Analysis on Competitive Determinants of China's Automobile Industry: UECM Model

Labor, capital, and degree of opening in the Auto industry over the past 20 years have had a significant effect on the development of this industry. By using the unrestricted error correction model (UECM), this article has empirically analyzed the impact of internal and external factors on the Auto industry, examined the impact of labor, ratio of capital to labor, and degree of opening on the output of the domestic Auto industry and assessed the short-run and long-run elasticity with the above-mentioned determinants respectively. It is found that whether for long-run or short-run, labor has a negative and significant effect on output, and ratio of capital to labor has a positive impact, whereas, there is only a significant and positive effect in the long-run for openness. From the view ofthat, strategies to enhance the competitiveness of the Auto industry have been suggested in the end of the article.