China removes restrictions on investment by foreigners in its automotive industry

China removes restrictions on investment by foreigners in its automotive industry

FineAuto

From January 1, 2022, the Chinese authorities will allow foreigners to be 100 percent owners of car factories in the PRC. There will no longer be a requirement to establish a joint venture with local manufacturers.

In China, since 1994, there has been a rule according to which foreign investors can create production in China only with the participation of a Chinese partner and own no more than 50 percent of the joint venture. Thus, the joint ventures FAW-Volkswagen, BMW Brilliance, SAIC-GM, Changan Ford, Dongfeng PSA, GAC Mitsubishi, Beijing Benz and others appeared. But from next year, foreigners will no longer have to take such a step.

This is stated in the message of the Ministry of Commerce and the National Development and Reform Commission, the country’s main economic planning agency, told Forbes.

Joint venture schemes in China have been designed to provide local companies with access to modern technology without transferring the money earned from the production of goods abroad to a large extent.

Liberalization was carried out in stages, starting in 2018, when the maximum allowable share of ownership in a joint venture for foreigners was increased to 70%. And only for Tesla in the same 2018, the PRC government made a special permit for the construction of the “Gigafactory” in Shanghai, which remains fully owned by the American company. It began mass production of electric cars in 2019.

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