Another Curb for Government Car Consumption

Another Curb for Government Car Consumption

In February China’s Ministry of Industry and Information Technology issued a draft list of vehicles for government purchase. According to this draft, vehicles for official use must be chosen from domestic branded products, and even joint-venture brands are not included in the list.

In China, government departments and institutions for public affairs have budgets to purchase cars for of fi cial use. The expenditure on these government cars in some places has been increasing, becoming a huge burden on local fi nances. Furthermore, some of fi cials are inclined to buy luxury cars and use those cars for private affairs. It is estimated that China now has at least 3 million government cars,spending no less than 300 billion yuan ($47.6 billion) on them each year.

The extravagant consumption on government cars and the waste of public resources it causes have been attacked by the public for a long time. To handle this problem, the Central Government has been deepening the reform of government cars, including cutting the permitted number and the budget. According to a survey conducted byThe Beijing Newsnewspaper, more than half of the respondents support purchasing domestic branded cars for official use, because domestic branded cars are much cheaper than foreign branded ones of the same type. The following are excerpts of some views on the Central Government’s plan to exclude foreign branded cars for government car purchases.

Shu Shengxiang (China Youth Daily):The highlight of this draft list is that all cars must be domestic brands. It’s not the so-called trade protectionism, but a common practice in auto manufacturing countries. China is trying to act in an international way.

Last year, Chinese authorities issued new regulations on government car purchases,saying that only those auto manufacturers whose spending on research and development accounts for no less than 3 percent of their major revenues could be quali fi ed to participate in the bid for government car purchases.For joint ventures, most of their products are just assembled in China with no redesign for the Chinese market, and thus it’s natural for these enterprises to be excluded in the list.

The Central Government issued three important regulations on government car purchases in 1994, 1999 and 2004 respectively, all stressing the importance of choosing domestic cars. The fact is, these regulations have never been put into effective implementation. As a result, the proportion of domestic cars is extremely low in overall government purchasing. Therefore, to demand government departments buy domestic cars is actually an effort to put into real practice the existing regulations.

Through government purchasing, China’s domestic auto manufacturers will sell more cars and more importantly, the authorities are setting a good example for society. We don’t want to see a situation that the authorities issue various documents and plans to support domestic auto industry and encourage the public to buy lowemission domestic cars, while government departments purchase luxury foreign branded cars. If the government means to promote the growth of a certain industry, or it means to encourage certain consumption habits, government purchase is a very important channel to realize this objective.

Domestic cars are usually much cheaper than foreign cars, so the draft list will effectively restrain government departments from overspending on car purchases. As a matter of fact, even if the list includes the purchase of only a small range of foreign brands, Chinese cars will still be discriminated against and the expenditure on government cars will still be very high. However, when government departments are all restricted to buying domestic cars, they will set an example for the whole society, which will be really bene fi cial for the domestic auto industry.

Yang Zhongyang (Economic Daily):For many years, the public has been unsatisfi ed with government departments’ excessive preference for foreign cars. China’s own auto brands have made great headway in recent years, and thus the voices asking government departments to use domestic cars are growing louder. The Central Government has also issued documents demanding more use of domestic cars in government departments.But the fact is that foreign cars still make up the lion’s share of China’s government car purchases. For example, the cars purchased in 2009-10 include joint-venture brands such as Volkswagen Jetta, Toyota Camry, General Motors Buick, and even luxury brands like Audi, BMW and Mercedes Benz. However,China’s own auto brands did not bene fi t from the government car purchases.

It’s undeniable that in recent years domestic cars have made big progress in quality, credibility and various technical indexes. According to J. D.Power’s investigation into the quality of Chinese cars, although there is still a gap between Chinese domestic cars and joint-venture cars in terms of quality, the malfunction rate per 100 Chinese vehicles has dropped to the level of joint-venture cars in 2004. What is embarrassing is that although domestic cars are of the same quality, and are much cheaper than joint ventures’ products for the same type, they are still not as popular as foreign branded cars. Yin Mingshan, Board Chairman of Lifan Auto in southwest China’s Chongqing Municipality, once said, “In terms of quality, if foreign cars can score 100, Lifan’s cars and motorbikes can score 90, but when foreign cars can sell for 1 million yuan ($150,873),ours even can’t sell at 100,000 yuan ($15,873).”China’s domestic auto brands are struggling very hard in fi erce market competition.

Why does this happen? First, we have to admit that China’s auto brands are still not competitive enough. They have low research and development capability, insufficient technology and poor brand loyalty. However,these are not the main problem. The deeprooted reason is that most Chinese people have blind faith in foreign things, particularly for cars. Most people have such a principle,“If I buy a domestic car, even if it is a good car, it’s a faceless thing. If I have enough money, I must buy a foreign car.” Worse still,blind faith in foreign products not only exists among ordinary people, but also among many government of fi cials.

What government officials do can be quite influential to the public. If officials always choose foreign cars as government cars, it’s not only a waste of taxpayers’ money, but more importantly, they are strengthening some people’s blind faith in foreign things and weakening the public’s perception of domestic brands.

No other country in the world has as many government cars as China does, and thus the government’s choice of cars has a farreaching in fl uence on China’s domestic auto industry. How to formulate a government car purchase standard suitable for China’s national condition not only is testing the Central Government’s wisdom, but also will affect the future development of China’s auto industry.

The good news is that this new draft list,within the framework of WTO international trade rules, restricts government departments to buying domestic cars. If this policy is well implemented, it will provide rational guidance for the public in car consumption. When Chinese cars sell well, not only the Chinese consumers but also consumers in other countries will begin to like and appreciate Chinese cars.

Wang Yunqing (Guangzhou Daily): This policy is actually coming a bit late. It should have come fi ve years ago when China’s domestic auto production just started to develop. Anyway, it’s better than never. China’s domestic auto manufacturing was struggling very hard throughout 2011, so the new policy is undoubtedly a timely help to promote this industry. As for how much this policy can help, it depends on these auto brands’ own efforts.

Dong Baoqing (Automobile): It’s good for the authorities to provide guidance in government department car purchasing.This measure has been adopted by some other countries, such as the United States.Available on the list are all China’s domestic brands. The only thing that worries us is that the government’s policy might make some companies reluctant to make further progress in research and development. In this way, it actually is harming them in the long run.

Ding Zhaolin (www.cnr.cn/china): It’s good that China’s government departments are required to buy domestic cars. For so many years, the public and the media have been calling for government departments to use domestic cars, and now their calls are responded. But there are two problems that we have to take into consideration. First, we need a definition of the “domestic cars.” Second,we need to ensure the new car purchase regulation is implemented.

The priority now is how to enforce the new regulation. China never lacks good ideas and objectives, but implementation is always a bit dif fi cult. As for how to make sure domestic cars are widely used by the government, we need a strong supervisory system, including efforts not only of the government, but also of the media and the public. Without an effective supervisory system to ensure the implementation of the car purchase regulation, maybe the good objectives will never come true.