Chinese industry ministry seeking to loosen JV ownership limits

Article by Anita Panait, on February 25, 2014

The Ministry of Industry and Information Technology of China is seeking to relax ownership restrictions on joint ventures by foreign carmakers despite intense opposition from the China Association of Automobile Manufacturers. Currently, foreign carmakers are required to partner with local companies to be able to build vehicles in China.

Likewise, foreign shareholders are not allowed to own more than 50 percent of the joint ventures. During a recent press conference, ministry spokesman Xiao Chunquan remarked that the agency will join other ministries to determine how to implement the reforms, but did not provide a timeline for relaxing the restrictions.

The association, which has state-owned carmakers as key members, expressed the last strong opposition to any relaxation of the restrictions. "Relaxing the current foreign ownership restrictions will wipe out Chinese brands," the association said in a statement. It said that foreign carmakers could use the competitive advantage of their global supply chains to "support a price strategy to kill Chinese brands in the cradle."

The Ministry of Industry is taking action as the government has decided to further open the economy. The communist party issued the directive at a plenary meeting in November 2013.

Topics: china, joint venture

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