The government of the world’s biggest automotive market has, so far, imposed restrictions on foreign automakers in order to protect its own industry, but it has now expressed its desire to lift the cap.
Any foreign car maker that wants to set up manufacturing plants in China has to do it through a partnership or joint venture with a domestic company, of which it can’t own more than 50%. Additionally, after the partnership ends, the Chinese car maker is free to use the foreign partner’s technological expertise.
However, Bloomberg reports that Xu Shaoshi, chairman of the National Development and Reform Commission, said the government is looking into lifting the embargo, which operates in the country since 1994. As a result, China, world’s biggest producers of automobiles is not much of an exporter, as all of the vehicles made through joint-ventures are exclusive to the country. On top of that, all but one of China’s top selling cars last year belonged to domestic brands.
Backing the lift is Li Shufu, the billionaire chairman of Volvo Cars parent company Zhejiang Geely Holding Group Co., who said it would encourage competition. Local automakers protected by the joint venture rules, on the other hand, have warned that allowing foreign automakers to become independent would kill the Chinese brands “in the cradle”.
This is not the first time the government proposed lifting the limit, but it has met resistance from local car plants in the past. No surprise there, so it’s interesting to see whether this time this plan gets through.
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