The following thesis will answer the question: Did China develop a competitive domestic automotive industry?
Therefore, the rest of the bachelor thesis is structured as follows: The next section will give an overview of the history and the current market structure of the Chinese automotive industry. The second section contains a literature review of the theory and the empiricism of spillover effects originating from Joint Ventures with foreign enterprises and Foreign Direct Investment.
Subsequently, in the third section, the related literature is applied on the case of the Chinese automotive industry. The fourth section presents an application of the infant industry protection argument on the Chinese automotive industry. The fifth section includes an analysis of trade data in order to access the competitiveness of the Chinese automotive industry. Afterwards, there will be a conclusion and an outlook of the possible future developments of the Chinese automotive industry.
Since the beginning of economic reforms in China, protection, Joint Ventures, and Foreign Direct Investment played a significant role in the Chinese economic policy to promote industrial development. This is also the case for one of the global most important industries; the automotive industry. The automotive industry is a pillar industry with a vast number of linkages throughout the economy and plays a major role in driving China's economic growth and in ensuring employment.
The Chinese government followed the idea of an infant industry protection argument and imposed tariffs and quotas on automobiles and automobile components to promote the development of the automotive industry. Further, the policymakers strived for spillovers originating from foreign Joint Venture partners and Foreign Direct Investment.
Like other Chinese industries, the automotive industry experienced massive growth over the last four decades, making China, since 2008, the economy with the largest automobile output globally, surpassing Germany, the US, and Japan. However, there does not exist a single Chinese automobile brand, which can sell more than a few of its Chinese branded cars in the markets of developed countries.
This situation raises some questions about the real strength and competitiveness of the Chinese automotive industry.
Table of Contents
1 Introduction
2 History of the Chinese Automotive Industry
The First Stage of Development
Governmental Discontentment and Policy Measures of the 1990s
The Second Stage of Development
Period after the Great Recession of 2008
Fostering of New Energy Vehicles and the Rise of Private Companies
Current Structure of the Chinese Automotive Industry
Component Suppliers Operating in the Chinese Automotive Market
3 The Special Role of Joint Ventures and Spillovers
The Theory behind Spillovers
Determinants of FDI Spillovers
Actual Strength of Spillovers in China
Actual Strength of Spillover Effects on Productivity
4 The Infant Industry Argument
Theory Behind the Infant Industry Argument
Infant Industry Argument applied to the Chinese Automotive Industry
Infant Industry Protection with Local Monopolies
Evaluating the Protection of the Chinese Automotive Industry
5 Assessing the Competitiveness of the Chinese Automotive Industry
Exports as a Measure for Competitiveness
Empirical Findings
Comparison with Global Competitors
6 Conclusion and Outlook
Objective and Thematic Scope
This bachelor thesis investigates whether China has succeeded in developing a competitive domestic automotive industry despite its heavy reliance on state intervention, protectionist measures, and foreign technology through Joint Ventures. The research evaluates the effectiveness of these policies by analyzing historical developments, the impact of spillover effects on innovation and productivity, and the industry's competitiveness through export market share data.
- Historical evolution of the Chinese automotive sector and industrial policy.
- Theoretical and empirical analysis of FDI-induced spillover effects.
- Application of the infant industry argument to the Chinese market.
- Quantitative assessment of export competitiveness across different product segments.
- The specific role and performance of component suppliers versus vehicle manufacturers.
Excerpt from the Book
Component Suppliers Operating in the Chinese Automotive Market
Component suppliers are a substantial part of the automotive industry. Automobiles can include more than 10 000 parts and components and in terms of value-added 66 percent to 75 percent of the vehicle content is bought by the vehicle manufacturers from their suppliers (Holweg and Pil, 2004). Hence, the structure of the market for automobile input goods is important. Following Holweg et al. in 2008, one can divide the component suppliers operating in China into four major groups; Firstly, suppliers affiliated with large local SOEs, secondly, small Chinese component manufacturers, thirdly, enterprises which produce as a JV with foreign partners or wholly foreign-owned subsidiaries of MNEs7, and lastly, large Chinese independent part and component enterprises.
The first two groups of component suppliers are minor important because both groups only secure their business by partnering with large local automobile manufacturers. They do not have R&D capabilities, do not invest in new technologies or products and do not export their products. (Holweg et al., 2008)
The third and fourth group have huge market shares on the Chinese market and are the driving forces behind the development in total output and export of Chinese automobile components. The third group has R&D capabilities in foreign countries and China, and since the early 2000s, they export a considerable number of automobile components to other countries. However, these enterprises are reliant on their foreign partner or completely foreign owned. The fourth group is more independent from foreign expertise and contains large leading Chinese component suppliers such as the Wanxiang Group and the Torch Automobile Group. These enterprises are commonly SOEs and have self-reliant strategies for R&D and management. Further, they have a strong position in the domestic market and since they are large, they benefit from economies of scale. (Holweg et al., 2008)
Summary of Chapters
1 Introduction: Introduces the role of protectionism, Joint Ventures, and FDI in the Chinese automotive industry and outlines the thesis's core research question regarding the development of a competitive domestic industry.
2 History of the Chinese Automotive Industry: Provides an overview of the industry's development from the post-1978 reforms to the current era, including key policy phases and the rise of private companies and NEVs.
3 The Special Role of Joint Ventures and Spillovers: Reviews the theory of spillover effects and applies it to the Chinese context, assessing how FDI impacts local R&D, productivity, and innovation capabilities.
4 The Infant Industry Argument: Explains the theoretical framework of infant industry protection and evaluates the costs and benefits of China’s protective tariffs and quotas on the automotive sector.
5 Assessing the Competitiveness of the Chinese Automotive Industry: Uses trade data and export market shares to empirically measure the industrial competitiveness of Chinese automobiles and components against global competitors.
6 Conclusion and Outlook: Synthesizes the findings, concluding that while China has achieved massive output growth, its competitive strength is uneven, particularly highlighting the superior competitiveness of component suppliers over full-vehicle manufacturers.
Keywords
China, Automotive Industry, Foreign Direct Investment, Joint Ventures, Spillovers, Infant Industry Argument, Export Competitiveness, Trade Policy, R&D, New Energy Vehicles, Industrial Policy, Market Structure, Component Suppliers, Total Factor Productivity, Trade Data.
Frequently Asked Questions
What is the core focus of this bachelor thesis?
The thesis examines whether China has succeeded in building a globally competitive domestic automotive industry, exploring the impact of state-led interventions and foreign cooperation.
Which key industries are analyzed?
The analysis covers the Chinese automotive sector as a whole, specifically distinguishing between full-vehicle manufacturers and the automobile components supply industry.
What is the primary research question?
The research question is: "Did China develop a competitive domestic automotive industry?"
Which scientific methods are utilized?
The author uses a literature review to explore FDI and spillover theories, an application of the infant industry argument model, and an empirical analysis of export market shares using UN COMTRADE data.
What topics are covered in the main body?
The main body covers the historical timeline of the industry, the theoretical impact of Joint Ventures on technology transfer, the costs of protectionism, and a quantitative assessment of export performance.
Which keywords define this work?
The work is defined by terms such as automotive industry, FDI, infant industry protection, spillovers, competitiveness, and export market share.
How do component suppliers differ from car manufacturers in terms of competitiveness?
The study finds that while full-vehicle manufacturers still struggle to compete in high-end global markets, Chinese component suppliers have achieved significantly higher levels of competitiveness and integration into global value chains.
What role does the "Infant Industry Argument" play in the author's analysis?
It provides the theoretical justification for the high tariffs China imposed in its early developmental stages, though the author highlights the trade-off between domestic protection and consumer costs.
Are Chinese New Energy Vehicles (NEVs) mentioned in the analysis?
Yes, the author highlights NEVs as a strategic pivot for Chinese policymakers to bypass traditional combustion engine shortcomings and establish a pioneer position in global markets.
- Arbeit zitieren
- Joshua Karcher (Autor:in), 2018, The Chinese Automotive Industry. Competitiveness in Comparison with Global Competitors, München, GRIN Verlag, https://www.grin.com/document/496939
