Monday 20 January 2020

Foreign companies 'forced to partner with Chinese firms'

Currently, foreign carmakers must form joint ventures in China to make cars locally, but overseas component makers are not subject to any ownership requirements
Currently, foreign carmakers must form joint ventures in China to make cars locally, but overseas component makers are not subject to any ownership requirements

Christoph Steitz, Edward Taylor & Andreas Cremer

Three German car parts suppliers have been told by China they can no longer manage their Chinese units independently but need to form partnerships with local peers, the chief executive of auto parts maker ElringKlinger said.

"The Chinese state has told several (German car) suppliers that they are no longer allowed to operate their Chinese subsidiaries on their own but only as part of a joint venture in the future," Stefan Wolf was quoted as saying by the Stuttgarter Zeitung newspaper.

He said he knew of three companies that now needed to look for a Chinese partner, but did not say which, adding ElringKlinger was not affected. "If that were to happen, it would be an attack on intellectual property - 50pc of the company is being taken away - this, effectively, is expropriation," Mr Wolf said.

"I believe this is an attempt to make up leeway in terms of know how and innovation."

German auto parts maker Robert Bosch GmbH's China unit said it has not received any notification from Chinese authorities with regard to changes of foreign investment policies related to the automotive component industry.

"We believe that foreign investment will continue to play a vital role in China's economic development and foresee improving investment environment of fairness and open competition in China," Bosch said in an statement.

Continental, another major German automotive supplier, could not be reached for comment at its headquarters. The China units of US engine maker Cummins and France's Faurecia said they're not aware of any policy changes.

Chinese investment bank China International Capital Corp said in a report that the Chinese government, which has the power to approve foreign investments, will more likely urge foreign component makers to "voluntarily" seek Chinese partnership during the approval process, rather than make drastic policy changes in the short term.

Currently, foreign carmakers must form joint ventures in China to make cars locally, but overseas component makers are not subject to any ownership requirements.

Earlier this month, the European Union Chamber of Commerce in China expressed concern over a recent series of antitrust investigations, saying China, the world's largest car market, was using strong-arm tactics and appeared to be unfairly targeting foreign firms.

At the time, the chamber said it had "received numerous alarming anecdotal accounts from a number of sectors that administrative intimidation tactics are being used to impel companies to accept punishments and remedies without full hearings."

The auto sector has been put under scrutiny from China's National Development and Reform Commission, which has investigated car companies amid accusations by state media that global car makers are overcharging consumers.

"The Chinese state is noticing that 50pc of the automotive world is taking place in China and that its manufacturers are not benefiting accordingly," ElringKlinger's Mr Wolf said.

European car brands including Volkswagen's Audi, BMW and Mercedes-Benz are scrambling to lower prices for new cars and spare parts in an effort to appease Chinese regulators who have accused some of them of anti-competitive behaviour.

Irish Independent

Also in Business