What The BMW Deal Means For The Future Of Auto Joint Ventures In China

What The BMW Deal Means For The Future Of Auto Joint Ventures In China

. In June, China’s National Development and Reform Commission (NDRC) and its Ministry of Commerce (MOC) announced that, as of July 28, the country's "Negative List" of industries where foreign ownership is prohibited or restricted would be reduced from 63 to 48. Despite the fact that China formally opened to the outside world in 1978, foreign investors and companies were not permitted to own more than 50% in any Chinese entity until 15 years later in 1993. In that year, China opened its automotive components industry to majority ownership by foreigners as a way to encourage investment and bring technology to the sector. Since then, ownership restrictions in one industry after another have been lifted. In recent years, China has reduced the number of restricted measures on foreign investment by nearly two-thirds. .

Under the latest changes, ownership restrictions in the finance, transportation, professional services, auto, ship,  and aircraft manufacturing industries will be phased in over the next few years or ended immediately. In addition to a number of key industries where greater foreign ownership is now permitted, the new regulations announced by the NDRC and the MOC dramatically change the ownership rules in autos. Except for special purpose and new energy vehicles, foreign ownership in automobile manufacturing companies has been limited to 50% under the old regulations. Moreover, foreign companies have not been permitted to have more than two joint ventures producing similar vehicle products in China. Under the new rules that became effective on July 28,  restrictions on the foreign-invested shares of Chinese companies that manufacture commercial vehicles will be eliminated in 2020. .

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