China has put aside plans to control over-investment in the booming auto sector and is planning huge increases in exports of cars and components instead. Experts told RFA that China might succeed in selling large volumes of car parts to the rest of the world but predicted problems with resources and U.S. labor unions if volumes became too large.

�Our short-term target is to increase automobile and component exports to U.S.$15 billion to U.S.$20 billion next year,� deputy commerce minister Wei Jianguo was quoted as saying last month. The government hopes that China will export U.S.$70-100 billion of cars and components per year by 2010, official media reported.

The target would require steady annual growth rates of 30 to 35 percent. In 2003, exports of cars and parts totaled just U.S.$4.71 billion, but that represented a 34.4 percent increase from a year earlier. Other official media reports have indicated that government targets for a domestically designed Chinese passenger car by 2010 had been scrapped, with targets expanded to include parts as well as vehicles.

�In the auto parts market, I definitely think that there�s potential, particularly with all the foreign participation at the assembly level these days,� Eric Thun, assistant professor of politics at Princeton University, said in an interview. �Chinese firms are being integrated with the global production networks...They�re able to... get access to global markets which they didn�t have before.�

Eric Harwit, China auto expert and associate professor in Asian studies at the University of Hawaii, said that one possible advantage of exporting parts rather than cars is that it was less likely to spark opposition from American consumers and labor unions over job losses to China.

�Most consumers, I think, if they see that the car is at least assembled in the United States... then American consumers, at least the consumers won�t be quite so alarmed,� Harwit said. �If you�re going to have overcapacity in something, I think it may not be the worst industry to be promoting.�

But some were skeptical about China�s export ambitions. There are reasons to doubt projected growth rates of more than 30 percent through 2010, according to Denton Dance, senior manager for Asia-Pacific forecasting at J.D. Power and Associates.

�Those projections seem a bit outrageous,� Dance told RFA. �They do not have the infrastructure in place to handle that type of growth. Nor are they going to be able to achieve those types of incremental growth [rates] year-over-year without incurring increased costs on their own.�

Dance said China would have low-cost competitors in the auto parts business, such as Brazil, which recently devalued its currency and has been attracting renewed interest from worldwide auto manufacturers. There were also doubts that the quality of the products would be improved by massive increases in production with exports of $100 billion a year. Political opposition might also be a problem if exports grew at those rates.

�Once China gets a little bit more on the radar scope, I think that there�ll be a lot of political intervention in the form of possibly non-tariff barriers that will impede the onslaught or the possible dumping of parts and supplies into various countries,� Dance said.

But Steve Beckman, director of governmental and international affairs at the Washington offices of the United Auto Workers (UAW), the biggest American labor union for the auto industry, said the U.S. trade deficit with China on autos and parts reached $2.2 billion last year and had already raised concerns about jobs.

�There�s a lot of investment going in in the vehicle and parts industry, which we are watching closely and are concerned about,� Beckman told RFA. �It is definitely something that the UAW is watching closely and looking to see what its impact will be.� #####


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