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Critical Policy Decision for China

Christine Tierney for the Detroit News reports from Beijing.

GM officials expect China to eventually become Cadillac’s largest overseas market, second only to the United States.

Their market studies show that Chinese consumers like their cars big and roomy and luxurious, as Americans do. Fuel-efficiency ranks low as a priority, mainly because fuel is not taxed.

GM’s optimism seems well-founded.

This is a critical time in this burgeoning market. The appetites we have in the US for size and speed were formed during earlier years of the oil market; the situation is different now. For China’s own good as well as for better managing the demand side of the oil market, inducements for fuel efficiency would be the best. It seems that China is leaning in that direction -- which is a good thing.

In a speech to visiting auto executives delivered in Beijing a day after the Cadillac launch, a senior official with a government think tank cautioned that the the government was studying imposing fuel taxes to steer demand away from big, luxurious vehicles.

For now, the government is reluctant to tax fuel because oil prices are high, said Chen Qingtai, vice minister for the State Council Development Research Center.

But as demand for vehicles spreads to the hinterland, the government will probably impose fuel taxes to encourage demand for cleaner, more fuel-efficient cars, Chen said.

“If we follow the U.S. example, we’ll see a U.S.-style market develop, and that would be unbearable for China with its huge population and limited resources,” Chen said.

The Chinese government also wants to avoid becoming dependent on oil imports. Unusually for a developing economy, China has already expressed a strong interest in alternative and energy-saving technologies, where Japanese and European carmakers have established a strong lead.

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