China rolls back ownership restrictions on automotive sector as part of foreign investment reforms

Today, Beijing removes foreign investment caps in the automotive industry, as well as in the financial, manufacturing and agricultural sectors.

These moves are part of China’s plan to open more of its markets to foreign investment this year, responding to EU and US criticisms of its closed trade practices. Indeed, Chinese business has long been protected by the “Negative List”, a measure that restricts investment in specified industries. As of today, the negative list will be trimmed from 63 to 48 sectors.

Previously, China required foreign automotive companies to create joint ventures with Chinese firms, splitting profits evenly. Within five years, foreign auto companies will be able to hold 100% ownership of their Chinese locations.

China has the world’s largest automotive market, with upwards of 24 million vehicles sold annually. As such, the opening of the industry could draw large manufacturers from the US, EU and Japan in the next few years, though some restrictions on manufacturing, particularly the requirement that Chinese made parts be used, will remain. Thus, China will likely draw more Western auto sector investment, though Washington is unlikely to lower its recent tariffs on Chinese manufacturing goods in response.

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