Empirical Study On Factors Effecting The Concentration Of China’s Automobile Industry

This paper focuses on China’s automobile industry as the object. Because of its high degree of interindustry association and the strong ripple effects, automobile industry is regarded as a pillar industry by many countries and regions and its development is enjoying a priority. Meanwhile, automobile industry is also a capital-and technology-intensive industry, characteristic of a scale economy. On the threshold of the21st Century, development of China’s automobile industry took acceleration thanks to increasing demands of the market and the government’s encouraging policies.2009saw a national production of13.7910million units, making China the world’s NO.1auto-producer, and in2013the amount rose to the number of22.1168million, by which China leaded the world consecutively for the fifth year. In spite of this, China is yet not an auto-manufacturing power; the industrial concentration is evidently too low, compared with the world’s major power. The fact of the industrial concentration being too low is causing at least two problems:First, most auto enterprises are below scale, unable to bring down product cost. Second, technology innovation is thus hindered. Both problems having negative effect on the overall competitiveness of China’s automobile industry, it is of great practical importance to have a study on how to improve the concentration of China’s automobile industry, under the background that the competition is becoming heater among automobile industries home and overseas and that the risk of production capacity surplus further increasing.Based on qualitative analysis on the present conditions of China’s automobile industrial concentration and the history of it, and borrowing ideas from the developing trends of that of the world’s major powers, this paper concludes that the market structure of China’s automobile industry should develop towards an extremely high-oligopoly market structure. Then, based on qualitative analysis on factors affecting China’s automobile industrial concentration, this paper further makes a quantitative analysis on them, with the methods of yearbook static analyzing, cointegration and VAR model. The empirical results show:That the market-capacity growth-rate of China’s automobile industry has tiny effect on industrial concentration. The level of product differentiation exercises a negative impact on industrial concentration. That enterprise sizes and entry barrier exercise a positive impact on industrial concentration. That FDI to a certain degree improves industrial concentration. At last, based on the above conclusions, this paper puts forward policy proposals for further improving China’s automobile industrial concentration:First, to accelerate the merging and reorganization in the industry, enlarging the enterprise sizes. Second, to establish effectual entry and exit barriers in the industry. Third, to continue the introduction of foreign capital, rationalizing the market structure of the industry.