China's Gamble Advantage And Disadvantage In Joint-stock Automobile Industry Chain

Automobile industry of China began in the 1950's. The first automobile work was founded in 1953 for the economic development of China then, and the No.2 automobile work was set up in 1970's. The two works accordingly laid the foundations of automobile industry of China. Since the reform and opening policies was introduced, the mode of act blindly has not been able to meet the needs of the rapid development of automobile industry in China. We would quickly acquire advanced technology and management knowledge to quicken the development of automobile industry of our country through the cooperation and joint venture with transnational corporations.Since the beginning of 1980's, the automobile industry of China has adopted the strategy of joint venture. The strategy was we obtained foreign advanced technology at the cost of part of market. At the same time, Chinese government laid down automobile industrial policies and set up tariff barrier and non-tariff barrier to protect national automobile industry. More than twenty years have passed since the strategy was performed, we always introduced old technology and equipment because of lacking the terms of the introduction prohibited of old technology. The core technology was strictly controlled within foreign management in daily cooperation of joint venture. We have not really obtained know-how ownership of transnational corporations and formed neither independent capacity of development nor independent intellectual property rights. There is not still a well-known brand in international market until now.At the beginning, China controlled domestic sales and service network that had territorial character because the foreign participant was not familiar with Chinese market. As a result, the foreign participant tried to transfer profit by other means. For example, joint venture had to purchase the parts from the foreign suppliers that were designated by the foreign participant and import core parts and components from the country of the foreign part. Furthermore, the foreign participant asked for highcharges for technology transfer.China's policy restrictions would gradually be eliminated after China's entry into WTO. Controlling sale and service network have been main purpose of the foreign participant because of this cause that if one had laid hold of sale and service network, he could control all the lifelines of China automobile market. We have not still obtained core technology, although the Chinese side has offered the foreign side the market so far. And the sale and service network as the bargaining counter has also been threatened by the foreign side.This paper analyzes more deeply the whole process of the value chain of automobile industry in industrial organization in China. The whole process includes research and development, investment, procurement, production, distribution and service. We conclude the Chinese side must not continue the old way of market exchanging technology but should strengthen our sale and service network that is our advantage to fill up weakness. We will gamble with the foreign side against the advantage of market channels to gain more technology.