China To Relax Restrictions On Foreign Joint Venture Ownerships

Cameron Aubernon
by Cameron Aubernon
china to relax restrictions on foreign joint venture ownerships

China’s Ministry of Industry and Information Technology, in line with President Xi Jinping’s desire for opening the domestic economy to private and foreign investors, plans to relax restrictions on foreign ownership of joint ventures with local automakers in the face of those warning such a move would be the beginning of the end of the Chinese local auto industry.

Automotive News China reports the organization will join their fellow ministries in developing a plan to implement the proposed deregulation sometime in the future. Currently, foreign companies are mandated to form joint ventures with local companies in order to do business in China, while foreign shareholders are barred from owning more than half of said ventures.

Meanwhile, the China Association of Automobile Manufacturers, representing local interests, voiced their opposition in a statement following the announcement by ministry spokesman Xiao Chunquan:

Relaxing the current foreign ownership restrictions will wipe out Chinese brands. Foreign companies can totally use the competitive advantage of their global supply chains to support a price strategy to kill Chinese brands in the cradle.

The death spiral may have already begun, however, as Chinese consumers opt for foreign makes such as Buick, Volkswagen and Peugeot. Local brands lost 4.9 percent market share in 2013 from the year before, hovering around 38.4 percent as Volkswagen AG became the No. 1 foreign automaker over General Motors during a prosperous run by all foreign manufacturers bolstered by higher industry sales.

Join the conversation
  • Corey Lewis Corey Lewis on Feb 21, 2014

    That's a very sexy, fat ass.

    • See 9 previous
    • Rentonben Rentonben on Feb 22, 2014

      @redav You can... and oddly enough there's a weird cross market of Opel, US Buick and Chinese Buick owners swapping logos - I helped a Swiss fella get Buick logos, and trim for his Opel.

  • Iamwho2k Iamwho2k on Feb 21, 2014

    This is code for "we need more intellectual property to steal and more cars to copy line for line".

    • LALoser LALoser on Feb 21, 2014

      James2: Happened to someone I know. He designed and was producing specialty tools in the DFW area, then was lured to Communist China to save tons o' cash. A small factory was funded by the government, all workers were sent, things were great for three years. Then one day senior management and several lead people quit. They went up the road 3 km to a brand new factory turning out the same product for 2/3 or less the cost.

  • Readallover Readallover on Feb 21, 2014

    Or, the need for foreign investment spurred by the problems of huge, bad loans by Chinese banks. (See - Japan 1980`s)

  • Trend-Shifter Trend-Shifter on Feb 22, 2014

    My speculation... First the China government may assume that the present joint ventures will not break up. The foreign automakers will not want to fall out of favor with the government. Second, China will want to pretend they trade fairly. How many more auto manufacturers are left that are not in China that they need to marry to a Chinese automaker? Third, I bet Tesla is behind the scenes questioning this trade policy with both US and China government officials. I would guess Tesla does not want to manufacture in China under a joint venture to TRY to maintain their IP. China wants Tesla to manufacture within in their border rather than be an import.