New foreign auto investment rules begin in China

BEIJING: China has withdrawn support for fore i g n i nve s t ment i n a u t o manufacturing under new rules that took ef fect M o n d a y, a s it seeks to e n c o u r a g e t h e d o me s t i c industry in the world's largest car market.

The guidelines -r e l e a s e d by t he Nat i o na l Development and Refor m Commission (NDRC) and the Commerce Ministry on December 30 -- signal an end to incentives for foreigners and discourage fresh projects in China.

A spokesman for t he NDRC, the country's top economic planner, confir med t he new re g ul at i ons t ook effect Monday.

“It's a gover nment decree that has legal force,” he told AFP.

The move comes as sales in t h e wo rl d 's b i g g e s t market are slumping and Beijing tries to shore up the economy by helping domestic companies and opening up other industries to fore i g n e r s s u c h a s e nv i r o n - mental technology.

Growth in China's auto sales hit the brakes in 2011 a f t e r Bei j i n g r o l l e d b a c k sales incentives and some cities imposed restrictions on car numbers.

Total sales rose just 2.5 p e r c e n t t o 1 8 . 5 1 mi l l i o n units last year, the China Association of Automobile Manufacturers said earlier this month, compared with an increase of more than 32 percent in 2010.

The new obstacles to fore i g n a u t o ma k e r s c o me “because of the need of the h e a l t hy d e ve l o p me n t o f domestic auto making,” the official Xinhua news agency said at the time the gover nment announced the rules.

Some of the world's biggest car fir ms, i ncluding GM, Honda and Volkswagen, have long had o p e r at i o ns i n Chi na , but Xi n h u a s a i d t h e g ove r n - ment would “withdraw suppor t for foreign capital in auto manufacturing.”

De s p i t e t h e n e w r u l e s, French automaker Renault -- one of the few major companies that is not building vehicles in China -- said this month it plans to begin production in China with its local par tner Dongfeng as early as 2014.

Vo l k s w a g e n also announced this month plans to build a plant in the eastern city of Ningbo.