Beijing may regret retaliating against U.S. automakers

Yang Jian

Automotive News | 2019-6-7

SHANGHAI -- China¡¯s State Administration for Market Regulation this week slapped Changan Ford, Ford Motor Co.¡¯s car joint venture, with a hefty fine of 163 million yuan ($23.6 million) for fixing vehicle prices. 

As China and the U.S. engage in a full-blown trade war, the ruling has created the impression that Beijing has begun targeting U.S. automakers in retaliation for U.S. President Donald Trump¡¯s tariffs on Chinese products.

But the tactic could only serve to buttress Trump¡¯s protectionist policy agenda, rather than protect China¡¯s economic interests. 

In recognition of the huge profits and millions of jobs it creates, auto manufacturing has long been billed as a ¡°pillar¡± of the domestic economy by the Chinese government. 

Despite the rise of domestic brands such as Geely and Great Wall in recent years, foreign automakers remain the backbone of China¡¯s auto industry. 

In 2018, global brands accounted for 58 percent of all light vehicles sold in China. Among them, American brands had a collective 10.5 percent share of all cars and light trucks sold. 

In addition to Trump¡¯s tariffs, the Chinese economy has been confronted with unprecedented challenges such as high corporate debt levels and widespread pollution.  

In response, Beijing started to take measures last year to stem lending by banks to unqualified borrowers and tighten environmental standards. Such measures have affected a large number of small and medium-sized domestic enterprises.  

As a result, China¡¯s economic growth slowed to 6.4 percent in the first quarter from 6.6 percent in 2018. Last year, new-vehicle sales in the country contracted for the first time in nearly three decades. 

Given the pivotal role the auto industry has played in its economy, China now has a greater need for a strong domestic auto market than ever. 

Unless Beijing has a solid legal case behind it, punishing American automakers in retaliation for Trump¡¯s trade practices would be unwise.  

Such punishment undermines the companies¡¯ operations in China and their support of the local economy. 

And the only person who would be delighted to see Beijing take such a retaliatory move is Trump; He can use it as an excuse to further press U.S. automakers to reduce overseas output. 

That is not something Beijing would like to see. 

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