BEIJING -- China is easing controls on foreign ownership of car manufacturers against the twin backdrop of the green vehicle revolution and trade frictions with the U.S.
The other 100-day deadline
China's National Development and Reform Commission, together with the ministries of science and industry, laid out a long-term developmental blueprint for the domestic auto industry on Tuesday, which includes a plan to ease investment restrictions on foreign-backed automakers.
This deregulation is believed to send a message to the U.S. that China is further opening up its market. U.S. President Donald Trump has put protecting the domestic auto industry front and center by pressing trading partners to loosen up market entry.
For China, the meeting earlier this month between President Xi Jinping and Trump produced a 100-day plan geared toward resolving trade imbalances between the two countries. By signaling a conciliatory stance regarding automobiles, one view posits, Beijing will be able to prevent the U.S. from playing hardball in the energy and other sectors.
The promotion of new vehicle technology via foreign investment is another goal for the market liberalization movement. China is busy manufacturing electric vehicles and plug-in hybrids, and the development plan calls for the sales of 7 million of the so-called new-energy vehicles in 2025, nearly double the target of the previous blueprint. The plan also envisions sales of autonomous vehicles that can run on public roads by the same year.
Technological leaks and soured ties
It is hoped that technological innovations developed outside of China will advance these aims. Japan's Toyota Motor owns 50% stakes -- the maximum allowed -- in separate joint ventures with FAW Group and Guangzhou Automobile Group. Similarly, Nissan Motor operates a 50-50 venture with Dongfeng Motor Group.
Among Japanese and Western automakers manufacturing in China, many are indicating a cautious approach in transferring technologies within 50-50 partnerships. Several of the Chinese co-investors released vehicles under their own brands, and proprietary technologies may end up being applied to those autos.
But if China starts recognizing majority ownership by foreign capital and the control that goes along with it, foreign carmakers could institute strict rules and other mechanisms that forestall technological misappropriation.
The government's easing of capital restrictions may not necessarily guarantee majority ownership by foreigners. Such arrangements are still subject to approval by Chinese partners, and they may push back amid fears of diminished influence.
Moreover, Sino-Japanese relations are complicated to say the least. "There are probably many Chinese [automakers] who would permit increased stakes from U.S. or European concerns but not from Japanese counterparts," mused an analyst.
China first threw open the auto market to foreign competitors in the 1980s under the late paramount leader Deng Xiaoping. Rising incomes whetted Chinese appetite for cars until purchases surpassed those in the U.S. in 2009. Now China is the largest market in the world, trouncing American new car sales by 60%.
International automakers are baking these capital reforms into their business strategies in order to stake out a favorable spot in this massive market. Germany's Volkswagen currently leads in unit sales, followed closely by General Motors of the U.S. The Japanese contingent topped by Nissan, Honda Motor and Toyota lags behind the two rivals.