The Ministry of Commerce said yesterday that lifting quotas on auto imports had worked well in its first month of implementation.

The restrictions were removed in line with commitments to the World Trade Organization (WTO) and import permits granted from January 1 to qualified sellers with licenses granted by carmakers.

According to the ministry, it issued permits worth more than US$7 billion last month. Auto components that were granted licenses were worth US$4.5 billion, and the 43,362 vehicles imported worth US$1.9 billion.

"The figures include vehicles from quotas reserved from last year," said Li Minglin, director of the ministry's Department of Mechanic and Electronic Product Exports and Imports. "So it is hard to compare them with those of last year."

The director said the new permit mechanism is aimed mainly at monitoring imports and enhancing brand sales.

"The strategy is to reduce the number of sellers and strengthen management of sales," said Jia Xinguang, an analyst at the China National Automotive Industry Consulting and Development Corp.

For example, only a fraction of the current 2,000 plus auto dealers in Beijing will be granted licenses to sell cars.

"This will better protect consumers because it ensures purchases are legal," Li said.

The ministry is working on regulations that would impose the same tariff on some key components as on complete vehicles.

By taxing these components at the same rate as complete vehicles, some experts believe the intention is to encourage foreign carmakers to increase the local content of cars made in China, effectively compensating for the removal of earlier content requirements.

But the regulations would only affect specific combinations of components that could be easily assembled into whole vehicles once in China.

Tariffs on imports of completed vehicles and components will be reduced to 25 and 15 percent respectively by the middle of 2006.

(China Daily February 4, 2005)