Chen Bin:China may curb overcapacity of

　　September 3, 2010, China Automotive Industry Development Forum entitled the reputation of “Automotive Industry Davos” held in Tianjin Binhai New Area.

　　Focus on the annual theme of he restructuring and upgrade of China automobile industry, the senior leadership from government, industry and corporations will start in-depth discussion. More than 600 government officials, industry leaders, business leaders and scholars have participated in this forum.

　　Mr. Chen Bin, head of National Development and Reform Commission industry Coordination Division, made the speech of the situation confronted with China automobile industry and the need for structural adjustments at the scene, pointing out currently the auto industry faces overcapacity risks and the country will firmly control the automobile surplus production capacity during the twelfth five year plan period.

　　The improved 100 million tons of new refining capacity during Eleventh Five Year Plan was almost consumed by more than 3,500 new cars during five years.

　　Rapid expansion of automobile business exacerbates the risk of overcapacity. Chen pointed out that China's 30 major vehicle enterprises including 20 domestic automobile enterprise groups and 10 core vehicle enterprises had a manufacturing capacity of nearly 13.6 million vehicles in 2009. The planned capacity for 2015 is more than 31.2 million units, according to a report on the planned capacity of the automotive industry from 2010 to 2015.

　　The government will strongly inhibit the overcapacity in auto industry. The inhibition of excess manufacturing capacity demand government in all levels to formulate rational development goals. Relevant state departments should strengthen the surveillance of the capacity and the production rate of the automobile industry and timely release productivity, corporate restructuring and other information to the community sector.

　　Dear Leaders, Ladies and guests, Hello, everybody! Very pleased to participate in the 2010 China Automotive Industry International Forum.

　　I would like to take this opportunity to talk about some personal thoughts about the situation of China automobile industry and the suggestion to accelerate the automotive industrial restructuring.

　　The situation confronted with China automotive industry

　　China auto market has entered a new era. Since reformation and opening up, China auto industry has been doing their best to meet the demand of domestic market. In 1990s, the automotive industry spent ten years increasing the production capacity by more than 1 million. Entering the new century, through another ten years, production capacity of the automotive industry added more than 10 million. In terms of to meet the public demand for transportation, the automotive industry has made outstanding contributions. With the rapid development and rising living standards, China auto market is becoming more mature today and automobile consumption is getting more rational. The car market will be see competitions than before. Besides, in a new era, the quality will be more important than the quantity to the automakers.

　　Cars have a double property of a means of production and a type of consumer durable. The development of automobile industry not only improves people’s living standards and quality, upgrades the level of consumption, promotes the development of national economy, but also consumes vast natural resources, pollutes the air and aggravates the traffic pressure, brings tremendous pressure to the energy supply, road transport and environmental quality. The proportion of gas-guzzling vehicles in China is too large while that of energy-saving environment-friendly vehicles is relatively small. From 2005 to 2008, the government implemented restrictions on passenger car fuel economy in the first phase, China’s Average fuel consumption of passenger cars fell from 100 km 9.11 liters in 2002 to 8.13 liters in 2008. However, fuel consumption of one single passenger car is still much higher than the level of developed countries. The fuel consumption of new vehicles increased each year equals to the establishment of one new refinery with the capacity of 20 million tons oil, which will take four to five years and more than 200 billion Yuan investment. Although I believe we have the ability to do this, it is very difficult to import 10 million tons of crude oil every year. The improved 100 million tons of new refining capacity during Eleventh Five Year Plan was almost consumed by more than 3,500 new cars during five years.

　　Automotive industry facing great challenges

　　Our urban road construction and renovation is far behind the auto industry growth rate of 48%, therefore, in large and medium cities, traffic congestion is becoming more serious. Automotive exhaust accounts for 50% of gaseous air pollutants. Our government has great hope to the development of automobile industry, but also suffers increased stress of energy supply, maintaining traffic environment and environmental quality. The government wants to maintain steady and rapid development of automobile industry and also hope the auto industry can accelerate the restructuring, driving the auto consumption growth and social development, which is also a great challenge the automotive industry facing.

　　Rapid expansion of automobile business exacerbates the risk of overcapacity

　　In 2009, China sold out 13.6 million new cars, which made many companies could not wait to come up with a new round of capacity expansion plans. Family cars and mini buses became the new focuses. Passenger car companies have increased sales targets and the proportion of economic car products. Some had not produced mini-bus are brewing to enter this market segment. Last year, the sales of independent brands were rising constantly, which added the risk of the extreme deterioration of capacity expansion. In the context of merger and reorganization, a number of joint ventures and multinational companies in China have begun looking for new partners.

　　State measures to encourage new energy vehicles greatly stimulated the enthusiasm of new energy vehicles

　　Since the state measures to encourage new energy vehicles greatly stimulated the enthusiasm of new energy vehicles, new energy automobiles and key parts have crazily expanded their capacity. Earlier this year I commissioned China Automotive Technology and Research Center to carried out a research. The results showed that China's 30 major vehicle enterprises including 20 domestic automobile enterprise groups and 10 core vehicle enterprises had a manufacturing capacity of nearly 13.6 million vehicles in 2009. The planned capacity for 2015 is more than 31.2 million units, according to a report on the planned capacity of the automotive industry from 2010 to 2015. Currently, there are 27 provinces, autonomous regions and municipalities are producing vehicles, mainly in the northeast, Beijing and Tianjin, east China, the Pearl River Delta and the Chongqing region.

　　According to authorities, the capacity planned in twelfth five year plan exceeds the number of 30 enterprises. Always, overcapacity means unstable market signals, companies are difficult to predict market demand, which will lead greater blindness of investment behaviors. Therefore, overcapacity will not only hinder the sustained and healthy development of automobile industry, but also cause a great impact on the macro-economic development.

　　As a result, since the China auto industry is developing rapidly, we should pay more attention to the quality rather than quantity. We should adjust our concept to correctly handle the relationship between the structural adjustment and the growth rate. Now I would like to talk about the macro point of view of policy adjustments in auto industry.

　　First, we must insist the market be regulated by the policies and lead the companies to adjust under the guidance of the market.

　　The top ten industrial revitalization planning introduced in early 2009 has played a prominent role in maintaining the national economy growth, expanding domestic demand, adjusting the structure and promoting development. This is mainly because the standpoint of the restructuring and revitalization planning of auto industry is to expand domestic demand and guide consumption. We have built a good market environment by encouraging the car to the countryside and the consumption of small cars and the cash for clunker. During the twelfth five year plan period, in the process of vigorously industrial restructuring, based on the stable development of the automobile industry, we should insist on guiding the market through consumption policies, regulating the market through laws and rules as well as leading the automotive companies to carry out industrial structure adjustment and optimization upgrade under the guidance of the market. However, our focus should always be the new energy vehicles.

　　Second, we should adhere to the principle to positively develop both the energy saving and new energy vehicles. We must establish auto product management system as soon as possible to promote energy-saving and environmentally friendly automotive products. To strive to foster the development of new energy vehicles, governments at all levels should integrate policy resources and big cities need to take the lead in the starting sample. Government official car should take the lead to use new energy vehicles and set a good example for ordinary consumers, which is a great contribution to the development of energy saving industries. Besides, the major car companies should actively carry out cooperation in new energy vehicles. Guidance revised by Development and Reform Commission and relevant departments in 2010 includes energy battery, battery management systems, motor management systems, electric vehicle drive motor, electric control integration and charging equipment. And it also put forward the corresponding technical requirements.

　　Third, we have to strongly inhibit the auto industry overcapacity. China is a developing country, in the context of regional uneven development, economic development and the improvement of people’s living standards are the primary task of local governments. As the automobile industry has the characteristics of long chain and wields enormous influence, local governments have paid great efforts to promote large-scale development of automotive industry, which increased planning capacity indiscriminately. The governments should strongly inhibit the overcapacity in auto industry. The inhibition of excess manufacturing capacity demand government in all levels to formulate rational development goals. Relevant state departments should strengthen the surveillance of the capacity and the production rate of the automobile industry and timely release productivity, corporate restructuring and other information to the community sector.

　　Land utilization and capacity utilization, new energy cars and mergers and acquisitions should be taken into full consideration. At the same time, the entry standard of new energy vehicles should be improved properly to avoid frauds. To fundamentally curb excess capacity need deepening the systemic reformation, focusing on reformation of tax system and investment and financing system.

　　Ladies and gentlemen, the twelfth five year plan is critical transition period of China auto industry. The auto industry is facing great tasks to o strengthen its own capacity building, implement the enterprise mergers and acquisitions as well as brand building, which demand the guidance of the national policies, the companies own efforts and the support from foreign and domestic partners. Let us work hard together to promote the transformation and upgrade of China automotive industry.

　　Finally, I wish this meeting every success and thank you all!

　　(Translator: Yalong/Jessie)

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