Breaking News
0

China to open auto market as trade tensions simmer

EconomyApr 17, 2018 12:30PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Cars are parked at the Great Hall of the People during the opening session of the 19th National Congress of the Communist Party of China in Beijing

By Norihiko Shirouzu and Adam Jourdan

BEIJING/SHANGHAI (Reuters) - China will scrap a limit on foreign ownership of automotive ventures by 2022 in a major policy shift to open up the world's biggest car market, even as trade tensions simmer between Washington and Beijing.

In a move welcomed by Germany's powerful car industry, China's state planner said on Tuesday it would remove foreign ownership caps for companies making fully electric and plug-in hybrid vehicles in 2018, for makers of commercial vehicles in 2020, and the wider car market by 2022.

China imposed ownership restrictions in 1994, limiting foreign carmakers to owning no more than a 50 percent share of any local venture. Forcing foreign carmakers to work with Chinese firms was designed to help domestic carmakers compete.

The latest policy move marks a new twist in a see-saw week for Chinese trade. The country slapped a temporary fee on U.S. sorghum after the United States banned American companies from selling parts to Chinese phone maker ZTE Corp (HK:0763) (SZ:000063) on Monday.

Germany's BMW (DE:BMWG), which has a big stake in trade relations between Beijing and Washington as the biggest exporter of vehicles from the United States to China, welcomed the car decision.

"We believe a more free and flexible business environment will benefit both Chinese and foreign companies in China and the Chinese economy. BMW will continue pursuing mutual benefit and win-win solutions with the local partners," the carmaker said.

BMW added it remained committed to expanding a joint venture with China's BBA and was still discussing how to structure a new partnership for its Mini brand with China's Great Wall Motors.

Analysts said the main beneficiaries, at least in the short term, would be manufacturers focused on new-energy vehicles, including U.S. electric carmaker Tesla (O:TSLA), which has been seeking to set up its own plant in Shanghai.

Tesla chief Elon Musk said last month that China's tough auto rules for foreign businesses created an uneven playing field as scores of local and international companies compete for a slice of China's fast-growing market for "green" cars.

Tesla declined to comment.

The looser rules are likely to raise pressure on domestic carmakers, potentially hitting the likes of Warren Buffett-backed BYD Co (SZ:002594).

Traditional automakers will need to wait longer for any direct impact and could face more risks than opportunities in ditching their joint venture structures, said James Chao, Asia-Pacific chief at consultancy IHS Markit.

"Foreign companies may already be in a box (in China)," said Chao, adding the joint venture structure was now so ingrained that many might not want to change it.

"While getting a bigger share could be advantageous in terms of boosting profits, they may actually be already too dependent on their Chinese partners to sever those ties."

A spokesman for Germany's Volkswagen (DE:VOWG_p) said: "We will carefully analyze whether this opens up new opportunities for Volkswagen and its brands."

Daimler (DE:DAIGn), parent company of Mercedes-Benz, said it was happy with its current business set-up in China, adding it was watching regulatory developments with interest.

JOINT VENTURES

A senior General Motors Co (N:GM) executive said last week the U.S. carmaker, even without ownership caps, would not cut ties with local partner SAIC Motor Corp (SS:600104). The source, who asked to remain anonymous because of the sensitivity of the matter, added GM would not be as successful in China on its own.

In a statement on Tuesday, GM said its growth in China was "a result of working with our trusted joint venture partners. We will continue to work with our partners to provide high-quality products and services to consumers."

A Ford Motor Co (N:F) said the automaker was encouraged by the announcement and looked forward to learning more. Japan's Nissan Motor Co (T:7201) said it would monitor developments and plan accordingly.

Honda Motor Co (T:7267) said its China business had grown on the back of strong local tie-ups. "At the moment we have no plans to change our capital relationship," a spokesman said.

China will also scrap limits on foreign ownership in the shipbuilding and aircraft industries in 2018, the National Development and Reform Commission (NDRC) said.

Airbus (PA:AIR) and Boeing (N:BA) did not immediately respond to requests for comment.

The highly symbolic moves in autos come after President Xi Jinping said last week China would scrap ownership limits "as soon as possible."

China, which said the easing of autos rules was unrelated to that dispute, is keen to portray itself as open for business. Its ties with the world's largest economy, though, are becoming increasingly fraught.

The United States has banned American companies from selling parts to telecoms equipment maker ZTE Corp for seven years, creating a new fissure in Sino-U.S. ties.

China to open auto market as trade tensions simmer
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email