China’s Policy-Driven Push to Innovate and Drive its Auto Industry Green

New rules issued by the NDRC represent the Chinese government’s most recent effort to centrally manage the development of the domestic Chinese auto industry, while still promoting the innovation required for its success. The modern auto industry presents the nation with what is arguably one of the most technology-intensive and innovation-laden challenges yet. Whether such government-led innovation can be successful will certainly be interesting to watch as the rules are played out.

By Steven H. Hilfinger and B. Kenneth Duck*

On October 17 2007, China’s National Development and Reform Commission (NDRC) announced the adoption of the Administrative Rules on the Approval of Manufacturing New Energy Automobiles (the Rules). The Rules became effective on November 1 2007 and were issued in accordance with the provisions of the Chinese government’s 2005 Policy on the Development of the Automobile Industry (the 2005 Automobile Policy). The Rules essentially require that automakers seeking to manufacture vehicles that will be powered by new energy sources must obtain government approval before production may begin. Anyone who has spent time in China in the past few years will certainly be crossing his or her fingers and hoping for the success of this ambitious venture to mass-produce cleaner cars.