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THE WORLD BANK ECONOMIC REVIEW, VOL. 18, NO. 1, 85-104
THE WORLD BANK ECONOMIC REVIEW, VOL. 18, NO. 1,
© The International Bank for Reconstruction and Development / THE WORLD BANK 2004; all rights reserved

Regulated Efficiency, World Trade Organization Accession, and the Motor Vehicle Sector in China

Joseph F. Francois and Dean Spinanger

Joseph F. Francois is professor of economics and research fellow at the Tinbergen Institute and research fellow at the Centre for Economic Policy Research; his e-mail address is francois{at}few.eur.nl. Dean Spinanger is senior research economist at the Institute for World Economies in Kiel; his e-mail address is dspinanger{at}ifw.uni-kiel.de.

Abstract

This article is concerned with the interaction of regulated efficiency and World Trade Organization (WTO) accession and its impact on China's motor vehicle sector. The analysis is conducted using a 23 sector–25 region computable general equilibrium model. Regulatory reform and internal restructuring are found to be critical. Restructuring is represented by a cost reduction following from consolidation and rationalization that moves costs toward global norms. Without restructuring, WTO accession means a surge of final imports, though imports of parts could well fall as production moves offshore. However, with restructuring, the final assembly industry can be made competitive by world standards, with a strengthened position for the industry.


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