DP4439 | Regulated Efficiency, World Trade Organization Accession and the Motor Vehicle Sector in China

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This Paper is concerned with the interaction of regulated efficiency and World Trade Organization (WTO) accession and its impact on China?s motor vehicle sector. The analysis is conducted using a 23-sector/25-region computable general equilibrium model. Regulatory reform and internal restructuring are found to be critical. Restructuring is represented by a cost reduction following from consolidation and rationalization that moves costs toward global norms. Without restructuring, WTO accession means a surge of final imports, though imports of parts could well fall as production moves offshore. With restructuring, however, the final assembly industry can be made competitive by world standards, with a strengthened position for the industry.