Formal Policy on Development of Automotive Industry (1)

Promulgated by State Planning Commission of China on February 29, 1994

CHAPTER I THE GOAL OF THE POLICY AND KEY DEVELOPMENT PRODUCTS
CHAPTER II VERIFICATION AND AUTHORIZATION OF PRODUCTS
CHAPTER III STRUCTURE OF THE INDUSTRY
CHAPTER IV TECHNICAL POLICY OF THE INDUSTRY
CHAPTER V INVESTMENT AND FINANCITY POLICY
CHAPTER VI POLICY FOR USING FOREIGN FUNDS
CHAPTER VII IMPORT CONTROL POLICY
CHAPTER VIII EXPORT CONTROL POLICY
CHAPTER IV LOCALIZATION POLICY
CHAPTER X CONSUMPTION AND PRICING POLICY
CHAPTER XI RELEVANT INDUSTRIAL AND SOCIAL SECURITY POLICY
CHAPTER XII INDUSTRIAL POLICIES, PROGRAM AND PROJECT MANAGEMENT
CHAPTER XIII OTHERS

The policy is aiming at building China's automotive industry (including motorcycle sector) into a pillar industry of the national economy by changing the current scattered investment, small-scale production and backward products in the industry to raise the development capacity of the producer as well as upgrade their product quality and technology and equipment level in a bit of achieving a reasonable streamline industrial structure and economic scale of production in the industry. With implementation of the policy, China's automotive industry will lay　down a sound　foundation by the turn of the century and become a pillar industry of the national economy after two more Five-Year Plans Periods, that is by 2010, to bring up the rapid development of the relevant industries.

CHAPTER I THE GOAL OF THE POLICY AND KEY DEVELOPMENT PRODUCTS

Article 1 The State is to guide the automobile enterprises to make good use of both domestic and overseas funds and open up and expand　domestic and international market under a diversified and economic scale of production to meet over 90 percent of domestic demand by 2000 with output of sedans accounting for more than a half of the total output and basically meeting the household　demand, and motorcycles basically meeting the domestic needs and exporting a certain amount.

Article　2 The State is to encourage a gathering of investment and an industrial restructuring in the industry so as to avoid the excessive number of manufacturing factories, scattered investment, disorder in examination and approval of automobile projects, duplicated　import　of low-level products and the low speed in construction of State-designated key factories and localization of products. The goals in stages are: in the Eight Five-Year Plan period, the stresses will be put on prompting the State approved assembly and auto part manufacturing projects to go into operation as soon as possible and creating　conditions for accelerated development of China's automotive industry; by the turn　of this century, through support by the State, 2-3 automotive manufacturers (or enterprise groups) will be developed into large producers of a considerable　strength,　6-7 automotive manufacturers (or enterprise groups) will be developed into domestic backbone enterprises of the industry, and 8-10 motorcycle manufacturers will be built into key enterprises to both meet domestic and international market demands so as to achieve of a new system of decreasing number of producers, mass production and orderly competition among a small　number of large enterprises on the market with the domestic three top sellers of a same kind　of cars (according to the classification of the QC/T59-93 industrial standards) accounting for over 70 percent of the automobile market, and before 2010, under the guidance of the State, the large　and backbone enterprises will be integrated into 3-4 large automobile as well as 3-4 large motorcycle conglomerates to join in international competition under own efforts of development, production and marketing:

Article 3 Key development products:
1. Auto parts and components: key parts and components of sedans
2. Passenger automobiles (Class M): economic sedans and special chassis for large and middle-sized passenger coaches
3. Trucks (Class N): special motor vehicles and new engines
4. Motorcycles (Class L): engines
5. Equipment: die sets
6. Basic components: casting and forging blank components

CHAPTER II VERIFICATION AND AUTHORIZATION OF PRODUCTS

Article 4 The State will effect control on the safety, pollution control and energy saving of　automobile products (including motorcycles) according to the law.

Article 5 The State will adopt the international conventional verification of up to standards on　automotive products (including motorcycles) the products without verification of up to standards　shall not be allowed to be marketed, imported and used.

Article 6 The automobile enterprises should apply for verification and authorization in accordance with the requirements of "verification and authorization system for models of automobile products." The authorities responsible for verification of automobile products shall issue certificates and labels to the qualified products and publish the catalogue and the public security departments shall handle registration of new motor vehicles in accordance with the certificates and catalogues mentioned above.

Article 7 Automobile manufacturers are still responsible for all problems in designing and manufacturing after their products are qualified after the verification.　　　　　　　

CHAPTER III STRUCTURE OF THE INDUSTRY

Article　8　The restructure of automotive industry is to promote conglomeration of automobile enterprises, serialization of products and specialization of production procedures; so as to make effective use of the automobile production bases in the country and bring into full　play the initiatives of the central authorities, localities and　enterprises, to avoid low-efficiency and blind competition and optimize structure　of industrial organizations.

Article 9 The State encourages automobile enterprises to develop　inter-department　and inter-regional enterprise groups through assets merge, annexation and joint-stock system and accelerate reform of the corporate system based on reform of the property right system of the　State-owned enterprises in a bit to establish a modern enterprises system.

Article 10 The State will select a number of automobile, motorcycle and auto part manufacturing enterprises or enterprise groups which have independent product and technology development capacity, a certain scale of production and a market share for special support; the enterprises or enterprise groups which will enjoy such support shall have the conditions and development goals before the end of 1995 as:
1.　For an, enterprise which has an annual capacity of producing over 300,000 units of automobiles and selling over 200,000 units and　spends at least three percent of its sales value on technological development, The state will support it to acquire an annual production capacity　 of over 600,000 units.
2.　For an enterprise which has an annual capacity of producing over 150,000　automobiles and selling over 100,000 units and spends at least 2.5 percent of its sales value on technological development, the State supports it to develop an annual production capacity of over 300,000 units.
3.　 For an enterprise which has an annual capacity of producing over 100,000 units of automobiles and selling over 800,000 units and spends at least two percent of its sales value on technological development, the State supports it to acquire an annual production capacity of　over 200,000 units.
4.　For an enterprise which has an annual capacity of producing over 20,000 units of heavy-duty trucks and selling over 15,000 units and spends at least two percent of its sales value on technological development, the State supports it to update its products and acquire a proper scale of mass production.
5.　For　an enterprise which has an annual capacity of　producing over 1,500 units of large or medium-sized motor coaches or the chassis of motor coaches and selling over 1,000 units and spends at least two percent of its sales value on technological development, the State supports it to develop a certain scale of mass production.
6. For an enterprise whose products of key parts or components of sedans accounts for at least 25 percent of the domestic market or belong to niche or urgently needed products in the country (the catalogue is　not determined yet),　the State supports it to develop toward the goal of economic scale of production.
7.　For a motorcycle enterprise whose products account for over 10 percent of the sales volume of the domestic market, the State　supports it to further expand output and increase varieties:

Article 11 The production capacity and the sales volume of an enterprise or enterprise group means the amount of the　serial　products, which include　that of the parent company and its solely owned subsidiaries, holding companies and its subsidiary Chinese-foreign joint ventures.

Article 12　For an enterprise which meets the requirements listed in Article 10 of the present policy, it will enjoy the following treatments after approval by the State when developing the products listed in

Article 3 of this policy from 1996 through construction, renovation and expansion of facilities:
1. Zero rate of orientation regulation tax for its investment in fixed assets;
2. Priority for it to issue and list its shares and debentures;
3. Active support in bank loans;
4. Priority for its use of overseas fund in the foreign funds use plan;
5. Policy-based loans will be arranged for projects of economic cars, auto parts and components, die sets and casting and forging mills; and
6. The　financial company within an enterprise group may expand its business scale after approval of relevant State departments.

Article 13 Automobile and engine projects (including Chinese-foreign joint ventures and cooperative firms) newly approved by the State shall be built, in principle, according to the following scales:
1. The　sedan project with engine displacement capacity up to 1600 cc shall have an annual production capacity of 150,000 units at least;
2. The light-duty truck project shall have an annual production capacity of 100,000 units at least;
3. The light-duty bus project shall have an annual production capacity of 50,000 units at least;
4. The heavy-duty truck project shall have an annual production capacity of 10,000 units at least;
5. The motorcycle project with engine displacement up to 1500h cc shall have an annual production capacity of 150,000 units at least;
6. The auto gasoline engine project with displacement up to 2500 cc shall have an annual production capacity of 150,000 units at least; and
7. The auto diesel engine project with displacement up to 3500 cc shall have an annual production capacity of 100,000 units at least.

CHAPTER IV TECHNICAL POLICY OF THE INDUSTRY

Article 14 The State encourages and supports automobile enterprises to set up their own product research and development institutes and　build up　independent product development capacity through assemiliation of foreign technology. The State supports joint development of key research projects among enterprise groups with research and development funds.

Article 15  The State encourages dissemination and use of electronic technology, new technology and new materials in auto production, production of energy-saving and low-pollution automobiles and research and development of new fuel and new power driven automobiles.

Article 16  Construction of the new automobile enterprises must ensure the advanced level of their products; upgrading of the existing products and the self-developed products must reach the advanced international level in the early 1990s and the products manufactured　with imported technology must reach the contemporary advanced international level in the 1990s.

Article 17 The passenger motor coaches and trucks not up to 3.5 tonnes shall use 90# gasoline as the fuel step by step before 2000; the passenger motor coaches not up to 2 tonnes shall use lead-free gasoline; and the passenger motor coaches and trucks exceeding 5 tonnes　shall mainly use diesel as the fuel after 2000.

Article 18 The State supports establishment of national research, experiment and testing institutes of automobiles, motorcycles and key components of undertake formulation of standards, product authentication and inspection of import and export commodities.

Article 19 The State encourages automobile enterprise to establish Chinese-foreign joint venture or cooperative technological research and development companies.

Article 20 The State encourages automobile enterprises to adopt modern electronic technology and flexible processing equipment, on-line automatic testing equipment, purposely select automation　equipment to raise the per capita equipment volume and equipment technology level.