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According to the Chinese Year of the mouse chasing the car industry was found in a maze of Wheeling, dealing and regulations.
China is facing defeat in the World Trade Organization over its tax policies on imported auto parts.
The World Trade Organization on Thursday issued a preliminary decision in favor of the United States, the European Union and Canada, saying China's tariffs on imported auto parts breaks its commitments to the sales organization.
China has defended its policy, saying it prevents car manufacturers tax by importing escape of finished cars as spare parts to avoid higher rates.
China should lose a call, it would be the first loss of China to the WTO since its accession to the world body in 2001.
The maneuver of the WTO is widely considered as a trade dispute between the accelerated China, as an emerging and rapidly developing country of the automobile and the automotive giants abroad.
However, it is also considered as an illustration of the foreign car manufacturers trying to gain advantages when aggressive expansion in China.
Even if China bows to pressure and WTO directors and provides legislative changes, most analysts agree that the increased supply in China and taking advantage of efforts to use more parts automobile manufactured in China remains a key trend in the industry as all automobile manufacturers battle with the heated competition and lower prices for cars in the second largest car market in the world.
The crux of the complaint by the three parts of the West is that China imposes a tax on certain imported auto parts at the same rate as finished vehicles manufactured abroad.
They argued that such commercial practices prevent foreign car makers using spare parts imported for assembly in China and force them to move production to China, harm their own auto parts industry.
China 25 percent tax on imported auto parts, the same rate of customs duty on imported finished cars if they represent 60 percent or more of the value of a complete vehicle.
Other imported auto parts are taxed at 10 percent.
The measure is not only intended to prevent tax evasion, but also encourage Chinese auto parts manufacturers to increase their own innovation capacity and competitiveness, said Zhou Shijian, Standing Director of the China Society for World trade organization studies.
If we didn t will ask limitation of imported auto parts, Chinese joint ventures are purely importing spare parts and assembly plants for car manufacturers to overseas territories.
This would seriously undermine the development of China's automotive industry.
Boshun Zhang, secretary general of the China Auto Industry Trade Commission Market Association, said that there were similar regulations placed on machinery and automotive industries in developing countries.
China must improve the competitiveness of its automotive parts industry before realizing its goal of making the highest automotive industry.
The conflict began in 2005 when the new Chinese regulations on imported auto parts took effect, changing previous local content requirements.
The new rules were originally intended to encourage foreign carmakers to locally produce automotive components in China.
In 2006, the EU and the United States filed the case with the WTO and were later joined by Canada.
In the midst of negotiating a detailed key standard has been postponed for two years to be effective from July this year.
luxury automakers like BMW, Mercedes-Benz, Cadillac and Chrysler suffered the most under Regulation that their small production scale forced them to rely more on imported auto parts rather than investment in local factories.
General Motors Corp. last year restarted imports of certain Cadillac models instead of producing them locally because of the high cost of production caused by the import of spare parts.
According to statistics from China Customs, United States 7 2 billion auto parts were imported in the first half of last year.
The value of imports of engines increased 16 percent to 43 US 697 million, and imported transmissions climbed 66 percent in the United States 1 4 billion.
The ongoing conflict has raised concerns that if China moves away from its firm position on the issue, most car manufacturers prefer to import auto parts in large chunks rather than supply in China.
That will not happen in the long term because the Chinese auto parts manufacturers have gradually achieve in improving their technology, said Zhang automobile association.
For most automakers overseas, it would be a shortcut to use more auto parts made in China at competitive price and good quality as they seek a cushion to maintain profit margins amid lower prices for Car and furious competition.
An official with the Zhejiang Wangxiang Holdings Group, one of the largest auto parts manufacturers in China, said there would be no significant impact if China were forced to change the rule.
Although we still have some shortage technology for providing advanced auto parts, there is a growing tendency to move the production base of automotive components to China due to the low production costs and improving technology, the official said.
While most car manufacturers such as BMW, Mercedes-Benz and Chrysler have kept their eyes on the issues, they also added local suppliers and expanded their purchases in China in recent years to keep up their production rapid expansion.
Other giants of auto parts, including Delphi, Visteon, and Bosch followed the automakers to start manufacturing auto parts at low cost in China.
WTO showdown for car prices in China, China, automotive, tariffs, imported auto parts.