PLA can be en­voy of do­mes­tic brands

China Daily (Canada) - - COMMENT -

The four People’s Lib­er­a­tion Army head­quar­ters pub­lished a cir­cu­lar, ap­proved by Pres­i­dent Xi Jin­ping and the Cen­tralMil­i­tary Com­mis­sion, in Jan­uary say­ing the pur­chase of newmil­i­tary ve­hi­cles should be made ac­cord­ing to a cen­tral­ized sys­tem and the armed forces need to choose do­mes­tic au­to­mo­bile brands. Fol­low­ing the cir­cu­lar, the PLA pur­chased more than 1,000Hongqi H7 sedans made by First Au­to­mo­bileWorks. And be­fore theHongqi sedans, it bought Trumpchi from Guangzhou Au­to­mo­bile Group and Bes­turn from FAW Group in def­er­ence to the cen­tral lead­er­ship’s call for pro­mot­ing fru­gal­ity and cut­ting waste.

Al­though the PLA’s move will not have an im­me­di­ate ef­fect on the auto mar­ket, it will boost China’s auto in­dus­try in the long run. China be­came the world’s leading au­to­mo­bile man­u­fac­turer in terms of out­put in 2010, end­ing the pole po­si­tion held by the United States for more than a century.

To­day, as the largest equip­ment man­u­fac­turer, China has an out­put that ac­counts for one-third of the world’s to­tal. It has also be­come the largest auto pro­ducer, as well as the largest auto mar­ket in the world. China is thus well po­si­tioned to fa­cil­i­tate the de­vel­op­ment of do­mes­tic auto brands, and it should em­bark on that be­cause the growth of self-owned brands holds the key to sus­tain­ing its eco­nomic and so­cial de­vel­op­ment. Based on the premise of en­sur­ing ef­fi­ciency, fair com­pe­ti­tion and clean gov­er­nance, giv­ing pri­or­ity to do­mes­tic brands when pur­chas­ing ve­hi­cles for of­fi­cial use will not only re­duce costs, but also have a far-reach­ing im­pact on the do­mes­tic auto in­dus­try.

More­over, the PLA’s pur­chase of do­mes­tic brand ve­hi­cles for of­fi­cial use is also ex­pected to fa­cil­i­tate their growth over­seas. In­ter­na­tional trade is an in­ter­ac­tive process in­volv­ing both the do­mes­tic and for­eign mar­kets of a trad­ing na­tion. In many cases, an emerg­ing man­u­fac­tur­ing sec­tor, be­cause of in­suf­fi­cient ef­fec­tive de­mand at home, has to first tap over­seas mar­kets to seek the economies of scale and un­leash its po­ten­tial for growth.

But the lack of brands, tech­nolo­gies and mar­ket­ing chan­nels forces many en­ter­prises to lower their ex­port prices and sub­si­dize their strat­egy of en­ter­ing over­seas mar­kets with the prof­its made at home. But af­ter the ex­port-led growth model is es­tab­lished and growth in the size of do­mes­tic mar­ket, the trad­ing na­tion will reach a point where it has to rely on the do­mes­tic mar­ket to bet­ter po­si­tion it­self in global trade. This is ex­actly the case with China now that it has be­come the world’s top man­u­fac­tur­ing coun­try by out­put.

Along with the ro­bust de­vel­op­ment of the do­mes­tic auto mar­ket, China’s auto ex­ports have in­creased rapidly over the last decade. Gen­eral Ad­min­is­tra­tion of Cus­toms’ fig­ures show that China ex­ported 43,490 ve­hi­cles and au­to­mo­bile chas­sis worth $261 mil­lion, and auto parts worth $1.84 bil­lion in 2002. In 2013, how­ever, China ex­ported 920,000 ve­hi­cle units worth $12 bil­lion and auto parts worth $29 bil­lion— ex­clud­ing the value gen­er­ated from the ex­port of en­gines, tires and other auto ac­ces­sories.

China has es­tab­lished a fairly com­pre­hen­sive in­dus­trial sys­tem and trained the high­est num­ber of tech­ni­cians and me­chan­ics in the de­vel­op­ing world, as well as de­vel­oped some tech­nolo­gies of the most ad­vanced lev­els. It is thus in a good po­si­tion to fur­ther in­crease the tech­ni­cal value of its auto ex­ports and bet­ter tap over­seas mar­kets. And it is in pro­mot­ing self-de­vel­oped auto brands abroad that the PLA can play a pi­o­neer­ing role.

Other coun­tries’ mil­i­taries, too, have played a key role in pro­mot­ing home­grown prod­ucts in over­seas mar­kets. For in­stance, made-in-Amer­ica prod­ucts were of­ten de­rided for their poor qual­ity in the late 19th century even though the US had be­come an in­dus­trial pow­er­house by then. The global per­cep­tion of Amer­i­can prod­ucts changed af­ter the two world wars, in which US forces played a crit­i­cal role. Many US-made prod­ucts con­sid­ered sub-stan­dard ear­lier be­came trendy and pop­u­lar among Europe’s up­per class— one of which was the typ­i­cal lum­ber­jack check shirts made of coarse fab­ric.

To­day, China as a re­spon­si­ble power is com­mit­ted to play­ing a greater role in the world, es­pe­cially on the peace­keep­ing front. Among the five per­ma­nent mem­bers of the United Na­tions Se­cu­rity Coun­cil, China has con­trib­uted the high­est num­ber of per­son­nel to UN peace­keep­ing mis­sions in Africa. And at the re­quest of the UN, Bei­jing dis­patched a se­cu­rity team for peace­keep­ing op­er­a­tions in­Mali last year.

It would have been im­pos­si­ble for China to serve on these mis­sions with­out the con­tri­bu­tion of the PLA, which can also act as an am­bas­sador for do­mes­tic in­dus­tries and indige­nous brands be­yond China’s borders. The au­thor is a re­searcher at the In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion In­sti­tute of the Min­istry of Com­merce.


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