2010-09-06 09:29

TIANJIN - Unchecked expansion of China's auto industry encouraged by local authorities could harm the wider economy, a central government official said Saturday, warning excess capacity must be "resolutely" stopped.

Although China surpassed the United States to become the world's biggest auto market last year with sales hitting 13.64 million units, the nation's capacity by the end of 2015 was expected to far exceed demand, said Chen Bin, head of industrial coordination at the National Development and Reform Commission, the nation's economic regulation agency.

China's 30 major auto makers had a production capacity of 13.59 million vehicles by the end of last year, and that was set to more than double to 31.24 million units by the end of 2015, which would largely exceed demand, Chen said at the International Forum on Chinese Automobile Industry Development in Tianjin.

Encouraged by the industry healthy profits and economic benefits, local governments had been making "blind" efforts to open new factories and expand capacity, Chen said.

Twenty-seven of the country's 31 provinces, autonomous regions and municipalities have plants that are able to produce finished vehicles.

However, excess capacity would bring vicious competition, and hurt corporate profitability. It could even hamper sustainable development of the national economy, he said.

He said local authorities should avoid setting unrealistic output quotas for auto makers, and should end preferential land and tax policies for them.

He said the government should strengthen supervision of industrial efficiency data to guide reasonable resources allocation.

With the extension of the national auto replacement subsidy to the end of this year, domestic output and sales both exceeded 10 million units in the first seven months, according to data released by the Ministry of Industry and Information Technology at the end of August.