China plans to ease foreign equity restrictions in automotive industry
China's pledge to further open up its automotive industry will bring more opportunities than challenges, according to industry insiders.
As part of the country's broader opening-up push, the National Development and Reform Commission said on Tuesday that China will phase out the 50 percent equity cap that foreign carmakers can have in their joint ventures in China by 2022.
Dong Yang, executive vice-president of the China Association of Automobile Manufacturers, said "Easing the equity restrictions will bring more benefits to foreign brands than Chinese ones in the current stage, but in the long run, the move will help to build a powerful Chinese automotive industry."
Dong said without reforming and opening-up in the past four decades, China would not have seen great progress in its automotive sector.
Statistics from Dong's association show that China produced some 29 million cars and sold 28.9 million last year, ranking first worldwide for nine years in a row.
While some analysts said wider access could intensify competition in the Chinese market, Wu Jun, assistant general manager of international trade at Zotye Domy, a privately owned automaker, shrugged off the worries.
In an interview with Xinhua, he said easing foreign equity restrictions can allow domestic private automotive companies to better interact with foreign firms and help Chinese companies to improve.
According to Wu, the performance of many Chinese cars could now rival vehicles made in Japan as China's manufacturing capabilities have advanced significantly compared with 30 years ago.
In addition, thanks to government initiatives to support the new energy vehicle industry, many Chinese carmakers have a competitive edge in the sector, making the cooperation between foreign and Chinese carmakers a win-win one for both sides.
Shen Hui, founder and CEO of electric carmaker WM Motor, said a series of domestic brands such as Geely Auto have emerged and become internationally competitive after China's four decades of reform and opening-up.
Fu Yuwu, head of the Society of Automotive Engineers of China, said China is fully prepared for the relaxing of ownership restrictions.
"It's not something to be afraid of considering China's strength in technology, capital, management and talent," Fu said.
But more fierce competition will also force carmakers to invest more in research and development and encourage innovation, resulting in overall upgrading of China's auto industry, they said.
He Xiaopeng, chairman of electric vehicle maker Xpeng Motors, said the new opening-up policy would be a turning point for China's auto sector to shift from quantity-oriented to quality-oriented growth, bringing benefits to domestic consumers.
Wu said that Zotye Domy invests about 1 billion yuan ($159 million) annually in R&D, or roughly 10 percent of its sales.
"For an emerging company like us, if we don't invest heavily in R&D, it will be hard to sell our products on the market," Wu said.
