Special Report

November 27, 2014

Environmental pressures promote industrial upgrading

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Written by: Suhail Nasir
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On October 17, 2014, upon the theme of “The Vision for the Transformation of China’s Automotive Industry”, the 5th Annual Global Automotive Forum (GAF2014) was held in Wuhan East Lake International Conference Center. In the afternoon keynote speech session, Fan Gang, the chairman of China Reform Foundation and National Economic Research Institute expressed his opinions on Chinese consumer market potentials, environmental protection, automobile industry and issues of antitrust.

Fan Gang firstly analyzed the issues of China’s current macroeconomic environment. He believed that China is already the world’s largest economy; this year’s economic growth rate may be around 7.3%. Within three or four years, it has largely achieved a soft landing for the economy with increasing number of industries that are gradually returning to a normal growth. The first one is the automotive industry, from the beginning of 2013, the problem of overcapacity has gradually eliminated with over 10% of growth every year.

Meanwhile, Fan Gang emphasized that China has a huge potential consumer market, retail sales of social consumer has annual growth rate of 11% which is higher than the growth rate of GDP, various channels are gradually opening up, especially in small and medium cities. In the automotive industry, for example, the last two years, sales growth has shifted from large cities to small and medium cities, and the rapid development of the new type of consumption, E-business, significantly stimulates people to consume more.

Currently, the Government is trying to resolve the issues of traffic congestion, environmental protection and other problems through the restriction of purchasing autos and limiting the autos on roads during weekdays. Fan Gang believes that traffic congestion is a problem of urbanization that is hard to avoid, it can be addressed to a certain extent via public transportation and reasonable road planning. But environmental problems are related to the overall adjustment and upgrading of industrial structure, economic structure, and many other factors; particularly in the automotive industry, the auto consumption is growing rapidly with increasing pressure on environmental protection, which requires the automotive industry to deal with environmental problems by technological innovation and upgrading, focusing on the development of new energy sources.

In terms of whether the Government will further implement more stringent restrictions policy, Fan Gang said that from the perspective of environmental development under long-term point of view, certainly there will be more restrictions and higher environmental standards, this is a problem that all industries have to confront with. However, everyone including the government has recognized that auto is playing a leading role of national economy as a whole, which means it will not limit the automotive industry itself to develop.

Against the recent turmoil of “anti-monopoly” within the automotive industry, Fan Gang illustrated that differential pricing and extremely high ratio for the Chinese market by certain auto brands have led to a lot of complaints from consumers; these diffuse discontent, which caused the consideration of government policies to warn the entire industry as a whole, but does not merely for foreign companies in the automotive industry.

-Published on page#9 November-2014 edition of MOBILE WORLD Magazine

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