Study On The Vertical Integration Of Chinese Automotive Industry

From 1959 first Chinese a Red Flag Brand car birth to today, Chinese auto industry has traversed over 50 years. During the 50 years'development, Chinese automobile industry has become national economy pillar industry and formed relatively complete automotive product series and production institutional. Nowadays,China already became the world second biggest production and marketing country, but the Chinese automobile industry still has many problems, the longitudinal integrated degree oversized is one of them.This article carried on the outline to the domestic and foreign scholars in view of the longitudinal integration fundamental research fellow up a clue of auto industry development. We conducted that whether auto companies choose vertical integration is actually a company boundary selection problem, by measuring the cost of all aspects of corporate earnings, auto companies will preference arrangements according to their business strategies and governance structure of trade, in order to get the enterprise's own profit maximization,.vertical integration is a way of the corporate governance structure,. Auto company transact inter-enterprise business into insider trading by vertical integration,. Insider trading mainly rely on the enterprises authority to coordinate.Then, this paper studing on the behavior of Chinese auto industry vertical integration.Firstly, the analysis considered that the Chinese auto industry vertical integration is reasonable, it is because:first, incomplete industry value chain provides a larger space for for Chinese vertical integration's development; second, the market economy imperfect development make the high cost of making market transactions. Secondly, by theoretical analysis we considered that the special existence of vertical integration in China was decided by the ambiguous property rights and mixture competition.Because of the ambiguous property right of Chinese auto companies, corporate management in the enterprise on the border of choice will deviate from the goal of maximizing profits, a vertically integrated managemen may become a way to achieve individual utility maximization. In addition, most the leaders of Chinese auto companies have official position, by expanding the size of the business to increase their own political advancement chips has become an important factor in decision-making. Economic and political mixing competition further intensified this effect. As the automotive industry with high relevance can effectively promoted the development of the local industrial economy, increasing employment, so district officials expect that the automotive industry can drive local economic development. And in order to highlight their work performance in the promotion, local officials will take some protection in order to nurture local enterprises, This can cause some problems such as the market area segmentation, repeated construction and so on,which affect the automotive industrial efficiency.Finally, we used the DEA model, regression model to verify the theoretical analysis. This paper also measured the degree of Chinese auto vertical integration from 1994 to 2004 by using 10 model. This article conclusion thought Chinese longitudinal integrated question has the historical inheritance, the longitudinal integrated promoted the development of automobile industry in the initial period of the development of Chinese automobile industry, but with the expanding and the global integration of Chinese automobile industry, current longitudinal integration degree of chinese automobile industry has been already difficult keeping up with the world's auto market trail, the longitudinal integrated degree oversized already affected the development of chinese automobile industry.According to the analysis and conclusions of this paper we put forward policy recommendations.