Industrial Impact on Automobiles after China Joined the WTO

Impact on automobiles industrial after China joined the WTO

Changes in quantities lead to changes in qualities. China is now kind of the largest market in the world, and when it is open to the whole world, the whole international market changes a lot. China has joined the WTO on Dec 11, 2001. When 1.3 billion people joined into an open market, there are many people and counties benefit from this event. Car trading is my project. Since china joined into the WTO, everything is expected to increase, like GDP, imports and exports, industrial growth, international trades, etc. Especially, the automobiles industrial is growing fast. And as our neighbor, also the world second largest automobiles produce country, Japan’s car production also should increase as well. However, it almost stays the same for 8 years. It is an important event for China and the whole world to become a member of WTO at the beginning of 21st century. It has opened China's market to the world. The membership of WTO could push China's economy forward and expand China's markets too. Increasing imports and exports, growing GDP, technical development, there are many positives for China. On the other hand, considering the competition from foreign company and techniques, it probably destroy the local firms and factories, especially the car industrial. China’s economy has grown approximately 10% per year over the past 18 years. And in that time, the automobiles industrial has grown fast too. The total output increased from 1627 thousands in 1998 to 5708 thousands in 2005. And imports of automobiles have increased after China joined the WTO. China is currently the largest car market in the world. Since there is such a large market is now open to the world, china’s imports, Japan’s total output of automobiles should increase immediately and quickly right after China became the member of WTO. I assume that after china became the member of WTO, the domestic car industrial of China and its imports has grew sharply and also for the large automobiles export country, such as America, Japan and German, their output for cars and exports should increase sharply as well. In the article "China’s WTO accession impacts on domestic automobile industry—a rudimental approach from the view of scale economy", it said "Though the tariff has been decreased to 25% and quota has been abrogated, China’s automobile industry is still under the protect of some industrial policies, whether it could survive after several years joining in WTO when foreign products flow into China is uncertain." China did a lot to protect domestic companies. And government allow foreign car producer cooperate with local firms. The foreign companies, like Kia, Honda, Volkswagen, brought techniques and production line to local manufactures. They kept the original logo and combined the name with local companies, like "Huachen BMW", "Dongfeng Kia", "Guangzhou Honda". Here is the data analysis. From the table, we can clearly see the development of car industrial in China from 1998 to 2005. Compared with China, Japan did not make a great progress on its automobiles industrial. China increased the total output from 1627 thousand to 5708 thousand in 8 years. And Japan stayed at 1000 thousand level for about 8 years. Also, from the Graph 1, we can see the differences between China and Japan and the huge development in China. What is more, in the Graph 2 which is from the article "China’s WTO accession impacts on domestic automobile industry—a rudimental approach from the view of scale economy", before 2001 the year China joined the WTO, the imports of cars took very few percentage of the whole sales from year 1996 to 2000. And two years after the WTO event, the percentage of car imports took over 20% of the whole year sales in 2003 and 2004. The automobiles industrial of China experienced a "booming" period as I cited from the article from 1998 to 2005. And it still developed continually. The second large car produce country, Japan, had a mild development in 8 years. Moreover, the rate of car imports increase slightly from 17.1% in 1996 to 25.7% in 2004. In my opinion, the reason why the car import increase slowly is the government policy and the protection for the domestic firms. After the WTO events, China made a great progress in total automobiles output and the car imports. However, China joined the WTO seemed to did not affect Japan's automobile industrial. Their total output increased slightly. But Japan still benefit from the techniques selling and enterprise training to the cooperation companies. So, based on the political environment and the protection policy, I think my hypothesis is incorrect. China developed a lot. And as the control country, Japan was not affected by China. The total output almost stayed at the same level before and after China joined the WTO. The question is why the hypothesis is wrong. It is because this is not the first-best world. People lives in a second world, one that includes distortions. There are lots of externalities, government intervention and policy impacts. Those are unavoidable. In the second world, government could interfere as directly as possible. For example, the high tariff and force to cooperate with domestic companies. These could be the reasons why Japan's automobiles industrial was not affected by China joining the WTO. In the conclusion, what China did is to protect the domestic companies after 2001. It lowers the competitions from the foreign companies and force them to co-work with local firms. What we can see is that China's national enterprise still cannot compete with the international brands, like Toyota, Honda, BMW and so on. This is the reason why Chinese government protect them. Once there are some Chinese companies can compete with Japanese cars. I do not think we will need those policies and protections any more. And we will have a pure competition environment in China. At that time, China can start another booming period.