China Exports Capital, Not Cars
Remember how everybody was scared by cheap Chinese car imports? It’s not happening. Leading executives of Chinese car companies have pretty much given up hope for major car exports in the near future. Instead of exporting cars, China’s auto makers should think about exporting technology and capital to get into foreign markets, said Xu Heyi, chairman of BAIC to China Daily. “This is an inevitable change for Chinese auto makers who want to go global,” Xu said. “Products export is a short-sighted behavior.”
That behavior clearly has been without merit so far. According to data published by the China Auto Manufacturers Association CAAM, China exported 297,100 units in the first five months of 2011. That is about 3 percent of total production. And an embarrassment for the export powerhouse China. China imports more cars than it exports. I the meantime, China can console itself with the fact that it exports 70 percent of the world’s sex toys.
Instead of exporting, BAIC is looking towards investments into foreign markets. BAIC announced Tuesday the establishment of a joint venture with Russia’s AMS Auto. It is the first joint venture formed by Chinese and Russian auto makers since the global financial crisis.
After China and India, Russia is the fastest-growing auto market in the world and is expected to become the largest new vehicle market in Europe this year.
Even that joint venture won’t flood Russia with Chinese cars. It is about trucks. BAIC has entered a joint venture to produce light, medium and heavy cargo trucks to be sold under the BAW brand in Russia.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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The commerial for Great Wall X240 I saw on television last night and the Chery J1 I can buy at the admittedly few dealers says otherwise.
I do not think any Chinese manufacturer is serious about breaking into foreign markets, because China is the world's largest auto market for the foreseeable future. This is entirely different from Japan and Korean car makers, who must export because the domestic markets are not large enough.
The Germans and Japanese built export markets for cars because they generate substantial foreign cash inflows and high-wage employment. In time, the Chinese will want the same thing. Right now, the need isn't pressing for them, given their ability to generate massive trade surpluses with lower value goods. But as their wage rates increase and reduce their wage competitiveness, it will be in their best interest to create jobs that create value-added products that can be sold abroad even as wage rates at home are increasing. They take the long view, and I wouldn't count them out. Give them a few decades, and things will start to look different. The path that they'll use is unclear, but somehow, they're going to be on it.
By "exporting capital" I suppose he means buying foreign companies, which makes sense. However, what does he mean by "exporting technology"? Stick shifts with integrated sex toys? Nuclear-powered Wankel engines?