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China shuts door on foreign cars

BEIJING, China - Chinese automaker shares rose, led by Dongfeng Automobile and FAW Car, after the government excluded foreign brands from a preliminary purchase list of official vehicles.

Dongfeng Automobile jumped 10%, the first time it climbed by the daily limit since November 2009, FAW gained 4.9% and Great Wall Motors 3.6%.

All 412 models approved for state purchase in 2012 will be limited to Chinese brands. The move will help local brands gain in the government fleet's R95.9-billion market at the expense of foreign brands such as VW, GM and Toyota, China International Capital Corporation said in a report.

'NATURAL PROGRESSION'

Analysts reported:"This signals strong government determination to cultivate China's own auto industry. State support of local brands is greater than expected," analysts reported.

Foreign brands accounted for about 80% of the official pool, according to Guotai Junan Securities. In the broader market, they account for seven of every 10 cars sold in the country, which overtook the US in 2009 to become the world's largest vehicle market.

China spent the equivalent of R95.9-billion on state vehicles in 2010, 4.5% of total passenger-vehicle sales. Officials said the state operated a fleet of at least 5.2-million vehicles as of November 2007 - more than the total number of cars sold in Japan in 2011.

Janet Lewis, Lin Zhixuan and Aaron Qi analysts at Macquarie Group said: "Most countries use official cars as a way to showcase the domestic auto industry, so we see this as a natural progression of the development of China's automotive industry."
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