China to stop efforts to attract foreign investors in car manufacturing sector

Article by Christian Andrei, on January 1, 2012

China will end seven years of benefits for foreign investors in automobile manufacturing in order to allow for the "healthy development" of a market with sales growth dropping to a tenth of last year's pace. According to senior market analyst Jenny Gu at LMC Automotive in Shanghai, the benefits include reduced tariffs on imported facility equipment. Beijing has rearranged a list of technology and industrial sectors where it wants to encourage foreign investment, downgrading cars and placing more emphasis on domestic companies and emerging fields.

According to the Ministry of Commerce and the National Development and Reform Commission, foreign investment in more fuel-efficient automobiles will still be encouraged. Being the largest light vehicle market in the world, China has attracted billions of dollars in research spending and plant investments from international carmakers.

Volkswagen AG, Toyota Motor Corp. and General Motors Co., among others have operated in the country for years through joint ventures with local automakers and partners. They have also increasingly relied on China for profits and growth as European and North American markets mature.

Gu stated that it might be harder for automakers to get approval for new factories in the future unless they have an investment in new-energy vehicles. SAIC Motor Corp., the largest listed automaker in the country, increased 4.1 percent to 13.88 yuan in Shanghai trading on Friday. This is the company's largest gain in almost two weeks.

China needs to focus on nurturing strategic new industries in order to make its manufacturing more sophisticated and be more competitive globally, the National Development and Reform Commission said.

Topics: china

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