Set the tone! China will completely lift restrictions on foreign investment access in the manufacturing sector
On October 18, according to Xinhua News Agency, President Xi Jinping delivered a keynote speech at the opening ceremony of the third "Belt and Road" International Cooperation Summit Forum. On supporting the construction of an open world economy, Xi Jinping said that China will create a "Silk Road e-commerce" cooperation pilot zone, negotiate free trade agreements and investment protection agreements with more countries, and completely abolish restrictions on foreign investment in the manufacturing sector.
The Chinese government has always been committed to promoting high-level opening up to the outside world. Since 2017, the negative list for foreign investment access has been revised for five consecutive years. The 2021 version of the negative list for foreign investment access in national and pilot free trade zones has been reduced to 31 and 27, respectively. Restrictions on foreign equity ratios have been lifted or relaxed in many industries and fields such as seed industry, automobile, ship and aircraft manufacturing, securities, banking, insurance, and vocational training, creating more market opportunities for foreign investors.
In the field of automobile manufacturing, the original intention of China's restriction measures on foreign equity ratio is to protect the national automobile industry. In 1994, China's automobile industry was still in its infancy. That year, China introduced the "China Automobile Industry Policy", which stipulated that foreign car companies could only form joint ventures with two domestic car companies at most, and their shareholding in the joint venture could not exceed 50%.
However, with the gradual growth of domestic automobile brands, China no longer relies on the passive development strategy of "exchanging market for technology". Therefore, in recent years, all restrictions on foreign investment to equity ratios have been lifted.
In June 2017, the National Development and Reform Commission and the Ministry of Industry and Information Technology jointly issued the "Opinions on Improving the Management of Automotive Investment Projects", which stipulated that newly established Sino foreign joint venture pure electric passenger vehicle enterprises would no longer be subject to the "two quota" restriction.
Since the beginning of 2018, the new version of the negative list for foreign investment access has been officially implemented. In the field of automobile manufacturing, compared to the 2020 version of the document, the new list clearly states that the restrictions on foreign ownership ratios in passenger car manufacturing will be lifted, as well as the restriction that the same foreign company can establish two or fewer joint ventures in China to produce similar vehicle products.
In terms of specific measures, the automotive industry will implement transitional opening-up by type, and in 2018, the restrictions on foreign equity ratios for special vehicles and new energy vehicles will be lifted; The restriction on foreign ownership of commercial vehicles will be lifted in 2020; In 2022, the restriction on foreign ownership of passenger cars will be lifted, and the restriction on joint ventures not exceeding two will also be lifted.
So far, the restrictions on foreign equity ratios in the automotive industry have been fully lifted.
With the relaxation of the joint venture stock ratio policy, several joint ventures in the automotive industry have completed stock ratio adjustments in recent years. Among them, BMW increased its stake in Brilliance BMW to 75% in 2018; In 2017, Volkswagen and Jianghuai Automobile established the new energy joint venture company Jianghuai Volkswagen, which is also Volkswagen's third joint venture in China; In December 2020, Volkswagen increased its stake in Jianghuai Volkswagen to 75% and took over the management of the company. The joint venture was officially renamed Volkswagen (Anhui) Co., Ltd.
In addition, Tesla has also become the first foreign-owned automaker to enter the Chinese market. Nowadays, Tesla's Shanghai Gigafactory has become an important manufacturing base for Tesla worldwide. On September 6th of this year, Tesla's Shanghai Gigafactory completed the production of its 200000th vehicle.
In the field of commercial vehicles, Sichuan Hyundai also completed its share change as early as 2020, with Hyundai Motor Co., Ltd. of South Korea holding 100% of the shares and renamed as Hyundai Commercial Vehicle (China) Co., Ltd., becoming the first foreign-owned commercial vehicle enterprise in China.
Regarding the comprehensive lifting of stock ratio restrictions in the automotive industry, Cui Dongshu, Secretary General of the National Passenger Car Market Information Joint Committee, stated in an interview with First Financial News that only through cooperation and win-win outcomes across the entire industry can new energy vehicles achieve success, achieve good results, and promote higher-level development of intelligent electrification. The comprehensive opening-up policy of our country to increase the vitality of the Chinese new energy vehicle market is conducive to meeting the differentiated car buying needs of consumers in all aspects and driving the all-round development of the domestic market with higher quality. It is also beneficial for foreign-funded automobiles to deeply cultivate in China and fully participate in high-quality and high-level competition.
At the regular press conference held by the Ministry of Commerce on October 12th, spokesperson He Yadong stated that opening up to the outside world is a fundamental national policy of China. In terms of continuously expanding market opening, we will continue to reasonably reduce the negative list of foreign investment access, study the feasibility of further canceling or relaxing restrictions on foreign equity ratios, and attract more global factors to enter the Chinese market. At the same time, we will continue to work with relevant departments and localities to implement the State Council's "Opinions on Further Optimizing the Foreign Investment Environment and Increasing the Attraction of Foreign Investment", strive to build a market-oriented, rule of law, and international business environment, and provide better services for foreign-funded enterprises.
Information source: Phoenix Net · First Financial
