be abandoned
The European Commission’s accusations appeared in 2005. They look to China for "improvement" in the year 2006.
After China's accession to the WTO, the negotiating officials obtained a three-year transition period for the Chinese auto industry: that is, from 2002 to 2004, the quota management of automobile imports will continue to be implemented, and the import quota for automobiles and key components will be 6 billion US dollars in 2000. Based on the annual increase of 15%. At the same time, the import tariffs on automobiles have been reduced year by year, and the tariff of whole vehicles has fallen from 30% of the 70% displacement in 2001 to 3% of the displacement in 80%, and dropped to 25% on July 1, 2006. Jin Renqing, Minister of Finance, said: "After this tax cut, China has basically completed its duty to reduce tax on its WTO commitments."
Since its entry into the WTO, the state of survival of the Chinese auto industry has actually been "actively integrating itself in the retreat". Therefore, on the day of departure from the protection period, under the offensive of foreign investment, the Chinese auto industry must maintain a proactive stance. It must be clear: what needs to be maintained and what can be abandoned.
Miao Wei, general manager of the original Dongfeng Motor Co., once said: “The cooperation conditions that Dongfeng insists on are mainly the Dongfeng brand can not be changed, and the ratio of foreign capital can not be increased by 50%.†On the issue of brand and share ratio, the Chinese government has not relaxed.
The first lesson in this regard is the “Latin American model†characterized by complete liberalization. Mexico, due to the adoption of a completely open development model for the automotive industry, not only cut off the road to independent development, but also led to a long-term trade deficit. In Brazil, as the auto industry is completely controlled by foreign investment, the auto industry has not only become a pillar industry in the country, but also hinders its own technological development and brand creation. Miao Wei said: "Several million hamburgers cannot affect China's economy, but the situation of millions of cars entering China is different."
Those who fantasize about packaging companies and selling them to big foreign groups are skeptical. If there is no “defense line†on the equity, people can control the direction of technology and product development and can leave you at any time. As China's pillar industry, the auto industry cannot afford to give up. In the terms of the WTO, the most important link with the handling of foreign investment is the Agreement on Trade-Related Investment Measures, which consists of nine articles and an annex. It does not explicitly support or prohibit local funding requirements on the share ratio issue. Therefore, we have the policy space to adhere to a 50% equity ratio.
China has the most attractive market in the world. We have no reason not to make full use of the market resources that are generally favored by foreign capital. China has increased from the world’s seventh-largest automobile consumer country in 2001 to the world’s third-largest automobile consumer country in 2004. Xu Changming, director of the Resource Development Department of the National Information Center, predicts that China’s total automobile consumption in 2005 may rank second in the world with Japan, or officially become the second largest in the world. At this time, European automakers have just announced that their October 2005 sales record has hit the worst record since 1996; the US auto market also experienced a 14% drop in total sales in October.
Recently, foreign giants represented by Nissan and Volkswagen have demanded the production of joint ventures' own brands in China. This is an expression of their active posture. In combination with their needs, China has no reason not to make good use of manufacturing, talent, and technology.
“Sun Tzu’s Art of War and Military Form†reads: “We can protect ourselves and win the battle.†The future of China's auto industry can be considered as one of the two. ?
Speak in advance
Changhua Automobile Group Vice President Zhu Huarong
The Chinese auto industry has formed a three-dimensional competitive structure. Since the accession to the WTO, an image of saying "wolf came", in fact, after more than four years, our expected impact did not appear. The real competition is now formed between domestic auto companies. Therefore, there may be some deviations from previous judgments in the Chinese automobile industry.
China Automotive Industry Advisory Committee Secretary General Teng Bole
The original (impact on the accession to the WTO) is estimated to be severe. This worry is not without reason, after all, our car base is too weak. However, now when we talk about the issue of self-owned brands, we are talking more about cars, which shows that the awareness of the automotive industry has increased. During the transitional period of accession to the WTO, we are faced with the problem of how to fight for development opportunities after entering the automobile society. Next, we need to think calmly and handle the keywords “concept, mode and qualityâ€. (Zhang Zhaohu, Wang Jing)