In Search for Consolidation: The Political Economy of Industrial Restructuring in China's Automobile Industry

This paper, through examining the emergence and evolution of industrial structure in China's automotive industry, have attempted to assess the degree to which the country has succeeded in restructuring the overly fragmented and dispersed pattern of industrial organization in a capital-intensive industry featured by high economies of scale, the loss in economic efficiency due to fragmented structure of which is therefore greater. The result of the analyses shows that the fragmented industrial structure that emerged during the Cultural Revolution period, populated by numerous firms of sub-optimal scale that are scatted in all but a few regions of the vast country, have not only persisted throughout the reform era but in fact has become more fragmented both in terms of lower concentration ratios at firm level and greater geographical dispersal of production. Although there exist some signs of gradual progress in consolidation at the level of enterprise groups, the real economic effect of such restructuring, however, seems to be quite limited due to the lack of effective coordination and integration of operation between affiliate automakers nominally under umbrella of the same group.