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China Becomes World's Fastest-Growing Auto Market - 2004-04-22

The image of China as a nation on bicycles is history. China is the single fastest-growing automobile market in the world, and is already the second-largest in Asia after Japan. Now, industry observers have begun to worry that the Chinese will be turning their attention to exporting cars and trucks.

According to the Paris-based International Organization of Automobile Manufacturers, Chinese plants produced about 4.4 million vehicles in 2003. That puts China in seventh place among auto-producing countries of the world.

The Detroit bureau chief for Forbes magazine, Joann Muller, describes China's auto industry as exploding.

"It's over 25 percent growth [annually] for the last few years and there's every indication to think that that's going to continue," she said. "And that's why the automakers, particularly, you know, the U.S. and the Japanese-based and European-based automakers are pouring money into China, because the domestic market there is just enormous."

But Ms. Muller says China has not opened wide its doors to any and all manufacturers to do as they will? far from it.

"The Chinese government has decided that they really want to control the development of their auto industry," said Ms. Muller. "They've identified the automobile industry as one of their core industries on which they want to build their economy. And so they're being very deliberate about how they allow foreign companies in to invest."

And the main way in which the government allows outsiders to do business in China is by marrying them to a Chinese partner.

"Right now, any foreign company, that is, American, Japanese or European, who wants to do business in China has to go into a joint venture with a Chinese company and they must produce cars for the domestic market," explained Joann Muller. "So, right now, they can't export at all."

The Forbes bureau chief says the automakers report the Chinese domestic market is growing with such intensity that most of them can't foresee a time when China will be exporting vehicles. Does she go along with that?

"We think that there's a very good chance that maybe five to 10 years from now there will be cars coming from China," she said.

But before that happens, says Joann Muller, a number of developments will have to take place. We'll have more in our next report.