China, The Industrial Juggernaut: What is and will be its impact on the United States Original Equipment Auto Parts Industry

Abstract

China's accession to the World Trade Organization in November 2001 has been a catalyst for their economy and for the auto parts industry. Additionally, recent government activity has caused nationwide macroeconomic changes that have encouraged international competition and also microeconomic changes that have overhauled the domestic auto part industry. China's GDP per capita has steadily increased since the late 1990's, and has risen to over $4000 US dollars per person. Automobiles are a luxury good; increasing per capita GDP has expanded domestic sales. Also, China's auto and auto parts market has been specifically targeted for liberalization by the World Trade Organization. China has agreed to lower tariffs and quotas on international trade, which has allowed for increased foreign expansion and competition in China. This competition has improved the overall quality of the market, and partnerships with global companies are helping Chinese companies to be more efficient and compete internationally. On the local scale, Chinese banks are easing restrictions on auto financing, which allows for more Chinese citizens to take out loans on automobiles, making them more accessible to the general public. The result is that Chinese companies are now producing auto parts competitively with their other major foreign competitors. In fact, they are beginning to take business from US firms. This paper discusses the reasons that China's auto parts market has steadily improved, how it looks to become a global juggernaut in the industry, and how China's market will effect the US auto parts market.