China will restrict the number of domestic auto companies allowed to sell cars overseas in a sector restructuring that aims to ramp up industry competitiveness.

The new rules, which take effect in January 2007, will limit the number of export licenses granted to China’s fast-growing car industry, the China Daily quoted Zhang Ji, a departmental official in the ministry of commerce, as saying.

China’s auto exports business is small, less than one percent of the world’s total production, but many of its carmakers are turning to exports in a bid to move inventory backlog and shake-off fierce competition at home.

In the first quarter, China auto exports jumped 139 percent to 62,628 units from a year ago, the newspaper said.

But price cutting strategies used by small automakers are damaging the nation’s ambitions of building a strong car industry that can compete against the major world manufacturers, it said.

Chinese companies currently export vehicles mainly to Africa, the Middle East or Southeast Asia, but by 2007 Chinese cars are expected to begin selling in the United States while some are already available in Europe.

The new rules will likely permit only those companies with large enough capacity to export which would exclude most of China’s 120 auto firms.

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