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China to see acute auto overcapacity by 2010
(Reuters)
Updated: 2005-11-14 17:13

China will produce twice as many vehicles as it needs by 2010 if the current investment frenzy in the automotive sector goes unchecked, a newspaper cited a top economic planner as saying on Monday.

Vehicle production in China is expected to hit 20 million units in 2010, far outpacing anticipated sales of only 9 million units, Chen Bin, head of the industry department of the National Development and Reform Commission, was quoted as saying in the China Securities Journal.

Annual capacity, now at 8 million units, has already exceeded expected sales of 5.5 million units this year, but investments have shown no signs of cooling, Chen said.

Global auto makers such as Volkswagen , General Motors Corp. and Toyota Motor Corp. are spending some $15 billion to triple annual capacity to more than 7 million cars by 2008, which has sparked fears of an impending glut.

However, car sales in China climbed a moderate 17.9 percent in the first 10 months. Growth had slowed to just 15 percent in 2004 after a near-doubling in 2003, as Beijing cracked down on easy auto loans.

Experts now expect the market to grow just 10-15 percent in 2005 as Beijing keeps up credit curbs aimed at bringing about a soft landing of the world's seventh-largest economy.



 
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