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Chinese Car Makers in ASEAN
Asean Affairs, May 23

How many Chinese vehicle manufacturers are there? Most people would struggle to name more than one, while businesspeople might have heard of one or two more. Yet China Car Forums reveals that there are 45 (http://www.chinacarforums.com/chinese_car_manufacturers.html). Few of these were formed before the beginning of the twenty-first century and all have been competing in China’s increasingly crowded and competitive domestic vehicle markets. Through joint ventures with overseas manufacturers, technical capacity has been transferred to Chinese engineers, as well as the technology necessary to compete in modern markets. Chery Automobile, for example, was formed in 1997 in Wuhu City. It developed co-operative relationships with Britain’s Lotus Engineering, Mitsubishi and leading Italian design firms Bertone and Pininfarina. Now it is preparing to launch vehicles this year in the USA, while also targeting the EU with high performance engines.

Brilliance China Automotive is based in Shenyang in Liaoning and has been working with BMW to produce sedans for the domestic market. It has also developed partnerships with companies such as Porsche, Toyota, Italdesign and Mitsubishi to enable it to produce ever higher quality vehicles. Dozens of others have similar tales to tell. Now and for the past few years, some of the more ambitious of these companies have been not just marketing their products internationally but seeking to produce them overseas as well. Geely International was established in 2002 as the first independent manufacturer in China and with a licence to make minivans. It began exporting in 2003 and, by 2005, was listed on the Hong Kong Stock Exchange. Access to rational capital markets is often regarded as an important part of success for companies based on the mainland and seeking to expand their operations. Now Geely is opening factories in Indonesia, Russia and Ukraine. The company’s cars may already be found throughout Africa, Eastern Europe, the Middle East and South America. Now North American and Western Europe are being targeted for expansion.

Expansion to Southeast Asia certainly makes sense, since the region’s long recovery from 1997 means that vehicle use in numerous categories continues to increase across the region. Locating a factory within ASEAN means tariff costs may be reduced from 30% to 5% and suppliers of a decent quality are much more likely to be located in Thailand rather than China anyway. New Chinese factories are opening it seems on a monthly basis, although generally with little fanfare.

However, the companies do not operate in a vacuum. Where Chinese companies open overseas, they pull a number of supporting industries in their wake. A particular example is that of banks. Chinese investment overseas is increasingly accompanied by the opening of Chinese banks with expertise in dealing with necessary activities and, by and large, stuffed with Chinese executives at the top level. The banks of course now customarily have large amounts of cash and only limited ways of spending it at home. Shoring up overseas markets, in the view of supporting Chinese investment, proves to be a useful way of spending some of that money while diversifying risk and expanding economies of scale and scope. As travelers to Mandalay and the industrial estates around Chiang Rai will testify, when Chinese investments are made, then a significant number of other related industries will also pop up sooner or later.

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