China to relax price controls on domestic cars: China Daily

BEIJING (AFX-ASIA) - The government has decided to relax price controls on domestic cars and allow manufacturers to set their own prices, the China Daily reported, citing a State Development Planning Commission announcement.

	    The move is likely to increase competition and speed up the restructuring of the car manufacturing sector ahead of China's WTO entry, which will see tariffs on auto imports fall to 25 pct by mid-2006 from the current 70-80 pct, the newspaper said, citing Jia Xinguang, an analyst with the China National Automobile Consulting and Development Corp.

	    Before this latest relaxation, manufacturers were only allowed to adjust prices by 10 pct, based on benchmark levels set by the commission. 

	    The policy had led to inflated prices and a sluggish car market, with sales of domestically-made cars stalled at between 600,000 and 700,000 units over the last few years, the newspaper said.

	    However, the it added that the government had given tacit consent to dozens of price cuts over the past two years. 

	    FAW-Volkswagen, a joint venture between First Automotive Works and Volkswagen AG, cut the price of its Jetta model several times last year in the face of steep competition, the report said.

	    Zhou Yongjiang, vice president of the joint venture, told the newspaper the relaxation would give carmakers more room to manoeuvre. 

	    "We will tune our product prices to the market in order to increase our sales," he said.

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