Investors encouraged to enter scrap vehicle sector

Private and foreign investors are being encouraged to enter the scrap motor vehicle business to fuel competition in China's huge market, officials at the Ministry of Commerce said on Friday.

The newly amended rules on the recycling of junk vehicles, approved by the State Council last month, remove barriers to private and foreign capital, Vice-Minister of Commerce Wang Bingnan said at a news conference of the State Council Information Office of China.

"In practice, the number of recycling enterprises was strictly controlled, with some areas having only one, which created a monopoly and restricted private capital," Wang said, noting that the new rules eliminate the limits.

China had around 327 million motor vehicles at the end of last year, including 240 million automobiles, according to the traffic management bureau of the Ministry of Public Security.

Zheng Shuwei, director of the Department of Market System Development at the Ministry of Commerce, said at the news conference that the vehicle scrapping rate is 4 to 6 percent of the total number of vehicles annually.

"This means we have a vast market for the recycling of scrapped motor vehicles," Zheng said, adding that recycling will also help enhance the market for new and secondhand vehicles and improve the auto sector overall.

The amendment to the rules also removes provisions that require the five major components of a motor vehicle－engine, steering system, transmission, axles and chassis, or frame－to be melted down.

Instead, it encourages them to be remanufactured, thereby improving the vehicle's salvage value. Wang said that as part of the nation's development of a circular economy, scrap vehicles can be sold to remanufacturing companies.

Meanwhile, recycling enterprises must comply with the environmental protection standards regarding storage, equipment and norms for dismantling to ensure green development, he said.