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Chinese Car Market

So basically the firms that engage in FDI in China are actually teaching the Chinese how to compete with them in the future.
             Environmental.
             Cities of China like Shanghai and Lanzhou that are large industrial centres are some of the most polluted cities in the world. Still the ratio of cars to people is very low, so it is easily understood that the Chinese government is rather worried about how the environment will be affected by the expected rapid growth in the quantity of cars. As an answer to this problem the Chinese government imposed a 30% consumption tax relief, for cars that satisfy the European II Environment Protection Criteria, in 2001. Since BMW is a German company that very much target the EU market, their cars likely already satisfy these criteria. (news.bbc.co.uk).
             Legal.
             There are several legal issues that can affect foreign car manufacturers entering the Chinese car market. .
             One of the reasons that China does not have a sound working credit system is that the present legal system cannot recover a vehicle if the borrower fails to redeem the loan. However, as mentioned earlier China will take action in order to resolve this issue. .
             Since Chinas accession in the WTO there have been several changes that affects the Chinese car market. Regarding joint ventures, foreign partners' ownership used to be restricted to 50% but this policy has now been abolished. (www.english.peopledaily.com.cn) .
             These market-opening policies are naturally also affecting tariffs and quotas. Tariffs on cars with less than 3-litres engines will be slashed from 70% to 43.8%, while those over 3-litres will see a cut from 80% to 50.7%. By June 2006 tariffs shall be cut to 25% for cars while tariffs for car accessories will have to be cut to 10% by the same time.
             By 2005 the former quota imposed in 2000 fixed at US$ 6 billion will have to be removed. According to austrade.gov.au the local content requirement that at present is a minimum of 40% of parts used in domestic produced cars have to be manufactured regionally.


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