Dongfeng Motor Corporation, one of China's automobile giants, has set up the country's first joint-venture auto R&D center with Nissan of Japan. The move follows the diesel motor R&D center set up by Dongfeng and the Germany-based Commings earlier last year.

"To research and develop new automobile technologies will be an effective way for manufacturers to share profits in China," General Manager of Dongfeng Miao Xu said recently.

Miao said more and more automobile manufactures have realized that China is turning into a global auto R&D center, in addition to a sales center.

When China's auto market slowed in May, 2004 and the prices of cars kept dropping, world auto giants increased their investment in research and development in the country.

US-based General Motors added 2.1 billion yuan (254 million US dollars) to its auto technical center in Shanghai in June last year, and Japan's Toyota Motor opened its two auto R&D centers in Shanghai and Guangzhou last year.

Germany's Volkswagenwerk AG also increased investment to its R& D center in China to which it has input 1.2 billion yuan (US$145 million).

The tide of investment also flooded the auto parts production sector in China. In 2004, five overseas auto parts producers opened branches in Shanghai, with their total investment exceeding 400 million yuan (US$48 million dollars).

At the beginning of this century, China was described as the " largest and the last virgin auto market in the world."

Experts forecast that by 2005, about 42 million Chinese families will afford to purchase cars. In 2025, China is expected to take the place of the United States as the world's largest car consumer.

In 2001, 750,000 cars were sold in China. The next year, the number jumped to 1.2 million; it topped two million in 2003.

In the first five months last year, China maintained a 40-percent monthly increase of auto sales. But since July, the sales increase suddenly dropped to zero as a price war broke out among the country's auto manufacturers.

Experts said the price war marked the end of a history of huge profits in China's auto market.

After twenty years of development, China's auto market is still controlled by auto giants from Germany, the United States and Japan. Domestic manufacturers produce poorer quality cars, say experts.

Starting in 2005, China will cancel quotas for importing cars from foreign countries and continue to lower import tariffs on automobiles. Customs sources said by July 1st, 2006, the import tariff on cars will drop to 25 percent, and the tariff on parts will be dropped to 10 percent.

Experts said the policy will greatly benefit the overseas auto giants in China and their moves to strengthen R&D sector will also help them expand market in China.

Experts then urged domestic auto manufacturers to take the opportunity to cooperate with overseas partners in research and development and try to produce more cars adaptable to the China market in the future.

According to a blueprint for national automobile development in China's 11th Five-Year Plan period (2006-2010), China will make the automobile industry a pillar of the national economy in the coming six years. The country expects to become one of the world's top three automakers by 2010.

By 2010, the industrial added-value of the automobile sector will make up five percent of China's gross domestic product, while the sector's export value is scheduled to surpass US$50 billion, the development blueprint predicts.

China was the world fourth largest-producer of motor vehicles in 2003. It produced four million vehicles, more than half of which were cars.

(Xinhua News Agency January 4, 2005)