China to allow full foreign ownership in auto industry

BEIJING China announced plans Tuesday to allow full foreign ownership of automakers in five years, ending restrictions that helped to fuel its trade dispute with U.S. President Donald Trump as it promotes electric car development.

The change would scrap rules that require global automakers to work through state-owned partners, an arrangement that forces them to share technology with potential competitors.

It was unclear whether that might mollify Trump, who has threatened tariff hikes on $150 billion of Chinese goods in response to complaints Beijing pressures foreign companies to hand over technology.

The step reflects growing official confidence in China’s young but fast-growing automakers and a desire to make the industry more flexible as Beijing promotes development of electric cars.

Automakers had been waiting for details since President Xi Jinping announced in a speech last week that ownership restrictions would be eased and auto import duties reduced.

Some private sector analysts saw Xi’s promise as an attempt to placate Trump, but Chinese government spokespeople said the plans had nothing to do with the trade dispute.

Limits on foreign ownership of electric vehicle producers will be eliminated this year, the Cabinet’s planning agency said. That will be followed by a similar repeal for makers of commercial vehicles in 2020 and passenger vehicles in 2022.

Until now, global automakers such as General Motors Co. and Volkswagen AG have been allowed to own no more than 50 per cent of a joint venture with a Chinese partner and were limited to two ventures.

Automakers complied because they gained access to China’s populous market, which passed the United States in 2009 as the world’s biggest by number of vehicles sold. Sales of sedans, SUVs and minivans last year totalled 24.8 million units, about 55 per cent of which was American, European, Japanese and Korean brands.