China to Release New Policy for Car Industry

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Last updated at: (Beijing Time) Tuesday, June 10, 2003

China to Release New Policy for Car Industry

The Chinese government is putting the finishing touches on a long-awaited new policy for the fast-growing car industry and is expected to relax some of its controls. The government will relax some of its controls over the industry, though there will be no major breakthroughs in the new policy compared with the 1994 version.

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The Chinese government is putting the finishing touches on a long-awaited new policy for the fast-growing car industry and is expected to relax some of its controls.

The State Development and Reform Commission is currently working on the new draft, and inviting opinions from carmakers of the local and foreign variety.

According to the new draft, the government will relax some of its controls over the industry, though there will be no major breakthroughs in the new policy compared with the 1994 version.

The requirements regarding the equity structure of Sino-foreign automobile and motorcycle joint ventures, one of the most sensitive issues for the industry, will remain basically unchanged. The Chinese side must have a stake of at least 50 percent.

However, this requirement will not apply if Chinese and foreign motor manufacturers set up joint ventures in China's export-processing zones and if their products are exclusively for export.

Foreign automakers are allowed to establish a maximum of two joint ventures in China, with local partners producing the same category of products. However, more joint ventures can be set up through mergers and acquisitions of other companies in China.

Currently, the US giant General Motors has formed four joint ventures in China. Many other foreign automakers such as Toyota and Volks Wagen are also seeking more than two joint ventures through merger and acquisition.

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