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China car lobby opposes move to ease restrictions on foreign automakers

Foreign brands dominate China's roads. Photo credit: Bloomberg

SHANGHAI (Reuters) -- China's auto lobby has fiercely opposed a possible move by Beijing to ease restrictions on foreign ownership in the car industry, saying that the move would seriously weaken the position of domestic carmakers.

Dong Yang, secretary general of the China Association of Automobile Manufacturers (CAAM), said that if foreign ownership rules were relaxed, Chinese carmakers would lose control of joint ventures they now own and run together with global automakers.

"Foreign ownership being capped at 50 percent is the red line we must not cross because we need to protect our Chinese brands," Dong said in a statement posted on the CAAM Web site. "From another perspective, current restrictions have not dampened global carmakers' enthusiasm whatsoever to invest in China, so why should we be more open?"

China has required global automakers including General Motors, Ford Motor Co., Volkswagen Group and Toyota Motor Corp. to form joint ventures in order to produce cars in the country, hoping that Chinese carmakers can absorb foreign technology and management expertise to become more competitive.

The Ministry of Commerce told a media briefing in Beijing last month that the government would likely relax foreign investment restrictions soon in areas including auto manufacturing.

In addition to the 50 percent ownership cap, the current policy calls for foreign automakers to set up a jointly run technical center in China and to transfer certain technology to their local partners.

CAAM's opposition comes in the wake of indications by several Chinese policymakers that they are considering relaxing foreign investment rules in China's automobile industry.

Lifting JV rule

At an automotive conference in Wuhan in October, Chen Lin, the Commerce Ministry official who oversees international automotive investment policy, acknowledged that unlike China, automakers investing in most countries around the world are not required to form a joint venture with a local partner to own and operate any assembly plants in their markets.

"We do see this imbalance of policy," Chen told a panel discussion at the auto forum, urging Chinese automakers to study the effect from a possible lifting or easing of the JV rule. "It would be a life issue" for them, Chen said.

In his statement, CAAM's Dong urged Chinese policymakers to think twice before making such decisions, calling on the government to protect local brands.

"The government shouldn't rush to make decisions that would have a huge impact on the industry," and needs to study the issue and solicit opinions from various parties as much as possible.

Foreign brand dominate Chinese roads, with home-grown carmakers capturing only a 30 percent share of the market collectively.

CAAM is one of China's biggest industry associations representing the automotive sector. Its nearly 2,000 members include China's massive state-owned automakers such as SAIC Motor, FAW Group and Dongfeng Motor Group.

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