China has decided to license auto exports next year to prevent domestic car makers getting into cutthroat competition and to weed out companies that cannot make the grade. According to the 2007 Catalogue for Export License Management, no company will be able to export automobiles, full sets of car spare parts or car chassis without prior authorization.

The country's production capacity reached 8 million units in July 2005, and is expected to hit 10 million in 2007. But demand was only 71.5 percent of capacity in 2005. Customs figures show China's car exports surged 120 percent from 78,000 units in 2004 to last year's 173,000 units. This year, the figure is expected to top 300,000 with sedans accounting for 90,000, more than double the figure from a year ago.

A problem China must face is that about 600 of the 1,025 firms that exported vehicles -- whether they are manufacturers or trading agencies -- exported less than 10 units. A staggering 160 firms exported only one car per year. In introducing licensing, China hopes to weed out firms with minimal exports as well as companies that fail to guarantee product quality or provide solid after-sale service. Such firms will be prohibited from exporting automobiles to prevent further damage to the reputation of the indigenous car industry.

In August, the Chinese government designated Changchun, Shanghai, Tianjin, Wuhan, Chongqing, Xiamen, Wuhu and Taizhou as the sites of the country's major auto factories and its major export production base. China-made automobiles are mainly sold to emerging markets such as the Middle East, Latin America and Russia. The goal of China's auto industry is to account for 10 percent of the world's auto trade in 10 years, in other words to achieve export orders worth more than 120 billion U.S. dollars.

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