TOO MANY JOINT VENTURES

Although China's auto industry is widely believed to be overdependent on foreign companies, auto factories continue to sprout across the nation.

Volkswagen and its partner Shanghai Auto are building their seventh plant, Ford said it would build its sixth, and Renault and Nissan's luxury brand Infiniti both said they would begin to produce vehicles here in two years.

Dong Yang, chief of the China Association of Automobile Manufacturers, said "the joint ventures are undeniably successful, but we have attracted enough foreign investment and don't need to open the industry further."

"The government should immediately halt approvals of new joint ventures," Rao warned. "Opening the industry any further will kill off local automakers and even threaten national security."

"It's not joint ventures and huge car sale volumes that will make China's auto industry strong. What we need are domestic companies with strong capabilities in research and development," he added.

Many people are persuaded that the Chinese auto industry followed a strategy of "trading the market for technology," but analysts said it was wishful thinking because core technology can only be acquired by paying high prices or by doing independent research.

"Right now, China is powerless to break away from foreign automakers and their joint ventures. On the other hand, it must promote its own auto industry by taking the tough technology lessons they have so far neglected. That is the only way to stop the dependence deepening," said Zhong.

Wang Xiaoguang, a policy-making advisor at the Chinese Academy of Governance, said that industry policy was fundamentally mistaken and that China should stop state enterprises relying on joint ventures for easy money without doing any real R&D.

"Otherwise, they are doomed to fail," he said.