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China Experiences Fast-Paced Growth in Car Market - 2004-06-17

China's automobile revolution is accelerating; despite efforts by the government to slow what many economists believe is an overheating of its economy. China is the fastest growing car market in the world, and sales in 2004 are expected to climb 20 percent from last year.

Thousands of Chinese packed this month's week-long Beijing car show, which organizers touted as the largest in the world. More than 500 vehicle models were on display.

Meanwhile, the world's automakers have announced they will launch massive expansion projects in China.

Japan's Toyota is aiming to secure 10 percent of the Chinese car market in the next few years. U.S.-based Ford plans to build a new production plant in China.

America's General Motors, the world's largest car manufacturer, says it will invest $3 billion during the next three years in China and double its production to 1.3 million vehicles a year. GM says that will include assembling and marketing its top-of-the-line luxury Cadillac models in China.

At a lavish launch ceremony featuring dancers and strobe lights inside an ancient temple in Beijing, Cadillac General Manager Mark LaNeve said his division will target the growing number of status-conscious Chinese who have attained great wealth as a result of the country's explosive economic growth.

"Cadillacs are not for the understated," he said. "They are for people who have achieved status and want to enjoy the trappings of affluence. We think that we are [seeing] more of them in the Chinese market every single day."

Mr. LaNeve says sales of luxury cars in China have grown by about 45 percent in recent years.

The vast majority of China's population is made up of farmers, many of whom are too poor to even dream of buying a luxury vehicle, but analysts believe that China and its 1.3 billion people can sustain a market for luxury cars.

Professor Eric Hewitt specializes in Chinese auto production at the University of Hawaii, Manoa. He says that due to its strong economy, more Chinese than ever are able to aspire to owning a new car.

"You do have a population of several hundred million people in the coastal areas who are able to save their money," he explained. "Their apartment rent is low. Taxes are virtually nonexistent for many wage-earners, so they can save their money."

New cars in China now cost as little as $4000 and the government is now allowing banks to make car loans.

This has meant that young professionals, unlike their parents, can think about owning a car. A 24-year-old man who works as a wholesaler, says he would not have dreamed of buying even a cheap car five years ago.

"The economy was not developed at that time," he said. "Now that the economy is good, I want to buy one, but not a top-level car. If it is too expensive, I cannot afford it."

One 22-year-old student who gazed at luxury models at the Beijing auto show says she is saving up for a car, even though the capital has good public transport. "It is convenient and it is a symbol of success," she said.

In recent months, banks have started to tighten their lending criteria, in part a response to what analysts say are the government's efforts to stop China's rapidly growing economy from overheating, but car sales are skyrocketing, with many Chinese using their savings to purchase new cars.

Experts are sounding alarms about the long-term economic effects and the environmental consequences that could come with the rapid motorization in a country China's size.

They predict that if current trends continue, the number of motor vehicles in China by the year 2020 could reach 230 million.

Harry Dimitriou is a professor of planning studies at the University College of London in Britain.

"This would equate to the same magnitude of vehicles as in the USA and on a land mass approximately the same size," he explained. "Statistics suggest we should be, in effect, having two huge economies generating motorcar demand and consuming petroleum simultaneously, which would put a strain on the global economy."

Already, China is looking for new sources of petroleum, most notably in Central Asia and in Africa.

Environmentalists say this approach is short-term at best. Yu Jie is a climate-change campaigner with the Greenpeace office in Beijing.

"For people to buy more cars, it is difficult to stop them," he noted. "Also, the government wants a big car industry to support the economic growth. All those reasons are pushing the government to the point where they need to think about renewable [energy sources] more seriously."

For now, Ms. Yu and other environment advocates say the government is likely to stay focused on maintaining development above all else. They say the high cost of research and conversion to renewable energy sources mean it will be long time before China makes a serious effort to shed its dependency on conventional energy sources.