June 2015 Newsletter

Dear all,

It is my great pleasure to write this, the first IFRTT Newsletter from Asia. The timing could not be better. I am right now in Sweden for meetings, but just the other day I received a phone message from Mr Feng Feng of ACEA China (The European Automotive Manufacturers’ Association) that the provincial government of Heilongjiang has just approved a pilot project to test long vehicle combinations in that province.

In ACEA China we have for many years been working very hard together with the Chinese Ministry of Transport (MOT) to get acceptance for longer, safer and more efficient vehicle combinations on the Chinese roads. As in many other countries this is not an easy task as it involves a number of different ministries and authorities. However, the MOT has committed fully to this work and is pushing for cross ministerial cooperation on this issue.

Now, those who have not visited China may object and ask if China has the infrastructure needed to introduce long vehicles? The answer is short. Yes! China has the second largest motor highway system in the world, only second to the US and it is covering the whole nation. As a matter of fact it is too large for the present size of the economy and many roads are still hugely underutilized. At the same time the road network is largely filled with substandard vehicles, often overloaded, wrongly specified with too weak engines and brakes and with drivers working too long hours.

Both the issue of over investment in the infrastructure and the inefficient vehicles on the roads naturally lead us onto the topic of economic reform in China.

Up until very recently the Chinese economy has been driven by central investments to an unhealthy degree. This was further augmented after the global financial crisis in 2008 when China slammed the table with a close to 600 bn USD stimulus package in order to maintain growth in a highly unstable world economy. At the time it seemed the right thing to do and was welcomed by the world as China could continue to be a tractor for the world economy.

Now seven years later we can conclude that the price that China had to pay for this was very high. The stimulus money went into State Owned Companies, into unnecessary infrastructure investments and other wasteful activities. Today China suffers from an ailing economy, massive overcapacity, a debt problem and is in urgent need to completely reform its economic system.

Luckily, China has some very clever people at the top and in 2013 at the so called Third Plenary Session of the Communist Party a far reaching and very comprehensive program for reform was decided upon. It is often referred to as “the Decision Document”. It is one of the most important documents in modern time as it has the potential to totally transform China into a modern market driven economy where the role of the government is redefined so that it no longer can be both a player and referee in the economy. This may sound insignificant, but in my view, with the use of a few very well defined principles China could manage to develop past the treacherous “Middle Income Trap” and emerge as a global super power within some 30 years.

In the newspapers we read a lot about the new assertiveness of President Xi Jinping who came into power in 2012. There are conflicts in the South China Sea, a new Asia Infrastructure Investment Bank is being set up, China has taken the One Belt One Road initiative, there are border conflicts, not least with India etc. In addition we read about a more oppressive regime with less freedom of expression, jailed political dissidents and an anti-western values campaign. Furthermore we read about a long and far reaching anti-corruption campaign exposing not only a corrupt nation, but a corrupt Party . All of these things and much more are happening and they are worrying and very negative.

Parallel with these negative developments we are seeing a very hard push to succeed with the economic and social reforms outlined in the Decision Document and this is very positive. China hence requires us to be able to see all the ongoing developments at the same time and to realize and accept that there are uncountable of layers of development all happening in parallel. As a foreigner living in China my role is to try to understand the whole picture and to see how we as foreign companies can navigate these water, how we can influence the development within our respective areas and how we can benefit commercially from this.

This brings me back to the long vehicles.

In the Decision Document the Party states some very important principles: firstly the market forces should play a decisive role in resource allocation. Secondly the government needs to set clear rule for this to happen in a level playing field for all. Thirdly, the government needs to stop supporting industry and instead focus on a people centered development. Fourthly, China needs to embark on a path of sustainable development.

With the help of these basic principles we have been able to argue that the economy needs much more efficient road transport equipment as it will bring down the cost of transports and logistics, it will be less polluting and it will be much safer. China will be able to reap the potential benefits from its existing road network infrastructure. To achieve this all transport operators and all equipment manufacturers will have to follow the same rules, not least in relation to the masses and dimensions of commercial vehicles. Only then will China get a level playing field for transports, where the market economy will be driving efficiency improvements and competition through innovation, good management and a high service level.

As I said, through ACEA we have been able to a catalyst for such change.

After I got back from the HVTT in Argentina we made a press release announcing that Scania now plays the role of vice president at the IFRTT and that the next HVTT is planned for New Zealand in 2016 and possibly China in 2018. We have also had discussions with relevant ministries and organizations in China to raise the awareness of the IFRTT to pave the way for Chinese participation in New Zealand next year. I think the timing of the next HVTT is excellent from a Chinese perspective as I expect that China will have launched its revised masses and dimensions standard, the so called GB1589. It would be very good if this could be presented in New Zealand by the MOT.

Almost finally, let me say that the timing of this Newsletter is also perfect from another point of view.

In Argentina Veronica Pereseina, presented the research project V2B (Value to Business) within which she is writing her doctoral thesis. Yesterday, she and the rest of the academic team came to Scania in Södertälje to make a final report in the findings of this research project. It was quite well received and it provoked good discussions about how Scania can make a contribution to an even more sustainable future for road transports in society.

Now, finally, I was told that the Newsletter also needs to talk about the weather. As a consequence of economic reform and of closing down overcapacity in areas of steel, cement, glass and industrial production the air pollution levels in Beijing have fallen sharply. This has been the best spring that I have seen in Beijing since 2008 and the Olympic Games, when the same overcapacity production was temporarily closed down. This time around we hope that the closedown is permanent. If it is, I may even dare to propose that the 2018 HVTT be located to Beijing…

Mats Harborn

Vice President for Asia and Pacific