The Financial Times, September 19, 2012
Click here to read the article at FT.com
by Patti Waldmeir in Shanghai
When it comes to election year trade politics in the US, nothing is easier than to complain about China, an economy sustained by a web of subsidies across a wide range of industries.
Click here to read the article at FT.com
by Patti Waldmeir in Shanghai
When it comes to election year trade politics in the US, nothing is easier than to complain about China, an economy sustained by a web of subsidies across a wide range of industries.
China has long wanted to become a world leader in car and car part exports and has been offering tax and other incentives for years – including cheap credit and land – to domestic auto and auto parts companies. So why complain now?
Beijing has been quick to blame the move announced this week by Washington on the race for the White House.
“In the midst of an election race, the United States chose to announce this news in Ohio, an automobile production area, showing that the US took this step against China out of considerations of electoral politics,” the ministry of commerce said on its website.
The US case hinges on so-called “export bases” for car and car parts, which Washington says hurt US manufacturers and force them to shift production overseas. The Obama administration says these bases violate the prohibition on “export contingent subsidies” that China signed up to when it joined the World Trade Organisation.
“Based on publicly available documents, export bases made at least $1bn in subsidies available to auto and auto-parts exporters in China between 2009-2011,” according to the office of the US Trade Representative.
The export bases are located in 12 cities around China and serve to gather firms ranging from manufacturers to trading companies to training and financial institutions with the aim of facilitating automotive exports. In Shanghai, for example, Anting Shanghai International Automotive City offers preferrential policies on rent and other subsidies. Individual companies are not subsidised, but local governments subsidise spending on services, such as holding exhibitions.
The USTR says these bases “use central and local government funds to provide a variety of export-contingent subsidies to auto and auto parts exporters such as grants, tax preferences and interest rate subsidies”.
Auto market analysts in China say that is all true – and has been for several years.
China’s car exports have risen sharply in recent years, by 50 per cent in 2011 to 850,000 cars, and exports this year are expected to hit 1m. But only 2,252 of those cars went to the US last year: most went to emerging markets.
The jump in exports to those markets “has everything to do with weakening performance at home”, says Mike Dunne, of Dunne & Co, an Asian auto consultancy. Chinese automakers had been losing market share to European and American carmakers for the past few years, so to reach their production targets they had put new emphasis on exports.
Bill Russo, head of Synergistics auto consultancy in Beijing and former head of Chrysler in China, says: “Providing special economic zones ... is pretty standard in China. The legitimate question is: why have they not complained before?”
Additional reporting by Yan Zhang
Beijing has been quick to blame the move announced this week by Washington on the race for the White House.
“In the midst of an election race, the United States chose to announce this news in Ohio, an automobile production area, showing that the US took this step against China out of considerations of electoral politics,” the ministry of commerce said on its website.
The US case hinges on so-called “export bases” for car and car parts, which Washington says hurt US manufacturers and force them to shift production overseas. The Obama administration says these bases violate the prohibition on “export contingent subsidies” that China signed up to when it joined the World Trade Organisation.
“Based on publicly available documents, export bases made at least $1bn in subsidies available to auto and auto-parts exporters in China between 2009-2011,” according to the office of the US Trade Representative.
The export bases are located in 12 cities around China and serve to gather firms ranging from manufacturers to trading companies to training and financial institutions with the aim of facilitating automotive exports. In Shanghai, for example, Anting Shanghai International Automotive City offers preferrential policies on rent and other subsidies. Individual companies are not subsidised, but local governments subsidise spending on services, such as holding exhibitions.
The USTR says these bases “use central and local government funds to provide a variety of export-contingent subsidies to auto and auto parts exporters such as grants, tax preferences and interest rate subsidies”.
Auto market analysts in China say that is all true – and has been for several years.
China’s car exports have risen sharply in recent years, by 50 per cent in 2011 to 850,000 cars, and exports this year are expected to hit 1m. But only 2,252 of those cars went to the US last year: most went to emerging markets.
The jump in exports to those markets “has everything to do with weakening performance at home”, says Mike Dunne, of Dunne & Co, an Asian auto consultancy. Chinese automakers had been losing market share to European and American carmakers for the past few years, so to reach their production targets they had put new emphasis on exports.
Bill Russo, head of Synergistics auto consultancy in Beijing and former head of Chrysler in China, says: “Providing special economic zones ... is pretty standard in China. The legitimate question is: why have they not complained before?”
Additional reporting by Yan Zhang
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