China adopts fuel-efficiency standards.

In early September, China's State Council approved the nation's first fuel economy standards for cars, sport utility vehicles (SUVs), and vans. (Pickup trucks and commercial vehicles are exempt.) Minimum standards will apply for each vehicle model, as they do in Japan, rather than the fleet average, with requirements based on vehicle weight. Standards will be introduced in two phases, with the first beginning July 2005 and the second, stricter phase starting in 2008.

China's new regulations are not as strong as semi-voluntary standards that the auto industry in Europe adopted to avoid formal regulations, but are more stringent than U.S. standards, which have not been tightened in two decades. Most smaller vehicles are expected to meet the initial set of standards, but heavier vehicles will have more difficulty. Manufacturers will have to invest in fuel-saving technologies if they are to continue selling large vehicles in China's rapidly growing market.

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Few Chinese owned private vehicles in the 1980s, but today there are more than 27 million of them and the nation ranks third worldwide (behind the United States and Japan) in auto manufacturing and sales. More than 4.5 million private vehicles were sold in 2003 alone. The result of this explosion in vehicle ownership has been soaring demand for oil. A decade ago, China was a net exporter of oil, but imports now account for 40 percent of demand. City streets are jam-packed with cars and pollution is again on the rise after a multi-year struggle to reduce urban emissions from coal plants and other sources. Fuel efficiency standards are aimed at slowing or reversing these trends and ensuring that foreign manufacturers bring their latest and best technologies to China.

The regulations are already encouraging behavior change on the part of manufacturers. Initially, auto executives complained about the stricter standards for heavier vehicles, but they have since begun improving their vehicles to meet them. Toyota recently announced that it will soon begin assembling gasoline-electric hybrid cars in China. There is a growing interest in hybrids and alternative energy vehicles, including diesel-electric and hydrogen buses.