Former Chinese Minster: "Joint Ventures Are Smoking Dope"

Bertel Schmitt
by Bertel Schmitt
former chinese minster joint ventures are smoking dope

If you want to make cars in China, you need a joint venture partner. The Chinese joint venture partners have done well. 98 percent of last year’s sales of central government-owned Dongfeng came from joint ventures with Nissan, Honda, and Peugeot. Largest Chinese automaker SAIC derives 60 percent of its sales from made-in-China GM and Volkswagen cars.

That policy “is like opium. Once you’ve had it you will get addicted forever,” said former machinery and industry minister, He Guangyuan.

The influential ex-minister and former Standing Committee member gave an interview to the Chinese versions of Yahoo Auto , with an excerpt provided by Fang Yan of Reuters:

“From central authorities to local governments, everyone has been trying hard to bring in foreign investment. But so many years have passed and we don’t even has a one brand that can be competitive in the auto world. I feel red-faced.”

Reuters points out that it is extremely rare for current and even former senior government officials to publicly criticize an existing policy. Often, public utterances of former officials are meant to test the waters and could signal a shift. But a shift in which direction? Is the former minister suggesting to open the doors completely to foreign automakers, so that the cold wind of competition will wake up the Chinese industry from its Opium-induced slumber?

Dongfeng-Nissan President Kimiyasu Nakamura watches Yao Bin, Huang Kai Fong, and Ye Lei

China’s failure to create strong indigenous brands has been much discussed in China. China’s own brands lose market share to joint venture brands. A few years ago, the Chinese government started to strongly suggest to all joint ventures that it would be a great idea to launch an independent Chinese brand that is owned by the joint venture. The thinking was that this way, access to foreign technology would become easier.

It did not work out that way. Says Reuters:

“But instead of developing a car from scratch that would allow Chinese partners to claim half the patent rights and obtain know-how from their foreign partners, all the JVs simply took an existing foreign car model and only made a few changes to “create” a new JV car.”

From reading the interview, it sounds like the minister is going to a different direction. He praises Great Wall, one of the few Chinese car companies that start to make a name for themselves abroad.

“One should focus on support for the independent brands,” the former minster suggests.

As long as China’s state owned enterprises can indulge in being joint venture partners of the large multinationals, as long as the government fleet looks like the parking lot of Audi, the ex minister’s recommendations will fall on deaf ears.

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  • Icemilkcoffee Icemilkcoffee on Sep 04, 2012

    This is the same complaints that used to be aired about a lot of the 'tranplant' car factories here in the US. Americans were complaining that all the design work, engineering, and even engine assembly sometimes is done in Japan, and only final assembly is done in the US. That was true in the beginning. But as time went by, most of the japanese carmakers established design and engineering firms here in the US and started designing for the US market. I believe the same will happen in China. But whether it's a good idea or not is highly debatable. Personally I think every one of the 'designed in America for America' japanese car, have been abject failures (even though most of them have sold very well- another tragedy)

    • 28-Cars-Later 28-Cars-Later on Sep 04, 2012

      "Personally I think every one of the ‘designed in America for America’ Japanese car, have been abject failures (even though most of them have sold very well- another tragedy)" Agreed.

  • Outback_ute Outback_ute on Sep 04, 2012

    It does sound as though the minister is not making the same point as Reuters, because Great Wall also "simply took an existing foreign car model and only made a few changes to “create” a new JV car", or at least in Great Wall's case they took a combination of different parts from past vehicles, with a little new sheetmetal. I don't believe they have built a car from scratch.

  • Wolfwagen I would rather have an annual inspection that may catch something early or at least the driver can be informed of an impending issue. Government vs private is another issue and unscrupulous mechanics is another.On a slightly different topic is the inspection of salvage or rebuilt cars. In NYS it is strictly to ensure that stolen parts were not used to rebuild the vehicle. I would rather see an inspection to ensure that the vehicle has been properly put back together.
  • PeterPuck For years, Ford has simply reworked existing designs originating from Europe and Japanese manufacturers, not being capable of designing a decent car in the USA.What’s the last clean sheet design from the USA? The 1986 Taurus?And they still can’t manage to get things right.why is this? Are they putting all of the competent engineers and designers on the F150? Is woke diversification affecting them, as some rumours suggest? Are they rewarding incompetence?
  • Brandon What is a "city crossover"?
  • Tassos What was the last time we had any good news from Ford? (or GM for that matter?)The last one was probably when Alan Mulally was CEO. Were you even born back then?Fields was a total disaster, then they go hire this clown from Toyota's PR department, the current Ford CEO, Fart-ley or something.He claims to be an auto enthusiast too (unlike Mary Barra who is even worse, but of course always forgiven, as she is the proud owner of a set of female genitals.
  • Tassos I know some would want to own a collectible Mustang. (sure as hell not me. This crappy 'secretary's car' (that was exactly its intended buying demo) was as sophisticated (transl. : CRUDE) as the FLintstone's mobile. Solid Real Axle? Are you effing kidding me?There is a huge number of these around, so they are neither expensive nor valuable.WHen it came out, it was $2,000 or so new. A colleague bought a recent one with the stupid Ecoboost which also promised good fuel economy. He drives a hard bargain and spends time shopping and I remember he paid $37k ( the fool only bought domestic crap, but luckily he is good with his hands and can fix lots of stuff on them).He told me that the alleged fuel economy is obtained only if you drive it like a VERY old lady. WHich defeats the purpose, of course, you might as well buy a used Toyota Yaris (not even a Corolla).