Chen Bin:China auto industry overcapacity

【Compere: Thank you very much. We appreciate mayor wang’s presence and his speech, we are also grateful for the considerable support by the Party’s Tianjin committee, the Tianjin municipal government. As we know, under the background of financial crisis, the structure of auto industry of china has been into adjustment stage after a period of fast development, including the market, the products and techniques. How to grasp the trend of structural change, how to seize the opportunity is the key point to boost the development of the industry in order to meet the challenge made by the crisis, we carried out the stimulus plan of auto industry, which stabilize and promote the market effectively and point out the right direction for the future development.

Next, let us welcome Mr Chen bin, Chief director, Industrial coordination department, National development and reform commission, to deliver us a speech with the title of suggestions on boosting the stable and sustainable development of Chinese auto industry. 】

Mr Chen bin, Chief director, Industrial coordination department, National development and reform commission

Chen Bin:

Distinguished leaders and experts, ladies and gentlemen, good morning.

While the entity economy is affected seriously by the financial crisis around the world, the economy in china has been recovered gradually, and China’s auto market resumes its march towards prosperity and outshines others. Under this background, 2009 International Forum on Chinese Automotive Industry Development is held here. Besides the achievements we have, we should seriously think about that can the auto industry of china keep developing and continually and smoothly. Here I would like to talk about my own opinion on the issue, provide a reference only just.

In addition, Mr Liu Tienan, Vice president, the National development and reform commission planned to give us a speech with the topic of “to ensure growth, readjust structure, and accelerate the restructuring and revitalization of key industries”. But he is not present here due to an urgent meeting, so I’d like to give a brief report on pushing the auto industry steadily and the topic above together.

First Implementation and effect of the restructuring and revitalization of key industries, and the matters we need to concern about.

To implement the plan of the restructuring and revitalization of key industries has been an essential component of the stimulus package of maintaining fast yet steady economic growth to meet the challenges of financial crisis by the Party Central Committee and the State Council. The revitalization plans have been submitted and issued by the State Council. They are auto, steel, shipbuilding, textile, machinery manufacturing, electronics and information, light industry, petrochemicals, non-ferrous metals and logistics.

The added value of 9 manufacturing industries accounted for 80 percent of the total of industrial sector, the output value accounted for one third of GDP, the revenue also accounted for one third, its employment accounted for 30% of the whole country. Logistics plays an important role in increasing jobs, the added value accounted for 16.5% of the whole service industry, the output value accounted for 6.6% of GDP. According to the arrangement of central government, at meantime of solving the main contradiction in order to meet the challenge of financial crisis, we should accelerate the pace of restructuring, upgrade the industries, which is the main thoughts of implementation of the stimulus package. The whole plan is a comprehensive economic package to tackle the difficult and complicated year ahead in order to ensure growth and readjust structure.

The stimulus plan brings forward about 100 revitalization measures which covers almost every sectors concerning about future development.

In an effort to stimulate domestic spending, the government has increased subsidies for auto replacements, expanded the varieties of home appliance subsidies, broadened the application of domestic textile products, adjusted both export and import tax rate of steel, promoted self-own brands software into application.

In terms of stabilizing the production, we bring out, in the stimulus package, accelerating the management innovation, giving support to financial system and qualified auto factory, building car finance companies, setting up the mechanism of storing the strategic materials, improving the system of fertilizer storing, promoting the experimental units of straight purchase of power by aluminum industries, and relieving the burdens of medium and small sized enterprises.

The stimulus package got a positive feedback around the world. The leaders of the state council attached importance to the implementation of the package. All the departments actively participated in framing the detail rules. We have drafted 165 rules, and more than 60 have been carried out. The local governments also stressed the implementation of the plan. They have worked out the local stimulus plan and detail schemes according to their reality. As a whole, the implementation work is getting along very smoothly.

According to the present economic situation, China's measures are effective and successful. The domestic demanding is gradually expanding, the macro environment is improving. From January to July this year, the added value of large-scale enterprises increase 7.5% compared with the same period of last year, the production value of key industries fully increased.

The country's economy has shown a momentum of recovery from the global economic downturn, with more positive signs emerging, but the reviving foundation was not solid enough, we still face some deep-level contradictions, and it is hard to implement the stimulus plan effectively.

At the present time, efforts should be made to increase foreign demand and stabilize the production of all sectors. Compared with this, the stimulus package should aim at controlling the amount, eliminate the timeworn industries, recombination, innovation and optimize the distribution. But the actual fact of the plan is that the process of concerned sectors is not in balance. The following are the reasons:

Firstly, facing the impact of financial crisis, we must make growth keeping as our head task. We must focus our strength to prevent production downturn.

Secondly, we must realize that restructuring especially the elimination of timeworn facilities and combination is a gradual process, which need to coordinate the benefit of all aspects, involving system and mechanism innovation.

Thirdly, we need the time to set up the relevant measurement and the implementation rules due to the great workload of coordination and strong policy. Under the background of reviving, we need to handle with the relationship between growth keeping and restructuring, especially give emphasis to the restructuring work, which is the key point of the implementation of stimulus plan.

The problem should paid attention to is the spreading of redundant construction. This problem do not only exists in the traditional industries, for example, steel, concrete and flat glass, but also in the new industries, including wind power and polysilicon, even in the production of soybeans and aluminum. Some regions got the new project started without approving or approving illegally. In the 4th quarter of last year, our industry faced a lot of difficulties, which was not only affected by the international financial crisis, but also due to the redundant construction. And the exportation is limited, it aggravated contradiction of surplus production

The reviving foundation was not solid enough, if we don’t stop the spreading of redundant construction, and allow them to proceed unchecked, abominable competitions will reduce economic benefits. It will not only affect the implementation of the stimulus package and the reviving situation, but also make us lose the opportunity to structure adjustment formed by financial crisis.