Release of new auto policy 'within days'
By Gong Zhengzheng (China Daily)
Updated: 2004-05-28 08:42

A long-delayed new policy for China's booming automobile industry will finally be launched in the next few days, China Daily has learned.

The new auto policy will replace the one issued by the State Council in 1994.

The new policy will be released by the State Development and Reform Commission (SDRC) due to arguments between different regulators of the auto industry.

Apart from the SDRC, other government bodies such as the Ministry of Commerce and the General Administration of Quality Supervision, Inspection and Quarantine and State Environment Protection Administration also oversee the industry from different angles.

"We are looking forward to the new auto policy and will behave in line with it in China. But I cannot comment right now," said Ford Motor China spokesman Kenneth Hsu.

China Daily also learned that the lengthy new policy will both loosen and restrict the operations of foreign investors in the auto industry, when compared with the old one.

According to the new policy, foreign automakers could have stakes of more than 50 per cent in automobile joint ventures (JVs) with Chinese partners "if their JVs are built in China's export processing zones and will target overseas markets."

The old policy stipulated that the Chinese side in such arrangements must have shares of at least 50 per cent in all automobile joint ventures with foreign companies.

Japan's Honda Motor Co controls a 65 per cent stake in an export-oriented car joint venture with China's Dongfeng Motor Corp and the Guangzhou Automobile Group.

The joint venture, located in the export processing zone in Guangzhou, the capital of South China's Guangdong Province, will start to produce small-sized cars next year.

The new policy will allow foreign automakers to set up more than two joint ventures if they team up with existing Chinese ventures to merge other companies in China in order to produce the same types of vehicles.

The old policy only permitted foreign automakers to form one or two same-product-portfolio JVs with different local partners in China.

General Motors (GM), the world's No 1 automaker based in the United States, has four car joint ventures in China through acquiring local companies jointly with Shanghai Automotive Industry Corp.

However, if a foreign automaker has a controlling stake in another foreign automaker, they will be treated as one player when it comes to the requirements on the number of Sino-foreign joint ventures in China, according to the new policy.

If a Chinese listed automobile, motorcycle or other special-purpose vehicle manufacturer sells its corporate shares, one of the Chinese shareholders must have a stake larger than the total of all foreign investors, according to the new policy.

The new policy will not demand foreign automakers separate sales channels for their vehicles produced in and exported to China, saying that "overseas investors could conduct sales of locally produced and imported vehicles in China with the authorization of manufacturers."

The new policy will also cancel the target that involves vehicles being made by Chinese automakers with their own intellectual property rights accounting for more than 50 per cent of total automobiles sold in China.

The target was included in a policy draft issued by the SDRC last year to solicit public opinion.

At present, 90 per cent of passenger cars sold in China are foreign brands made by Sino-foreign joint ventures.

According to the new policy, total investment in any new automobile project should not be less than 2 billion yuan (US$241 million), including a research and development organization with input of no less than 500 million yuan (US$60.4 million).

All of the world's top nine automakers - GM, Ford, Toyota, DaimlerChrysler, Volkswagen, Renault-Nissan, PSA Peugeot Citroen, Honda and BMW - have built one or more joint ventures with local partners in China.

Sales of vehicles made in China grew by 34 per cent to 4.39 million units last year, including almost 2 million passenger cars.

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