China Boosts Local Brands in Road Map for Relaxed Auto Joint-Venture Restrictions

(Beijing) — A year after first indicating it would relax strict ownership limits on foreigners in car joint ventures, Beijing has issued a new plan outlining goals for building up the nation’s own auto brands on the road to easing current rules.

China currently stipulates that local partners must hold 50% or more of all car-making joint ventures, and that any single foreign company is limited to two joint ventures making any particular type of vehicle. Foreign companies have long complained of the limitations, and Washington is pushing for relaxation of those policies in a bilateral investment treaty being negotiated with Beijing.

Last year Beijing first indicated a policy change could be coming when Miao Wei, chief of the Ministry of Industry and Information Technology (MIIT) said at an industry event the limitations could be relaxed in as little as three to five years, and as long as eight years.

The newly released plan provides a broader vision of how the industry will develop, saying China will aim to transform itself from the world’s largest auto market to a powerhouse car manufacturer in the next 10 years, according to a newly issued document published jointly by the MIIT, the National Development and Reform Commission (NDRC) and the Ministry of Science and Technology.

The document states that some Chinese domestic brands should attain globally recognized status by 2020, and that a Chinese brand should be among the world’s top 10 automakers by 2025.

China made its original limitations in 1994 to protect its domestic industry, over concerns the market could become dominated by foreign brands like General Motors Co. and Volkswagen, nearly all of which have formed joint ventures. But Chinese brands like Geely and GAC now account for about 50% of the domestic market, which has been the world’s largest for the last eight years, with 28 million vehicles sold last year.

The new document also says that China aims to become a major car exporter, with an aim of selling domestic brands in Western markets by 2020. China already exports some of its domestic brands to developing markets, and has also recently begun exporting China-made GM- and Volvo-brand cars to the U.S.

Contact reporter Yang Ge (geyang@caixin.com)