Chapter One Policy Objective

Article 1 Stick to the principle of combining the fundamental function of allocating resources through the market with the macro adjustment and control by the government, create a fair-play and unified market environment and perfect a legalized management system for the automotive industry.

Article 2 Promote the harmonious development between the automotive industry and associated industries, urban transport infrastructure and environmental protection. Create a good environment for using automobiles, cultivate a healthy automobile consumption market, protect consumers’ rights and interests, and promote personal automobile consumption. By 2010, enable China to become one of those key automobile manufacturers in the world, with automobile products meeting majority demand of domestic market and entering into international market in batches.

Article 3 Encourage automobile manufacturers to improve R&D and technological innovation capability, actively develop products with self-owned intellectual property right, and implement the strategy of brand operation. By 2010, automobile manufacturer shall build up a number of well-known brands of automobile, motorcycle and parts and components product.

Article 4 Promote the structural adjustment and restructuring of automotive industry, enlarge size-based benefits of automobile manufacturers, improve degree of concentration of the industry, and avoid diversified, disorderly and low-level duplicate construction.

Through market competition, form a number of large-scale automobile enterprise groups which are internationally competitive and which shall strive to rank among the top 500 enterprises of the world by the year 2010.

Encourage automobile manufacturers to form enterprise alliance according to rules of market to realize sharing of advantages and resources and expand operational scale. Cultivate a batch of comparatively advantageous parts manufacturers to realize size-based production and enter into the international procurement system of automobile parts and components, and to actively participate in international competition.

Chapter Two Development Planning

Article 5 The state gives directions on the compilation of development planning of theindustry pursuant to development policy on automotive industry. The development planning includes long and medium-term development planning of the industry and development planning for large-scale automobile enterprise groups. Long and medium-term development planning of the industry shall be made by the National Development and Reform Commission in collaboration with relevant departments and with extensive suggestions obtained, and then submitted to the State Council for approval and implementation. Large-scale enterprise groups shall compile their own development planning according to long and medium-term development planning of the industry.

Article 6 Those large-scale automobile enterprise groups with features such as unified planning, self-developed product, independent product trademark and brand, integrated management of sales and service system etc., automobiles manufactured by their core enterprise and wholly-owned subsidiaries, holding companies and Sino-foreign joint ventures account for over 15% of the domestic market, or sales revenue from complete automobiles accounts for over 15% of that of the whole industry, may independently compile and submit development planning of the group, which is to be implemented after the demonstration and checkup organized by the National Development and Reform Commission.

Chapter Three Technological Policy

Article 7 Stick to the principle of combining introduced technologies with self-developed ones. Track and research internationally advanced technology, actively carry out international cooperation, and develop advanced and practical technology with self-owned intellectual property right. Products with introduced technology shall be internationally competitive and shall be in accordance with the demand of the development of compulsory requirement of international automotive technological norms; self-developed products shall be up to international technological level and participate in international competition. The state will provide support for R&D activities that comply with technological policy in terms of tax policy.

Article 8 The state guides and encourages the development of energy-saving and environment-friendly type, small displacement automobiles. The automotive industry shall, according to the requirement of national strategy for adjustment of energy resource structure and displacement standard, actively carry out the research and industrialization of new types of power like electric vehicle, power battery used in automobiles etc., and in particular, develop automobile technology with mixed power and diesel oil engine technology used in cars. The state will adopt measures in such aspects as scientific-technological research, technological reconstruction, industrialization of new technology, policy climate etc., to promote the production and use of automobiles with mixed power.

Article 9 The state supports the research and development of new types of automobile fuel such as alcohol fuel, natural gas, mixed fuel, hydrogen fuel etc., and encourages automobile manufacturers to develop and produce automobiles with new types of fuel.

Article 10 Automotive industry and related industries shall pay attention to the development and application of new technology to improve fuel economy of automobiles. By 2010, fuel consumption of new riding automobile shall be reduced by more than 15% over 2003. A public revelation system on the consumption of fuel by automobile product shall be established according to the compulsory requirement of technological norms on energy saving.

Article 11 Actively carry out the research of new automobile material such as light material, recyclable material, environment-friendly material etc. The state will stipulate the requirement for minimum use rate of regenerated material at due time.

Article 12 The state will support R&D and production of electronic product used in automobiles, actively develop the industry of automotive electronics, speed up the application of electronic information and technology in automobile product, sales and logistics and the manufactures, and promote the development of automotive industry.

Chapter Four Structural Adjustment

Article 13 The state encourages automobile enterprise groups to develop and generate new competitive framework. Based on combining market competition with macro adjustment and control and through inter-enterprise strategic reorganization, realize structural optimization and structural upgrading of the automotive industry.

The objectives of strategic reorganization are: to support automobile manufacturers to develop into large-scale automobile enterprise group with the means of assets reorganization, and encourage the formation of enterprise alliance with the cooperative means of sharing advantages and resources to establish an industrial structure with harmonious development of large-scale automobile enterprise group, enterprise alliance and manufacturers of special automobiles.

Article 14 Manufacturers of complete automobiles shall improve their professional production level in structural adjustment, and gradually change their internal production units of parts and components into professional manufacturers of parts and components that face the society and that are independent.

Article 15 The enterprise alliance shall carry out extensive cooperative in such aspects as product R&D, production collaboration, and sales and service etc., materialize the adjustment of product structure, optimize resource allocation, reduce operation cost, and realize size-based benefit and intensified development. The enterprise that has participated in a certain enterprise shall not form an alliance with other enterprises, so as to consolidate the stability and market status of the enterprise alliance. The state encourages the enterprise alliance to economic entities linked by the capital as quickly as possible. If newly built automobile manufacturer and production of different types of automobile are involved in the cooperative development scheme of an enterprise alliance, these projects shall be pursuant to the stipulations of this policy.

Article 16 The state encourages manufacturers of automobiles and motorcycles to carry out international cooperation, give play to comparative advantages, and participate in international industrial division; supports large-scale automobile enterprise groups in uniting with foreign automobile groups to merge and reorganize domestic and foreign automobile manufacturers, expand the market and operational scope, and suit the trend of internationalization in automotive industry.

Article 17 Establish an exit mechanism for manufacturers of complete automobiles and motorcycles, and those automobile manufacturers that cannot maintain routine production and operation (including those manufacturers of refitted automobiles currently available) will be specially and publicly revealed. These manufacturers shall not transfer production qualification of automobiles and motorcycles to non-automobile or motorcycle manufacturers. The state encourages these manufactures to turn into manufacturers of special automobiles and auto parts, or to carry out assets reorganization with other manufacturers of complete auto. Manufacturers of auto shall not buy or sell production qualification, and at the same time, those bankrupted auto manufacturers will be removed from the roll.

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