Ministry of Industry and Information Technology: Orderly liberalization of the equity ratio of automobile joint ventures

The Chinese government will improve the domestic and foreign investment management system and orderly liberalize the equity ratio of automobile joint ventures. Ministry of Industry, Development and Reform Commission and Ministry of Science and Technology recently published the "Medium-term and long-term development plan for the automotive industry" (hereinafter referred to as the "plan") to disclose the above information.

The ratio limit for auto joint venture stocks is clearly stipulated in the 1994 edition of the "Automotive Industry Policy," and the 2004 edition and 2009 revisions retain the relevant contents. The “Automobile Industry Policy” stipulates that the proportion of Chinese shares in Chinese-foreign joint-venture production enterprises for automobiles as a whole shall not be less than 50%. At the same time, the same foreign company can only establish no more than two joint ventures that produce similar vehicles in China.

The reason for the above limitation is to protect China's autonomous auto industry from the impact of foreign-funded enterprises, and at the same time realize the purpose of “market-for-technology”. Now both the internal and external situations have changed.

On the one hand, the rapid development of China's auto industry has been ranked the world's largest auto market since 2009, and China's own brands have also gained market recognition. According to data from the Ministry of Industry and Information Technology, in 2016, China’s auto production and sales exceeded 28 million vehicles, ranking the first in the world for eight consecutive years, of which sales of Chinese brand vehicles accounted for about 50%.

On the other hand, the Chinese and U.S. governments are currently negotiating bilateral investment agreements, involving the limitation of auto ownership ratios. The U.S. side strongly challenges this issue. On April 18, the American Chamber of Commerce in China released the White Paper for American Enterprises in China in 2017. It also stated that the governments of China and the United States should list short negative lists during the negotiations.

The Ministry of Industry and Information Technology adheres to the protection attitude, but the release of the joint venture shares has limited the existing timetable. In April 2016, Miao Wei, Minister of the Ministry of Industry and Information Technology, disclosed at the Closed Door Summit of the China Automotive Forum: “If you grow for 8 years, it will be released within 3-5 years.” (For more details, please refer to “The existing timetable for the release of China’s automobile joint venture companies”)

At that time, Miao Wei stressed that auto companies must seize the time to enhance the competitiveness of local brands in order to cope with the future of foreign investment control and even the competition of wholly-owned car companies.

The Ministry of Industry and Information Technology, the National Development and Reform Commission, and the Ministry of Science and Technology jointly issued the "Planning". The main goal is to build China into a powerful automobile country and not just a big automobile country within 10 years. The two main indicators are: By 2020, to build a number of world-renowned auto brands; By 2025, the production and sales of certain Chinese brand auto companies will enter the top ten in the world.

At the same time, the automobile industry is shifting to new energy sources, intelligence, etc. The competitive landscape may be completely reshaped. "Planning" said: New energy vehicles and intelligent network-linked cars are expected to become a breakthrough in catching up and catching up with the development.

"Planning" has listed new energy vehicles, smart gridlink cars and energy-saving vehicles as key breakthrough areas. "Planning" proposes that by 2020, the annual production and sales of new energy vehicles will reach 2 million units, nurturing the formation of a number of new energy auto companies entering the top 10 in the world, and intelligent grid-linked vehicles and international development will develop simultaneously; by 2025, the backbone of new energy vehicles The company's global influence and market share have further increased, and Smartnet has entered the world's advanced ranks.

"Planning" also clarified the goal of "going global" for Chinese autos. By 2020, Chinese brand cars will gradually export to developed countries. By 2025, the international market share of China's branded automobiles will increase substantially, and a globalized development layout will be achieved.