The Development Of The Chinese Automotive Industry: Restrained By Government Interference Or The Greatest Success Story In The World?

This study will determine the success of the development of the Chinese automotive industryand the government influence on this process. This topic is of high significance because theautomotive industry is one of the most important industries in all developed and developingcountries. The auto industry is contributing largely to the overall GDP and employs a bigshare of the workforce in countries like the USA, Japan, Korea, Germany, but also China.Government interference into the auto industry plays an important role in many of these statesamong them China.As the literature shows it is disputable whether the development has been successful until now.Although the total vehicle output has been increasing incredibly, China has not yet become amajor car exporter, which suggests that the competitiveness of the industry is still low. Alsothe domestic Chinese auto market is still dominated by foreign brands. However there isevidence that indicates the exact opposite too. Trucks and other commercial vehicles arelargely produced in China and by Chinese brands. The imported cars are to a large extentproduced with Chinese components. Although exports of vehicles are still weak, the exportsof components are very strong. Also the speed of the development in comparison to othercountries has been strong. Finally large parts of the industry are owned by Chinese whichmeans the development process mostly benefits domestic companies. The second and evenmore controversial issue is government interference in the industry in general and in theautomotive industry in particular. Many researchers believe that inefficiency will occur if thegovernment is interfering in the economy. However in the cases of Japan, Korea, but alsoChina, the automotive industry has seen a strong growth over many decades despite or evenbecause of government intervention.The analysis mainly focuses on examining data as previous studies strongly disagreeespecially on the issue of government interference. The Chinese automotive industry wasanalyzed in comparison to other countries. The main question in the first part is whether theChinese automotive industry developed successfully in comparison to the Chinese economyin general and to other auto industries worldwide. The main indicator that was used todescribe the development was total vehicle output per year among others. To explain thereasons for this development process, the regression analysis finally determined the driversbehind the output growth of the auto industry.It has turned out that this development has in fact been positive and not constrained bygovernment intervention. Still government interference can have a negative impact on certain economic indicators, but in the case of China only on a small scale and not on the entireindustry. The drivers of the output growth were mainly domestic ones like householdexpenditure and technological progress. Many studies that have criticized governmentinterference did not take the whole industry in consideration, but focused on certain indicators,which is why these studies were unable to determine the positive effects of governmentintervention.