China's auto industry unaffected by WTO ruling

Shanghai, July 23 (Gasgoo.com) China's complete car and auto parts industry won't be affected much by WTO's recent ruling against China in a dispute over car parts, as the industry has already benefited a lot from the government's existing regulation, an industry analyst familiar with the case said.

The WTO rules last Friday that China's trade practices to tax imports of auto parts at the same rate as imports of finished cars if the value of imported parts in the assembled vehicle exceeds 60 percent are illegal, siding with the United States, the European Union and Canada in the case.

Chen Guangzu, an expert from China's National Automotive Industry Consulting and Development Corp., said the ruling is not necessarily a bad news to China's domestic auto industry. "Foreign automakers have already had a relatively high local content level through local component sourcing, so they may not change much of their business style to rely on imports," he noted.

According to Beijing Youth Daily, the regulation, in place since 2005, has delivered a heavy blow to those foreign manufacturers who hope to evade higher tariffs for finished cars by importing vehicles in pieces and then assembling them.

A news report from the Associated Press said that in 2005, the United States had a $1.6 billion auto parts trade deficit with China. That jumped to $2.2 billion in 2006 and $2.9 billion in 2007. In the first five months of 2008, the auto parts deficit is up 15 percent from one year earlier.

In addition, the regulation has prompted foreign companies to transfer technologies to their Chinese joint ventures and increase procurement spending in China. It has also won a precious period of time for domestic companies to continuously retool themselves to meet challenges.