China’s Tire Industry Develops Rapidly

With strenuous efforts over many years, the tire industry in
China has developed rapidly. Both the output and the exported
quantity of tires already hold the leading position in the world.
China has quickly become a major player in the international tire
industry and is making significant impacts.

1   Rapid development of the tire industry in China

The tire industry in China started rather late, but has developed
rapidly. Since reform and opening up, in particular, the growth
of the automobile, communication/transportation and mining
machinery sectors and new development in rural areas have not
only attracted foreign tire companies to make investments in
China but also promoted rapid development of the domestic tire
industry.

    1.1  A complete tire industry system has been formed
China can already produce more than 2 000 tire varieties in 5
main series including sedan tires, heavy-duty tires,
agricultural tires, industrial vehicle tires and engineering
machinery tires. According to data from China Petroleum and
Chemical Industry Association, the total output of tries was 318
million pieces in 2005, an increase of 28.3% over 2004. The
output of tires reached 203 million pieces in the first half of
2006, being 14% higher than the same period of 2005. The output
of radial tires was 79.07 million pieces, an increase of 22.4%.
Statistics from China Rubber Industry Association show that the
output of tires in 44 member companies was 86.53 million pieces
in the first half of 2006, an increase of 14.42% over the same
period of 2005. Of the total, the output of radial tires was 61.12
million pieces, an increase of 23.55%. The output of all-steel
heavy-duty radial tires was 14.48 million pieces, an increase
of 33.92%. The sales revenue of radial tires was RMB40.2 billion,
an increase of 21.97%. Both the production and the sales of tires
grew steadily in the first half of 2006. The drastic price rise
of raw materials such as rubber, however, affected the economic
performance.

    1.2  The output of radial tires  has increased constantly
and the quality has steadily improved
    (1) The output of radial tires has grown dramatically. After
the exemption of the excise tax on radial tires in 2001, radial
tire production in China started rapid development. The output
of radial tires reached 143 million pieces in 2005, being more
than 4 times the output of 2000. Radial tires made up close to
45% of the total output, an increase of around 19 percentage
points over 2000.
    (2) The quality of radial tires has improved constantly.
Tests of all-steel heavy-duty radial tires made by China
National Rubber Tire Quality Inspection and Testing Center
showed that the durability and the high-speed properties of
famous-brand tires in China have already approached the level
of big tire companies in foreign countries.
    (3) Research achievements of tires have kept emerging. The
self-development ability in the tire sector has upgraded
constantly in recent years. Product design has reached
international advanced levels. Low-noise pattern design already
holds a leading position in the world. Low heat-generation
recipes developed with nanometer technology are close to the
level of Continental in Germany. Mixing processes have
approached the level of Michelin in France. Nitrogen
vulcanization technology has reached the international advanced
level. Tires with bionic patterns have applied for 8 state
patents.

    1.3 The tire production holds a leading position in the world
In the 75 top tire companies in the world in terms of sales
revenue in 2005, there were 18 tire companies in Mainland China,
accounting for 24%. The highest position Chinese tire companies
gained was the 14th place. The single-factory scale in Shanghai
Tyre & Rubber Co., Ltd., Triangle Group Co., Ltd., Hangzhou
Zhongce Rubber Co., Ltd. already holds a leading position in the
world.
   Rubber consumption of the tire industry in China was around
2.52 million tons in 2005. The rubber consumption per tire was
around 10kg, higher than other countries. The high rubber
consumption is related to the great proportion of heavy-duty
tires and the processing technology. Rubber consumption in
China's tire industry surpassed the United States and held first
place in the world in 2004.

2  Impacts of the development of the tire industry in China on
the world tire industry

The development of the economic globalization and the stable
growth of the Chinese economy have promoted sustained rapid
development of the tire industry in China. The tire industry in
China already holds an important position in the world tire
industry and is making significant impacts.

    2.1 Domestic and foreign-funded companies develop jointly
The tire industry in China was based on the state-owned economy
in the early 1990s. It has turned into a structure with the joint
development of state-owned or state-controlled companies,
private companies and foreign-funded (including Hong
Kong/Taiwan province-funded) companies. Such a change has
produced a considerable impact on the world's tire industry.
    (1) State-owned key companies have developed and grown.
Sixty state-owned companies once held the dominant position in
the tire industry in the past. Through nearly 10 years' fierce
competition, some of them have merged and regrouped and some of
them have been eliminated. Around 20 of them including Shanghai
Tyre & Rubber Co., Ltd., Guizhou Tyre Co., Ltd., Aeolus Tyre Co.,
Ltd. and Hangzhou Zhongce Rubber Co., Ltd. have had constant
development and growth in the competition. Seven tire companies
have been successfully listed in stock markets and become a key
force in the tire industry in China.
     (2) Private companies have developed rapidly. A group of
private companies with Shandong Linglong Rubber Co., Ltd. as the
representative have formed a considerable scale and become a new
force in the tire industry.
     (3) The proportion of wholly owned or joint venture
companies set up by foreign companies or Hong Kong/Taiwan
province companies has increased. Since reform and opening up,
the sound investment condition in Mainland China has attracted
foreign companies into China. Eighteen foreign tire companies
or Hong Kong/Taiwan province tire companies have constructed 33
tire factories in Mainland China. The tire production mode in
China has therefore changed fundamentally, the level of
internationalization is increasing and the impact on the world
tire industry is getting greater.
   The joint development made by three forces including
state-owned or state-controlled companies, private companies
and foreign-funded companies is effective. They have both fierce
competition and mutual promotion in the market economy. The
coming of well-known foreign tire companies has triggered the
vitality and increased the reputation of the tire industry in
China and also produced positive impacts on the world tire
industry.

2.2 China has become a tire production base
Since WTO accession, China has become a tire market and a global
tire production base with great potential. Large tire companies
in the world have all entered t