China will remove limits on foreign ownership of auto manufacturers by 2022, ending restrictions that had strained relations with its trading partners, particularly the U.S.
The National Development and Reform Commission announced in a statement on Tuesday that China will scrap foreign ownership limits on new energy vehicle manufacturers in 2018, followed by commercial vehicle makers in 2020 and passenger vehicle companies in 2022.
In China, which is the world's largest auto market, foreign carmakers are currently allowed to own up to a 50% share of any local venture. The rule is aimed at protecting domestic carmakers from international competition while prompting foreign auto makers to share their technologies.
At the Boao Forum in the southern island of Hainan last week, President Xi Jinping unveiled a broad set of measures to open up the country's economy, including lower import tariffs on cars and relaxed restrictions on foreign ownership in the automotive sector. The president said Beijing would scrap the foreign ownership "as soon as possible," but fell short of revealing concrete timelines.
Observers see Beijing's move to open up the economy as part of efforts to calm down the trade dispute with Washington that had intensified recently as the U.S. threatened to hike tariffs on as much as $150 billion of Chinese goods.
NDRC said in the statement that the removal of foreign ownership limits demonstrates Beijing's "attitude to oppose protectionism."
Full foreign ownership is expected to encourage global electric vehicle makers to set up wholly owned plants in China. Tesla has unveiled a plan to set up a manufacturing plant in Shanghai.
NDRC added that all foreign ownership limits in the ship and aircraft manufacturing sectors will also be scrapped in 2018.