Does government intervention help the Chinese automobile industry? A comparison with the Chinese computer industry

Through comparison with the computer industry this paper examines whether government intervention has facilitated development in the Chinese automobile industry. Chinese computer firms operate in a largely laissez-faire market environment, with relatively free entry and exit, whilst the automobile industry is subject to government protection and uses entry barriers and high tariffs to promote economies of scale and productive efficiency. We, however, find that the automobile industry is more concentrated and less efficient than the computer sector. This suggests that competitive forces can be more effective in improving efficiency than regulation, even in the Chinese context.