China regulator may break the rule of 50/50 JV in auto industry: expert
- Source: Gasgoo
- [08:15 November 11 2010]
- Comments
Deputy Director of the State Council Development Research Center, Liu Shijin, recently said at the "Sino-German automobile industry forum" that letting go the bottom line that requires foreign vehicle manufacturers to enter 50:50 joint ventures (JVs) with the local manufacturers for their manufacturing and assembly operations in China will enhance market competition, eeo.com.cn reported Wednesday.
Gregoire Olivier, President of PSA Asia-Pacific Operations, showed his agreement when hearing the remarks on the spot.
Since China's automobile industry is now at a sensitive policy- making stage, so an expert with the State Council making such remarks in public possibly indicates that senior government officials have changed their attitude toward the rule of 50/50 JV in the industry, which has lasted for 16 years since implemented in 1994, Chinese media experts predicted.
As the country's auto market develops rapidly in recent years, foreign vehicle manufacturers all start to criticize the policy, saying that the 50:50 equity proportion is another protective behavior in international trade after the "constitute the vehicle characteristics of auto parts imports management measures" issued by the Chinese government.
Earlier, some top executives from foreign vehicle manufacturers also said the policy has decreased the efficiency of joint venture investment, adding that the complex decision-making process has often hindered manufacturers in seizing good market opportunities.
Large domestic vehicle manufacturers, however, say that if not sticking to the bottom line of equity stake in a joint venture, foreign manufacturers will be able to control the China market more easily and instead the country's automobile industry will be severely hit.
Experts say whether or not the rule will be broken in the current period, China will agree to remove the 50 percent foreign equity limit for joint-ventures upon accession in the long run, and no matter what happens, independent innovation will always be a real challenge for Chinese vehicle manufacturers and Chinese automotive industry.
