China To Foreign Carmakers: Sorry, We're Closed!

If you are a car manufacturer, and you haven’t yet lined up your Chinese joint venture, don’t even bother to apply.

This is the message the Chinese government sends to the world in its new Foreign Direct Investment Industry Guidelines, which were released yesterday. These guidelines open more sectors of the Chinese industry to foreign investment, but they effectively close the door to foreigners who want to play in the increasingly overcrowded Chinese car industry.

Automakers have been removed from the list of industries the Chinese government “encourages foreign companies to invest in,” China Daily reports.

Of course this has nothing to do with the fact that growth in the Chinese auto market has come to a crawl, and that industry watchers have long been concerned of too much capacity spread over too many automakers. It’s a green thing.

The Chinese government also is no longer encouraging foreign investment in Chinese large coal-to-chemical operations and manufacturers of polycrystalline silicon. “The restrictions generally apply to industries that have excessively large capacities and that pollute the environment,” Zhang Xiaoji, senior researcher at State Council’s development research center told China Daily. Please practice your environmental responsibility and stay the heck out.

Keeping with the green meme, foreign investments into fuel efficient vehicles are still encouraged.

“Not encouraged” may sound a little oblique, but you get the picture. Nevertheless, Zhang expects that there will be “complaints about transparency in China’s market for foreign investment.” He recommends that his government “should try to provide detailed information about what will be restricted.” Senator Stabenow should wait with going ballistic until that information is available. Message to Stabenow: You constituents GM, Ford and Chrysler are already in and will be delighted to know that the club is closed to new members. Dayna Hart, a Shanghai-based spokeswoman at GM, expects “the new guideline to have minimal negative impact on GM’s future plans in China,” Bloomberg says.

Speaking of Stabenow, the noise about foreigners being kept out of the (possibly) lucrative Chinese EV market turned out to be premature. A draft version had limited foreign stakes in joint ventures that produce all of the chief components needed in new-energy vehicles to no more than a 50 percent. That language is not in the final version. “All chief components” has been changed to read “fuel cell batteries”. As a foreigner, you can happily set up shop to produce “all of the chief components needed in new-energy vehicles” all by yourself. Only if you want to produce “fuel cell batteries,” you need a Chinese partner, and you can only have 50 percent. More after the promised detailed information has become available.