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Chinas Economic Boom: Automobile Industry - Essay Example

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This paper talks about economic reasons behind the recent boom in the automotive industry of China. It is argued in the essay that Chinese automobile industry boom was the result of the implementation of the socialist market regulation by government…
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Chinas Economic Boom: Automobile Industry
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Chinas Economic Boom: Automobile Industry

Download file to see previous pages... This essay offers a comprehensive review of the rapid development of the Chinese automotive industry and the forces that stipulated that growth.
The institutional ambience of China has been changing steadily from command economy to managed market economy. Earlier the auto industry of China was completely under the direct supervision of the command economy. The country experienced command economy prior to 1978 and stern government control over auto industry in the early 1980s. From the mid 1980s China began experiencing institutional reforms when the economic decision making powers were not just restricted to central government. The decentralization of planning power led to competitions among the provinces.
The enlarged inflow of FDI (Foreign Direct Investment) from various MNCs (Multinational Companies) contributed immensely to the spatial transformations of Chinese auto industries.
There occurred a rapid increase in the demand of light vehicles and cars. Due to the excess demand over supply of motor vehicles the industry experienced diseconomies of scale. Low technical know-how along with less variety of models and low production capacity existed in industry.
Previously majority of China’s auto industry’s production used to be chiefly goods vehicles like trucks and vans. Early 1980s marked the boost in manufacture of light cars and heavy trucks. The number of imported cars in the country was far ahead of the domestic cars. Realizing this huge domestic demand for cars the Chinese government decided to expand car production ...Download file to see next pagesRead More
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