from Follow the Money

Washington Post v. New York Times on China’s auto exports

October 19, 2006

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Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

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Post: Bullish

Times: Bearish

Actually, it isn’t that hard to reconcile the two stories.   The Post focuses on auto parts exports.   Keith Bradsher of the Times focuses on exports of Chinese-made automobiles by Chinese-owned firms.   There is no reason why their fates would be all that closely tied together. 

China – assuming it can compete with India – is likely to be a force in the parts business long before Chinese-owned firms are selling lots of cars in the US.    Blustein and Goodman in the Post: 

“China's rapidly growing auto industry used to depend heavily on imported components, but last year for the first time the country exported more auto parts than it bought from abroad. Sales to the U.S. market have leapt 39 percent, to $5.4 billion in 2005. Worldwide, China has set a goal of exporting $70 billion worth of parts by 2010--a seven-fold increase from last year's level.”

And the fate of China’s auto sector isn’t necessarily tied to the fate of Chinese-owned auto firms.  Honda is exporting Chinese-made cars to Europe.  The RMB/ euro presumably makes China an even more attractive base for exporting to Europe than to the US …

That is where things get interesting though.  China’s success in many other areas has been based on its willingness to be an export base for MNCs.   That is one potential strategy for China in the auto sector.  But China’s government has made it clear that it also wants to develop and grow its own MNCs, not just be a workshop doing the assembly work that generates big profits for others.   It wants to grow a Chinese Honda, a Chinese Toyota, and Chinese Hyundai – not to (just) be an export platform for Honda, Toyota, Hyundai, Ford, GM and a host of parts producers.    That goal, it seems, may conflict with the goal of exporting lots of cars quickly.

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