Beijing to launch licensing system for car exporters

The mainland is launching its quality control licensing system for car exporters tomorrow, a landmark regulation that will force out underperforming companies from an overcrowded market.

While the country last year surpassed Japan to become the world's second-largest car market, Beijing knows that fostering a flourishing homegrown industry like Japan's and South Korea's requires a product in demand overseas.

To this end, the push for exports of 'domestic branded cars' was included in the 11th five-year plan.

But that cannot happen if the country burns up its reputation by flooding the world with lemons.

The government, which has yet to elaborate on the licensing system since announcing it at the end of last year, only said that the intention was to weed out the weaker players and create a few national stalwarts.

For the carmakers competing in a growing domestic market, this means that if they fail to establish a foreign beachhead, they will also end up being sidelined at home, according to analysts.

'This not only is the direction from the government, but also is a life and death matter for carmakers in the next five years,' said Matthew Kong, a Beijing-based analyst for Fitch Ratings.

Last year, the country - which bought 7.2 million cars - exported 342,400 vehicles, an increase of 98.13 per cent over 2005. The export value was US$3.13 billion, up 96.62 per cent, according to the China Association of Automobile Manufacturers.

But that was just 0.7 per cent of the value of cars sold globally. Beijing aims to increase the value of its vehicle exports to 10 per cent of the world's total in the next decade.

Car companies that successfully sold their brands overseas were expected to receive greater leeway from regulators, who had been trying to stem an industry that had reached overcapacity, CLSA car analyst Geoff Boyd said in a report last month.

Mr Boyd said they stood a greater chance to receive approval to expand their plants or build new ones.