Currently, the Chinese automotive market is the biggest one in the world, with the country being the number 1 car producer and consumer. But to protect its own industry, China’s government has imposed restrictions on foreign ownership of local companies.
Basically, any foreign car maker that wants to open a plant 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%. Moreover, at the end of the cooperation, the Chinese automaker can use its partner’s know-how, gaining technological and operational expertise.
However, Xu Shaoshi, chairman of the National Development and Reform Commission, recently said the government is looking into lifting the policy (which is in effect since 1994), but Chinese automakers urge for the foreign ownership cap to remain for at least another five to eight years.
This is to ensure the Chinese companies will be ready for what the competition will throw at them, with CAAM (China Association Of Automobile Manufacturers) saying that local companies are too weak to compete with the likes of GM and VW.
Bloomberg reports that Ye Shengji, deputy secretary-general of the China Association of Automobile Manufacturers, said in an interview on Saturday in Tianjin that the government can lift the embargo gradually on different parts of the industry according to their maturity.
For example, the motorcycle industry will see the cap dissolved in one or two years, followed by the commercial vehicles in three to four years.
“While removing the caps is something that can’t be stopped, it should happen in a gradual and orderly manner and not all at one go. If you open up fully now to foreign companies, those domestic brands and privately owned automakers won’t survive because the entire supply chain will be in foreign hands,” Shengji said.
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