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China’s attempts to limit auto sales are doomed to failure by its ingenious regulation-dodgers

July 11, 2013
July 11, 2013

Eight new Chinese cities will begin imposing restrictions on car ownership (paywall) in an attempt to reduce pollution and congestion, the nation’s car manufacturing association said on Thursday. The move to restrict the world’s biggest automotive market is unlikely to be popular among Chinese citizens, but only because it will be a minor hassle for them to find new ways to outsmart their local governments.

Beijing, Shanghai, Guiyang and Guangzhou already operate license plate quota systems, and a whole industry has developed to help drivers skirt the regulations, often making the problem even worse. When Beijing decreed that citizens would be prevented from driving on one day of the week depending on what number their license plate ended with, people simply bought a second car.

When Beijing introduced an additional lottery-based quota system for new license plates—20,000 a month from January 2011— people bought and registered their vehicles outside the city limits. Authorities put restrictions on those, too, banning them from inside the 5th ring road at certain times. That put a lid on most activity, but didn’t stop some rental companies from buying up second-hand cars and leasing out the license plates.

Shanghai’s approach has been to hold a monthly auction for new license numbers. This hasn’t been so much of a problem for China’s rich elite, but poorer citizens have struggled—the price of a license plate can be higher than the cost of a vehicle. Ordinary citizens have resorted to other tricks, like turning to the large black market for military plates, which also offers a way of avoiding getting stopped by police. A six-year military plate can go for $45,000.

Although there is no clear information about when the eight cities are likely to impose restrictions, their populations—each in the multiple millions—are not about to sit back and wait. Yale Zhang, managing director of Autoforesight Shanghai, told Bloomberg that “in the short term, the market will just jump in those cities. Consumers will panic and will start to buy whatever they can before the measures.” Any other attempts to make sure the “Chinese dream” doesn’t include carting around groceries in an SUV are likely to face even more ingenious methods of evasion.

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