GM in China

For General Motors (GM), the year 2004 brought a wide variety of new challenges that added to an already complex business environment. The industry structure was changing quickly. Demand and supply projections for motor vehicles had promised substantial increases in sales and profits, but suddenly the optimism faded. China's new membership in the World Trade Organization created expectations of a level playing field for foreign investors, but - at least in the short run - major barriers remained. Government intervention persisted, particularly the requirement of a joint venture partner, competition from government-owned assembly firms, and arbitrary rules such as sector-specific credit restrictions. Violation of intellectual property, with the copying of foreign automobile designs and false-branding of parts, was an ongoing threat. Also, inflation was increasing and the government was unsure whether and how to use monetary and fiscal policies. The government had purposely kept the renminbi undervalued for many years. Pressure was building for the government to change its foreign exchange rate policy, but a higher renminbi would suddenly decrease GM China's international competitiveness.