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.
That's a very sexy, fat ass.
This is code for "we need more intellectual property to steal and more cars to copy line for line".
Or, the need for foreign investment spurred by the problems of huge, bad loans by Chinese banks. (See - Japan 1980`s)
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.