domestically produced auto sales and sharpen the competitive edge of imported cars.

On July 18, the WTO ruled against China in its auto parts dispute with the United States, the EU and Canada. China argued that higher tariffs should be charged for imported auto parts whenever they accounted for 60 percent or more of the value of a final vehicle. The move was an attempt to prevent foreign auto manufacturers from bringing vehicle parts into the country and reassembling them to avoid higher tariffs on completed vehicles. But foreign auto manufacturers, discontent with the move, argued that China violated its WTO commitment.

It was the first time that the WTO had ruled against China in a trade dispute. China still has the right to appeal, but if the ruling is not overturned, it must reduce its tariffs on auto parts.

If the ruling stands, industry analysts expect that prices of imported autos, especially luxury cars, would fall sharply. Despite fierce market competition, demand for foreign luxury cars has surged. In late July, FAW-Volkswagen Audi said it sold approximately 60,000 vehicles on the mainland, marking the biggest growth rate of 23 percent since the joint venture was founded two decades ago.

Analysts also expect demand for luxury cars to increase further if auto parts import tariffs are cut.

M&As Soar

Mergers and acquisitions (M&As) have increasingly become the top choice for domestic companies that want to expand.

According to a report by ChinaVenture Investment Consulting Ltd., there were 169 M&A deals in China in the second quarter of this year, up 225 percent from the first quarter.

Of these 169 deals, 129 disclosed the transaction value, which totaled $15.5 billion, up 137 percent.

ChinaVenture said M&A deals occurred most often in the manufacturing industry, comprising 22.4 percent of the total transactions. The real estate industry had the biggest share by value, or about 46 percent of the total.

Cross-border mergers expanded appreciably, with 15 M&A deals by Chinese companies in the second quarter, up 24.7 percent.

The report listed several reasons for the M&A wave. One was a surge in corporate profits in 2007, which, combined with the proceeds from initial public offerings, provided companies with capital. Another reason was the rising price of raw materials, which motivated Chinese strategic investors to seek deals in energy and mining.

Catering and Hotel Industry Beefing Up

China's catering and hotel market boomed in the first half of this year, with total sales revenue of 720.7 billion yuan ($106 billion), an increase of 24 percent year on year. The growth rate was 6.2 percentage points more than the year-earlier period, according to a report by the Ministry of Commerce (MOFCOM).

MOFCOM said an increase in the number of rural tours and wedding receptions contributed to the first-half market boom, both up 30 percent or more.

MOFCOM predicts the industry will remain in high gear during the next half of this year. It estimated the industry's total sales would surpass 1.538 trillion yuan ($225 billion) for the entire year. Catering expenses per capita are expected to reach 1,158 yuan ($170), up 24 percent compared to 2007.