An Emerging Market: China's Automobile Industry
China’s Automobile Industry
Where is the world’s largest untapped market for the auto industry? The answer is China, of course. It is following the same path to success that South Korean automakers took in the 1980’s. Now that China has joined the World Trade Organization (WTO), the elimination of trade barriers provides a great opportunity for foreign companies. China is an emerging market, a country making an effort to change and improve its economy with the goal of raising its performance to that of the world’s more advanced nations.
We’ll begin by analyzing the role of regional economic integration in Asia, the Asian Pacific Economic Cooperation (APEC). Then we’ll compare and contrast some of the economic development stages of the surrounding countries and the effects of the economic development for global business. We’ll also discuss the benefits of some of the major drivers of globalization in the Asian region. And finally it will be determined why the automobile industry is one of the leading industries that the Chinese government is aiming to develop in the future.
Role of Regional Economic Integration
What do we mean by regional economic integration? Our textbook, International Business, defines it as “agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other.”(p.232).
There have been few significant attempts at regional economic integration outside of Western Europe and the Americas. The two most significant groups are the Association of Southeast Asian Nations (ASEAN) and the Asian Pacific Economic Cooperation (APEC). Both have emerged as the beginning of a potential free trade region (Hill, C.W.L., p. 253).
APEC was founded in 1990 at the suggestion of Australia. It currently has eighteen member states including the United States, Japan, and China. The eighteen member states account for half of the world’s GNP, 40% of world trade, and most of the growth in the world economy (Hill, p. 253). APEC’s goal was to increase multilateral cooperation in view of the economic rise of the Pacific nations and the growing interdependence within the region (Hill, p.253). The United States supported APEC because it believed that is may be a possible strategy for heading off any moves to create Asian groupings from which the U.S. might be excluded.
Economic Development
In 2002, the outlook of the APEC economy was reported to be optimistic (People’s Daily, October 2002) and said that Asian developing members will continue to grow with strong exports and industrial production in the coming year. China and Vietnam expected to register 7% of the GDP growth in 2002. In a document titled, “The 2002 APEC Economic Outlook”, it stated that China’s economic condition remained healthy in 2002 and should remain so throughout 2003. APEC contributes that to the rebounding private demand and big boost from the government sector. Because of China’s entry into the WTO it improved its position to induce foreign direct investment (FDI) in China, which would also improve the short-term economic [next page]