Formal Policy on Development of Automotive Industry (2)

Article 38 According to the market demand, the amount and variety of automobiles imported each year must be in great conformance with the State automobile production plan and the import must be under approval of the State Council. The State bans import of old automobiles and old motorcycles through trade or donation.

CHAPTER VIII EXPORT CONTROL POLICY

Article 39 The State encourages automobile enterprises to expand export and participate in international competition. The automobile enterprises should take expanding export and participating in international competition as their development goal.

Article 40 The State encourages automobile enterprises, when conditions permit, to set up joint equity or coop venture or solely owned manufacturing enterprises and after-sale service centres abroad.

Article 41 When enterprises satisfy the following conditions, the State encourages them to expand export and give them priority in arrangement of loans and use of foreign funds:
1. An automobile enterprise reaches the following indices in terms of the proportion of export amount of complete automobiles among its sales volume: Passenger automobiles: M1 three percent M2 five percent M3 eight percent Trucks: N1 five percent N2, N3 four percent Motorcycles: L ten percent
2. The export of an automobile (motorcycle) parts and components manufacture reaches 10 percent of its annual sales value.

CHAPTER IX LOCALIZATION POLICY

Article 42 After introduction of a manufacturing technology from overseas, an automobile enterprise must start its effort to localize the products therewith. The State takes the progress of localization of the import technology products as one of the conditions to support the enterprise to develop the second model.

Article 43 An automobile enterprise shall not engage in assembly through import of semi-knock-downs (SKD) or completely knock-downs (CKD).

Article 44 of the present policy, shall pay tax according to the regulations.

Article 44 The State formulates preferential import tariff rates in accordance with the localization rate of automobile products. Those firms that reach the following localization standards may enjoy the different preferential tariff rates.
1. The localization rate reaches 40 percent, 60 percent or 80 percent in the products manufactured with the import technology for complete automobiles in Class M;
2. The localization rate reaches 50 percent, 70 percent or 90 percent in the products manufactured with the import technology for complete automobiles and motorcycles in Classes N and L; and
3. The localization rate reaches 50 percent, 70 percent or 90 percent in the products manufactured with import technology for unit assemblages or key parts and components.

CHAPTER X CONSUMPTION AND PRICING POLICY

Article 45 The State encourages the use of energy saving and low- pollution automobiles.

Article 46 It is necessary to change gradually the consumption pattern of the administrative departments, organizations, institutions and State-owned enterprises being the main purchasers and users of sedans.

Article 47 The State encourages individuals to purchase automobiles and will formulate specific policies in accordance with the development of the automotive industry and the change of the market consumption pattern.

Article 48 Neither locality nor department shall interfere, with administration and economic means, in individuals, purchase and use of automobiles from legal source. It is necessary to adopt active measures to provide support and guarantee in facilities and system such as license management, parking lots, filling stations and driver training schools.

Article 49 The automobile enterprises shall determine the price of their civil automobiles independently in accordance with the market demand. But, the State-guided pricing will be adopted on sedans for the time being.

Article 50 The automobile enterprises are encouraged to establish their own marketing systems and after-sale service systems in accordance with the international conventional principles and models.

CHAPTER XI RELEVANT INDUSTRIAL AND SOCIAL SECURITY POLICY

Article 51 In accordance with the demand of the 2000 development program of the automotive industry, the metallurgical, petrochemical, machine- building, electronic, light industrial, textile and building materials departments shall work out overall plans in full supply of metal materials, machinery and equipment, auto electronics, rubber, engineering plastics, textiles and glass to support development of the automotive industry.

Article 52 Railways, transport, posts and telecommunications, power and environment protection departments shall adopt effective measures to keep close ties with automobile enterprises in a bit to provide them with auxiliary services to support development of the pillar automotive industry.

Article 53 Provision of sufficient parking lots must be considered in plans for construction and redevelopment of residential quarters, commercial blocks, hotels, office buildings, public facilities and cultural and recreational places.

Article 54 It is necessary to plan the layout of filling stations and build them gradually in accordance with the local growth trend of automobiles; the renovation and expansion of urban roads should be taken as an important task in the urban planning and implemented timely.

Article 55 From 1995 school year, primary schools shall list education in traffic knowledge in their teaching programs and enhance the traffic sense.

CHAPTER XII INDUSTRIAL POLICIES, PROGRAM AND PROJECT MANAGEMENT

Article 56 The State guides development of the automotive industry through the automotive industry policy and program. All the localities and departments should support development of the automotive industry in accordance with the automotive industry policy and program promulgated by the State Council.

Article 57 The automotive industry policy and development program are formulated and revised by the State Planning Commission, the State Economic and Trade Commission, the Ministry of Machine-Building Industry and other relevant departments and implemented after approval of the State Council.

Article 58 The firms undertaking construction, expansion, renovation of, and Sino foreign joint equity or cooperative ventures and import technology projects of sedans, light-duty automobiles and engines must be the State supported enterprises meeting the requirements of Article 10 of the present policy. Any project in this sector, either under or above the limitations, shall be examined and approved by the State before it is established. Other complete automobile and engine projects shall be examined and approved in accordance with the procedures stipulated by the relevant State provisions on the examination and approval limitations. All the projects examined and approved by localities and departments shall be reported to the State Planning Commission, the State Economic and Trade Commission and the Ministry of Machine-Building Industry for record. Before the end of 1995, the State will not approve new sedan and light-duty automobile assembly projects.

Article 59 The auto part projects complying with the State industrial policies and program, when they can ascertain sales market and construction funds independently and balance production conditions by themselves, may be examined and approved by localities and departments and reported to the State Planning Commission, the State Economic and Trade Commission and the Ministry of Machine-Building Industry for record.

CHAPTER XIII OTHERS

Article 60 The automotive industry management department, following the requirements of the present policy shall cooperate with relevant departments to formulate the relevant technical regulations, management decrees and system governing safety of automobile products, pollution control and energy saving so as to promote implementation of these industrial policies.

Article 61 The context of the present policy shall come into effect on the day of its promulgation and the right of its interpretation resides in the State Planning Commission. Notes:
1. According to the State motor vehicle classification standards [QC/T59-93] promulgated by the State Bureau of Technological Supervision, Class M means passenger automobiles, Class N means trucks and Class L means motorcycles.
2. "Localization" here means the making of products within the People's Republic of China.