The Chinese government for the first time is allowing local automakers to price their vehicles themselves, without state approval. In the past, the government determined the prices of domestic-made vehicles. In recent years, however, the procedure has become little more than a formality, and analysts say the decision should not impact business.
The move toward a greater degree of deregulation inidicates a general loosening of the market. Automakers have been gradually reducing their prices in order to compete against anticipated foreign entries if China, as expected, is permitted to join the World Trade Organization.
WTO entry means that China will have to cut tariffs on imports to 25% from current levels of 80% to 100%, heightening the level of competition in the burgeoning market.
The Chinese government is not entirely following a hands-off policy when it comes to automotive. The state is threatening to impose import quota restrictions on Japanese cars. The move is in retaliation against Japan's decision in April to limit imports of shiitake mushrooms, leeks, hand towels and rushes to make mats.