China’s guidelines on auto parts joint ventures spark debate

China’s National Development and Reform Commission (NDRC) has issued new draft guidelines entitled Catalogue for Guiding Foreign Investment in Industry, which sets caps for foreign investors involved in the financing of auto parts companies producing components for new energy vehicles.  The draft document states that all foreign investors would be limited to a maximum investment of 50% in auto parts joint ventures.  This is in line with China’s 50-50 rule for auto manufacturing joint ventures, but it is the first time this has been applied to auto parts companies.  Mei Songlin, general manager with Nomura Research Institute Shanghai Ltd., said, “Basically, Chinese automakers were not successful in mastering the core technologies of key components for conventional gasoline-fueled cars. This new policy aims to change that situation so that Chinese companies can take the lead in the production of new-energy vehicles.”  However, the new policy remains controversial.  Foreign auto parts manufacturers with wholly owned companies in China or who hold a majority share in domestic companies are concerned about the new regulations.  Dominik Declercq, with the European Automobile Manufacturer’s Association said, “We are concerned about this new rule because it means a tightening of foreign investment policy, whereas generally we would instead welcome a further relaxation of the investment rules.” (June 2, 2011)