Chinese government squeeze play

Joseph Smith

In a dose of cold reality for those on the left who so admire the Chinese communist system, the Chinese government appears ready to put the squeeze on their rapidly expanding domestic auto industry, with ominous portents for automakers.

The New York Times reports that, after a decade of breakneck capacity expansion, high-ranking economic and environmental ministers are signaling that producers must now cut production to help reduce congestion, pollution and foreign oil dependence.

Auto makers around the world, including GM and Ford, have invested heavily in new plants and expanded capacity in the Chinese market, and the government has until now encouraged buyers with subsidies and tax incentives. 

According to the Times account, Chinese auto production has increased from less then two million cars in 2000 to 17 million today and an estimated 31 million vehicles by 2013.  By comparison, U.S. domestic auto sales are currently running at an annual rate of about 12 million vehicles.

As the Times notes, "any slowdown in growth is likely to shock the world's automakers."  What happens to all that excess capacity, and the investments in same, is a very big unknown.

The Chinese central planners, incidentally, have introduced a novel method of curtailing domestic auto sales:

But limits on car sales in big cities may pressure Chinese automakers to slow down. The municipal government of Beijing, China's largest single market with 4 percent of sales last year, stunned the industry last December by imposing stringent limits on the number of new-car registrations each month, effectively imposing a decline in sales of close to 70 percent.

...with the exception this summer of Guiyang in southern China, most Chinese cities have been awaiting signals from Beijing on whether to follow suit.

Mr. Jiang said during a brief interview Sunday on the sidelines of the conference in Tianjin that he expected other cities to do so. "Beijing is a very typical city from which other cities may learn," he said.

No doubt party favorites will still get their new-car registrations.

The government also plans to aim new subsidies at selling cars with "very low fuel consumption."  However, the Times reports that China already has subsidies of about $19,300 for electric cars, "but virtually none are sold."  Now that sounds familiar...

Earlier this year it was reported that President Obama "has told people that it would be so much easier to be the president of China." 

In a similar vein, the Times' Thomas Friedman expressed his admiration for the Chinese totalitarians last year, as reported at American Thinker:

What if we could just be China for a day? I mean, just, just, just one day. You know, I mean, where we could actually, you know, authorize the right solutions, and I do think there is a sense of that, on, on everything from the economy to environment.

Just think, instead of having to "coerce" people out of their cars, the President could simply shut down the Department of Motor Vehicles. 

 

 

 

 

 

In a dose of cold reality for those on the left who so admire the Chinese communist system, the Chinese government appears ready to put the squeeze on their rapidly expanding domestic auto industry, with ominous portents for automakers.

The New York Times reports that, after a decade of breakneck capacity expansion, high-ranking economic and environmental ministers are signaling that producers must now cut production to help reduce congestion, pollution and foreign oil dependence.

Auto makers around the world, including GM and Ford, have invested heavily in new plants and expanded capacity in the Chinese market, and the government has until now encouraged buyers with subsidies and tax incentives. 

According to the Times account, Chinese auto production has increased from less then two million cars in 2000 to 17 million today and an estimated 31 million vehicles by 2013.  By comparison, U.S. domestic auto sales are currently running at an annual rate of about 12 million vehicles.

As the Times notes, "any slowdown in growth is likely to shock the world's automakers."  What happens to all that excess capacity, and the investments in same, is a very big unknown.

The Chinese central planners, incidentally, have introduced a novel method of curtailing domestic auto sales:

But limits on car sales in big cities may pressure Chinese automakers to slow down. The municipal government of Beijing, China's largest single market with 4 percent of sales last year, stunned the industry last December by imposing stringent limits on the number of new-car registrations each month, effectively imposing a decline in sales of close to 70 percent.

...with the exception this summer of Guiyang in southern China, most Chinese cities have been awaiting signals from Beijing on whether to follow suit.

Mr. Jiang said during a brief interview Sunday on the sidelines of the conference in Tianjin that he expected other cities to do so. "Beijing is a very typical city from which other cities may learn," he said.

No doubt party favorites will still get their new-car registrations.

The government also plans to aim new subsidies at selling cars with "very low fuel consumption."  However, the Times reports that China already has subsidies of about $19,300 for electric cars, "but virtually none are sold."  Now that sounds familiar...

Earlier this year it was reported that President Obama "has told people that it would be so much easier to be the president of China." 

In a similar vein, the Times' Thomas Friedman expressed his admiration for the Chinese totalitarians last year, as reported at American Thinker:

What if we could just be China for a day? I mean, just, just, just one day. You know, I mean, where we could actually, you know, authorize the right solutions, and I do think there is a sense of that, on, on everything from the economy to environment.

Just think, instead of having to "coerce" people out of their cars, the President could simply shut down the Department of Motor Vehicles.