If you want to understand China's car import market, you should look at what happened to Chairman Mao 42 years ago.
In the autumn of 1959, at the peak of the Great Leap Forward, Mao and his staff in Beijing could hardly contain their delight. Provincial governors were reporting huge increases in steel production and record grain harvests. Just one year earlier, Mao had proposed to surpass the United States in steel production. China's steel producers were meeting that goal. People at party headquarters were jubilant.
Then came a shock. In early 1960, Mao took a tour of the provinces where he discovered a reality vastly different from the reports. In place of abundant grain yields, he witnessed widespread starvation. Instead of steel ingot inventories, he found melted pots and pans.
By the end of 1961, 20 million people starved in one of the greatest man-made disasters in history.
THE INSIDE STORY
Mao should have known better. In China, you can never trust the statistics. Following Confucian tradition, provincial mandarins always have reported what they thought the emperor wanted to hear. If the reports conflict with the truth, well, too bad.
So, for the inside story about car imports, a little history - plus some geography - is helpful. The 65 million people of Guangdong, China's wealthiest province, make their living the way they have for the last 2,000 years. They trade whatever they can, whenever they can.
Located just north of Hong Kong, Guangdong is the number one entry point for smuggling cars into China. They call the car-smuggling trade 'water goods' because many cars are moved on speedboats up small rivers along the coast into China.
It would be easy to think that pirates and bandits handle water goods. But that would be a mistake. There is simply too much money to be made for it to be left unorganized like that. The provincial government, the local police, the army and the mayor's offices would like a share, too.
At a dinner party in Beijing several years ago, I met a police officer from Guangdong. When I asked him what kind of work he did, he replied: 'Water goods.' Seeing that I was confused by his answer, he then said: 'I smuggle cars. I just brought in 36 Pajeros yesterday.'
Like a naughty child, Guangdong always has exasperated Beijing. Guangdong contributes more tax revenues to Beijing than any other province. But it keeps too much for itself - at least in Beijing's opinion.
In the spring of 1998, Premier Zhu Rongji - a tough official - traveled 2,500 kilometers south from Beijing to stop car smuggling. Zhu hated to see Beijing lose the lucrative tax revenues to be made if cars were legally imported. Zhu declared a war on smuggling.
Several senior Guangdong officials were executed for smuggling. Car imports, both official and gray market, plunged in 1998 and 1999. 'The heat is definitely on,' said a Toyota executive living in Hong Kong at the time. But Premier Zhu began to focus on other things. These days, he is engaging the world in negotiations over China's entry into the World Trade Organization.
As part of its concessions, China has promised to lower import tariffs on cars to 25 percent by 2006. Considering Zhu's focus on the World Trade Organization rather than gray imports, you would expect imports to increase again, right? Not if the man in charge is no-nonsense Zhu Rongji. When Premier Zhu asked the Customs Department in January for last year's import statistics, he must have been pleased. Total car imports into China fell for the third consecutive year, to just 17,000 units.
'That number can't be right,' says Wang Wenhe with a smile. Wenhe is director of a car import company in Kunming, a town in rural southwest China. 'Our company alone sold 4,000 units, and we're a small inland market here.'
Walk along Guangzhou's streets and you notice the number of new imported cars. Top sellers include the Nissan Cefiro and Sunny, Toyota Camry, the Daewoo Nubira and the Mitusbishi Pajero. The view grows even more intriguing when you check import numbers from a different source.
According to the Japan Automobile Manufacturers Association, Japanese carmakers exported 39,000 sedans to China last year. That is twice the official total, and does not count imports from Korea, Europe and the United States. Total imports in 2000 probably reached 60,000 cars, accounting for 10 percent of overall Chinese sales.
Ask a Guangzhou car importer to explain the discrepancy. She shrugs and recites a Chinese saying: 'The top makes the policy; the bottom takes countermeasures.' On that much, at least, Mr. Zhu and the rest of us can count.
E-mail writer Michael J. Dunne at [email protected]