China's government should stop “micromanaging” the automotive industry and increase competition between automakers, according to a new report.
The report, from the Chinese Academy of Social Sciences, advised the government to scrap monopolistic policies and endeavour to build a fair and competitive market environment. Currently, many state-owned companies are relying too heavily on foreign technology and government funding, which is at once decreasing innovation and pricing smaller competitors out of the market.
“A fair and competitive market is the most effective mechanism for promoting innovation”, claimed the academy, which provides research to the State Council. The report also advised the government should become a “direct participant” in the industry, and not “an enabler” for large firms.
The recommendations stand in stark contrast to the government’s policy of encouraging mergers and reorganisations, likely to lead eventually to just two or three large domestic car makers. Instead, the report advises more money should be channelled into research and development at local companies, which would fuel innovation and reduce dependence on foreign technology.
Consolidation initiatives are already well under way, as state-owned Dongfeng Motor Corp has announced a 40% purchase of Fujian Motor Industry Group. Fujian Motors, fully controlled by the government of Fujian, will sign the deal for an undisclosed amount.