Level playing field for private firms (2)

The word "opium" captured the essence of the automotive industry policy of China in the past 30 years. Under the guidance of such a policy, the best assets and resources of the native automotive industry are gained by the joint ventures. As for the large-scale state-owned companies, they have made great profits depending on their relations with the government and the technologies from the foreign partners. In contrast, the private enterprises and the local government-owned companies are often considered scattered, messy and bad, and in need of constant consolidation.

What's ironic is that nowadays the most successful self-owned brands are those once labeled "others" by the government - Chery, Geely, Great Wall and BYD. The self-owned brands launched by several large state-owned enterprises have failed to gain market share in spite of large-scale investments for several years. Therefore, the "joint venture self-owned brand" concept can only be termed a last-ditch effort by the government to achieve the target of self-owned brands accounting for 40 percent of the market.

The aim of cooperation between state-owned auto companies and the foreign parties in a joint venture so far has been based on higher output. Company officials often perceive R&D investment and self-developed brands as growth risks and so are not keen to change the current output-led growth pattern. The foreign company is wary of sharing key research and technology pertaining to production.

This tacit agreement between the parties in the joint ventures satisfies most of the needs of the government officials, as higher output ensures that foreign companies can tap the Chinese market without sharing key technologies. As a result, it has been relatively smooth sailing for most of the foreign auto JVs in China.

The execution of such a policy leads to over-dependence on the foreign company and the erosion of self-reliance built up my most state-owned enterprises. The SOE's role in the joint venture becomes more one of a financial investor and governmental liaison. The so-called self-owned brands have to put up the pretense of "joint venture self-owned" in order to live up to its name.

This kind of "opium" joint venture policy leads to the weird phenomenon of "opening-up to the outside and closing to the inside". The joint venture self-owned brand is just a new name for this old policy.

The 18th Communist Party of China National Congress has outlined its goal of establishing a fair and just society in China. We hope that government officials act in accordance with this policy and get rid of the "opium" obsession and extend the opening-up to inside the country as well as to the outside. Only this can create a fair and square competitive environment for privately-owned auto companies, and build up a strong domestic car industry.