Impact of China s WTO entry

Impact of China's WTO entry

The stages in which import tariffs and localisation requirements will be gradually reduced under the negotiated terms of China's entry to the WTO were summarised at the end of Chapter 6.1 and again in Table 6.3.4 The same comments offered in Chapter 6.1 in relation to the impact of the relaxation of restrictions in foreign company operations of automobile manufacture apply equally to the manufacture of buses and trucks . Whatever changes may be brought about to the structure and ownership of the industry and to prices, it is likely that local production will maintain the mainstream of the China markets.

Table 6.3.4: Stages in the reduction of tariffs and local content requirements

Impact	Current	2003	2006
Tariff reductions	Import tariffs for autos:80% “100%	Import tariff cuts phased in equally 15% each year	Import tariffs for autos will be reduced to 25%
	Import tariffs for auto parts : 40%		Auto parts tariffs will fall to average of 10%
Investment and technology	Local content requirements for CBU will be restricted to 40% for Year 1, 60% (Year 2) and up to 80% (Year 3)	Will eliminate policies which restrict foreign automotive companies from importing inputs for production	Significant commitments in transfer addressing concerns about the terms and conditions of investment in China, and the government's role in what should be commercial decisions
	Foreign ownership is allowed (up to 50%)	Will eliminate and cease enforcing trade and foreign exchange balancing requirements

Export success in developed markets for both trucks and buses will depend on the Chinese industry's capability to satisfy foreign technical specifications and safety and exhaust emission standards, in which further alliances with the leading foreign manufacturers will play a crucial role. To date, China has achieved some modest sales of trucks to developing markets in Africa and the Middle East, selling on cost. With buses, they have moved a stage further; for example King Long now have a joint venture in India to build CKJD kits supplied from China. However, penetration of developed markets will require greater product sophistication, especially in the truck sector.