FAW quickens expansion steps

In the next five years, First Automotive Works Corp (FAW) will invest 20 billion yuan (US$2.42 billion) in its headquarter Changchun, Northeast China's Jilin Province, to double its annual auto output in the city alone.

That means the company's output will reach1 million units at that time.

This year, FAW will also try to push its nationwide output to 1 million units. The strategy will not only bring great benefits to FAW, but also create huge development opportunities in China's northeastern region -- originally the heavy industrial base of the country.

Northeast China, including Jilin, Liaoning, and Heilongjiang provinces, used to contribute significantly to China's industrialization between the 1950s and 1980s. The region was called "the elder son of the Republic."

But due to heavy historical burdens produced by local enterprises, the region is lagging behind burgeoning coastal areas such as Zhejiang and Jiangsu provinces.

But the central government has not forgotten its "elder son." In his government working report delivered to the second plenary meeting of the National People's Congress (NPC), Premier Wen Jiabao said this year should see a good beginning in the strategy to revive the old industrial base in Northeast China. This will benefit local automakers like FAW.

In fact, the automaking industry has accounted for a major portion of the current industrial structure in Northeast China. Besides FAW, there are also Hafei in Harbin and Jinbei in Shenyang.

In 2003, FAW produced 500,000 automobiles in Changchun alone, creating 80 billion yuan (US$9.66 billion) in production value. FAW contributed one-third of the industrial value of Jilin Province and 60 per cent of that in Changchun.

The automaking industry is an important stimulating factor for industry overall in the region.

First of all, the auto sector is becoming a major industry to stimulate consumption. Automobiles, especially cars, are major consumer products, and are also enduring commodities.

In addition, the auto sector can create derivative demands on insurance, financing, driving schools, car detailing, and asset evaluation.

More importantly, automaking is an integration of car assembling and the manufacturing of auto parts. A car consists of more than 10,000 parts and the operation of an automaker needs the support of a whole industrial system. One yuan (12.1 US cents) in added value in the automaking sector will create 0.65 yuan (7.85 US cents) in demands on its upper industries and produce 2.63 yuan (31.76 US cents) on demands for its lower-end industries. Each job in automaking sector will bring 25 jobs in other industries.

The auto sector produces wealth for the whole of society.

In the past two years, China's annual auto output has grown from 2 million to 4 million. Demand has nearly doubled and production has grown by 1 million annually.

In 2003, FAW's nationwide auto output reached 902,000 units and its sales volume was 110 billion yuan (US$13.29 billion). That has far surpassed its original plan to sell 705,000 autos and earn 85 billion yuan (US$10.27 billion) in 2005.

FAW planned to realize 4 billion yuan in profit (US$483.09 million) in 2005. But in 2003, its profit has already surpassed 5 billion yuan (US$603.1 million).

Brands like Jiefang, Hongqi, Jetta, Audi and Mazda, all produced by FAW and its joint ventures, can be seen on almost every road in China.

Jilin's government regards the auto sector as an important pillar in the province's sustainable economic development.

In recent years, FAW has also quickened its international co-operation. It began to expand FAW-Volkswagen production base and established a new joint venture with Toyota.

There are already 700 factories in Northeast China producing auto parts for FAW, and the further expansion of FAW will certainly create greater stimulus to local economy.

To construct a comprehensive auto manufacturing base up to international standards, with FAW at the core, is the key for the revitalization of Jilin's traditional industries.

As a respected State-owned enterprise, FAW has launched large-scale structural reforms, streamlining its functional departments from 47 to 22.

Source: China Daily

[The author,Zhu Yanfeng,is the general manager of FAW and a delegate to the 10th People's Congress.]





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