[Asia Economy Reporter Kim Bo-kyung] China will fully open its automobile manufacturing market, which has restricted foreign ownership, starting January next year.
According to the state-run Global Times and Pengpai (澎湃) on the 28th, China's Ministry of Commerce and the National Development and Reform Commission announced in the "2021 Special Management Measures for Foreign Investment Access" released the previous day that they will no longer restrict foreign investment shares in the Chinese passenger car manufacturing sector.
As a result, the requirement for foreign capital to form joint ventures with Chinese companies when establishing passenger car production plants in China will be eliminated.
Chinese authorities announced the automotive industry policy in 1994, limiting foreign ownership in complete vehicle manufacturing companies to no more than 50%. Following increasing pressure for market liberalization, the restriction on shares in eco-friendly vehicles was lifted in 2018, and the restriction on commercial vehicle shares was also removed last year.
Tesla's 100% ownership of its local Chinese subsidiary in 2019 was made possible due to regulatory easing. Similarly, Hyundai Motor secured 100% ownership of its Chinese commercial vehicle subsidiary, Sichuan Hyundai Motor Co., Ltd., in January last year after the commercial vehicle share restriction was lifted.
There is also an interpretation that China's move to open the automobile manufacturing market reflects the growth of Chinese companies. As of November this year, sales of automobiles by major joint ventures in China dropped sharply by 23% year-on-year to 780,000 units, while sales of Chinese domestic brands increased by 2% to 830,000 units.
While Chinese authorities have fully opened the passenger car manufacturing sector through this measure, they still restrict or prohibit foreign investment in 31 sectors including rare earths, film production and distribution, and tobacco.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
