For many years the automobile industry has been singled out for special treatment by all levels of government. According to Wei [2002], the traditional forms of special treatment are favorable financing, e.g. open ended, no or low interest loans, favorable regulations, assistance in restructuring and restrictions on foreign participation. .
The problems inherent in a special treatment approach are compounded by regional protectionism. A study by Wei [2002] indicates that provincial and municipal government use regional protectionism to limit the inflow of potentially competing goods or otherwise protect the interests of regional companies. Local officials use regional protectionism to accomplish their personal political objectives.[Wei, 2002]. At the moment not a single China's automobile manufacturer has a national market. As long as regional protectionism persists, none of China's automobile manufacturers can expect to advance beyond regional market status. .
Another layer of complexity to the issues of automobile industry is introduced by the emergence of environmental protection. Wei [2002] reports that in terms of standard measures of air quality, the majority of Chinese large cities are to be among the worst in the world. Mobile sources, i.e. trucks and cars, were correctly viewed to be the principal reasons. Research by Wei [2002] suggests that over the past recent years efforts in improving the environment has boomed dramatically especially in central urban areas. Moreover, the focus of efforts in urban pollution control has gradually moved more towards trucks and cars. Wei [2002] comments that ways to deal with problems of automobile pollution generally include restrictions on driving and efforts to innovate cleaner combustion, through cleaner engines, cleaner fuel or both. .
These inner constraints are companied by outer challenges. China's automobile industry will be greatly affected by China's joining WTO.
