Monday 23 April 2018

China to ease restrictions on foreign ownership of carmakers

Officials deny the move is related to the trade dispute with US president Donald Trump.

Motorists drive past China’s Ministry of Commerce in Beijing (Andy Wong/PA)
Motorists drive past China’s Ministry of Commerce in Beijing (Andy Wong/PA)

By Joe McDonald

China will allow full foreign ownership of carmakers in five years, ending restrictions that helped to fuel its trade dispute with US President Donald Trump as it promotes electric car development.

The change would scrap rules that require global carmakers to work through state-owned partners, an arrangement that forces them to share technology with potential competitors.

It was unclear whether that might mollify Mr Trump, who has threatened tariff hikes on 150 billion US dollars of Chinese goods in response to complaints Beijing pressures foreign companies to hand over technology.

The step reflects growing official confidence in China’s young but fast-growing carmakers and a desire to make the industry more flexible as Beijing promotes development of electric cars.

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Chinese President Xi Jinping had hinted restrictions would be eased (Naohiko Hatta/AP)

Carmakers had been waiting for details since President Xi Jinping announced in a speech last week that ownership restrictions would be eased and auto import duties reduced.

Some private sector analysts saw Mr Xi’s promise as an attempt to placate Mr Trump, but Chinese officials said the plans had nothing to do with the trade dispute.

Tuesday’s announcement coincided with a Commerce Ministry order to importers of US sorghum to post bonds to pay possible anti-dumping duties in a separate dispute.

It said preliminary results of a trade probe found US sorghum, a grain used as animal feed and in alcohol distilling, was sold at improperly low prices that hurt Chinese farmers.

Following a five-year transition period, all ownership restrictions will be lifted China's National Development and Reform Commission

Limits on foreign ownership of electric vehicle producers will be eliminated this year, the Cabinet’s planning agency said.

That will be followed by a similar repeal for makers of commercial vehicles in 2020 and passenger vehicles in 2022.

“Following a five-year transition period, all ownership restrictions will be lifted,” said the announcement by the National Development and Reform Commission.

Until now, global carmakers such as General Motors and Volkswagen have been allowed to own no more than 50% of a joint venture with a Chinese partner and were limited to two ventures.

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A Geely car (PA)

Carmakers complied because they gained access to China’s populous market, which passed the United States in 2009 as the world’s biggest by number of vehicles sold.

Sales of sedans, SUVs and minivans last year totalled 24.8 million units, about 55% of which were American, European, Japanese and Korean brands.

Independent domestic brands such as Geely, which owns Sweden’s Volvo Cars, SUV maker Great Wall and electric car brand BYD Auto are developing technology and increasing exports.

Geely has bought a nearly 10% stake in Daimler AG, becoming the German carmaker’s biggest shareholder and gaining leverage to push for technology sharing.

State-owned Dongfeng Motor Group, which has joint ventures with Nissan Motor and other brands, bought a 14% stake in France’s PSA Peugeot Citroen in 2014.

Press Association

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