A Discussion On Regulatory Efficiency Of Automobile Industry

With the worldwide technological innovation and the development of economic globalization since 1970s, regulative failure leads to the inefficiency and weak competitive power of firms. Fundamental reform of natural monopoly industries is undertaken firstly in western countries, and then industrial deregulation starts in China. However, most literatures focus on natural monopoly industries such as telecommunication other than competitive industries and hence this dissertation is aimed to analyze to the regulatory failure of Chinese automobile industry as a representative of competitive industries.This paper starts with the basic theories on regulation, which provides the foundation stone of the whole analysis. The relationship of historical regulation and the development of the automobile industry and current system of the regulation are then illustrated. With respect to the theories in industrial organization, performance of regulation of automobile industry is evaluated based on the market structure and market performance. The paper concludes that the regulation policy is invalid, and that the low efficiency of regulatory mechanisms and the rent-seeking behavior of governments lead to the failure. Finally, some suggestions are proposed to improve the performance of regulation on Chinese industry automobile considering the development of the industry.