China'sis Booming

Lower tariffs are set to encourage a Chinese export boom in auto parts and complete vehicles - and also help to reduce the trade imbalance.

China's fast-growing automotive industry makes up only a tiny part of overall exports - but that is set to change.

The government is expected to boost auto exports as part of the nation's policy to narrow the trade imbalance.

According to the Ministry of Commerce, China recorded exports of US$969 billion in 2006, compared with imports of US$792 billion, netting a massive trade surplus of US$177 billion.

To restructure its exports, the nation has cut export tariff rebates on raw materials and energy-consuming products while offering higher rates for high-tech and processed agricultural products.

And that means good news for Chinese auto makers.

Last year, China's total exports of automotive products grew 42.7 percent to US$28.1 billion, according to the China Association of Automotive Manufacturers.

Exports of automotive parts and components reached US$21.5 billion, far beyond the US$12 billion projection by Ministry of Commerce in 2005.

In the future, parts exports are expected to grow aggressively by 20 percent annually, as global auto makers, including General Motors Corp, Ford Motor Co, Volkswagen AG, Toyota Motor Corp, and DaimlerChrysler AG, ramp up their parts-sourcing operations in China.

"All of these original equipment manufacturers have set up sourcing operations in China, and all have expressed their desire to source billions of dollars of more parts in the coming years," said Timothy Dunne, analyst at Automotive Resources Asia Ltd (ARA), a division of J.D. Power and Associates, in a recent report.

The vast majority of these parts were for aftermarket applications, and 60 percent of the total spend was for chassis/drivetrain and electrical/electronic parts.
 

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