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BEIJING/SHANGHAI (Reuters) - China will scrap a limit on foreign ownership of automotive ventures by 2022 in a major policy shift to open up the world's biggest car market, even as trade tensions simmer between Washington and Beijing.
In a move welcomed by Germany's powerful car industry, China's state planner said on Tuesday it would remove foreign ownership caps for companies making fully electric and plug-in hybrid vehicles in 2018, for makers of commercial vehicles in 2020, and the wider car market by 2022.
China imposed ownership restrictions in 1994, limiting foreign carmakers to owning no more than a 50 percent share of any local venture. Forcing foreign carmakers to work with Chinese firms was designed to help domestic carmakers compete.
The latest policy move marks a new twist in a see-saw week for Chinese trade. The country slapped a temporary fee on U.S. sorghum after the United States banned American companies from selling parts to Chinese phone maker ZTE Corp on Monday.
"We believe a more free and flexible business environment will benefit both Chinese and foreign companies in China and the Chinese economy. BMW will continue pursuing mutual benefit and win-win solutions with the local partners," the carmaker said.
Analysts said the main beneficiaries, at least in the short term, would be manufacturers focused on new-energy vehicles, including U.S. electric carmaker Tesla, which has been seeking to set up its own plant in Shanghai.
Tesla chief Elon Musk said last month that China's tough auto rules for foreign businesses created an uneven playing field as scores of local and international companies compete for a slice of China's fast-growing market for "green" cars.
Tesla declined to comment.
The looser rules are likely to raise pressure on domestic carmakers, potentially hitting the likes of Warren Buffett-backed BYD Co.
Traditional automakers will need to wait longer for any direct impact and could face more risks than opportunities in ditching their joint venture structures, said James Chao, Asia-Pacific chief at consultancy IHS Markit.
"Foreign companies may already be in a box (in China)," said Chao, adding the joint venture structure was now so ingrained that many might not want to change it.
"While getting a bigger share could be advantageous in terms of boosting profits, they may actually be already too dependent on their Chinese partners to sever those ties."
Daimler, parent company of Mercedes-Benz, said it was happy with its current business set-up in China, adding it was watching regulatory developments with interest.
A senior General Motors Co
In a statement on Tuesday, GM said its growth in China was "a result of working with our trusted joint venture partners. We will continue to work with our partners to provide high-quality products and services to consumers."
China, which said the easing of autos rules was unrelated to that dispute, is keen to portray itself as open for business. Its ties with the world's largest economy, though, are becoming increasingly fraught.
(Reporting by Norihiko Shirouzu in BEIJING and Adam Jourdan in SHANGHAI; Additional reporting by Naomi Tajitsu, Ryan Woo and Beijing Monitoring Desk; Edward Taylor and Ilona Wissenbach in Frankfurt; Nick Carey and Joe White in Detroit, Editing by Mark Potter and Alistair Bell)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)