China loosens Joint Venture restrictions leading to more opportunities for foreign automobile manufacturers

According to a new ‘roadmap’ released by the Ministry of Industry and Information Technology (MIIT) in April, the Chinese administration will open up the restriction on joint venture ownership.

This change in policy has arisen out of China’s bold new target to reach 35 million vehiclesales per year, by 2025.

In order to hit their targets, the MIIT appears to have decided to adopt a two-pronged strategy.

The first is to restructure the Chinese auto-industry. For a long time China has adopted a 50:50 policy. This means that foreign investors like Ford, Audi or Nissan are only entitled to own a maximum 50% stake in a Chinese auto company. This rule stems from the older Chinese administration’s policy of containing and controlling the influence that foreign investors had on their economy. But as China further industrializes a more liberal approach, joint foreign ventures are being favored.

The new and audacious policy set by the MIIT, which includes attempting to get Chinese branded vehicles in the top 10 on sales, will require major policy shifts, part of which will include loosening the restriction on joint venture foreign ownership. This will be done to increase the speed of manufacturing and raise the technological quality of the vehicles.

The second approach, which is reliant on the first, is to increase foreign exports. The Chinese administration has identified developed countries as their major sales targets over the next decade. A substantial part of this goal will be to focus on building vehicles with improved battery technology for electric vehicles in recognition of the more green-minded western world.

Although the specific details of how this new policy will be rolled out are yet unknown, as noted in in a notice from China Spokesperson, Johanna Barth, European car manufacturers should feel positive, and rest assured that any current deals with regards to joint foreign ventures currently in place will be unaffected.

The main aim is to create a win-win situation for both Chinese manufacturers and internationally recognized brands. But there is still a long road ahead.

All car manufacturers must obtain the CCC certification for their vehicles so that they can be sold on the Chinese market. Electric vehicles also need CCC certification for the Chinese market. For further information regarding CCC please don’t hesitate to contact us.

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