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China to open auto market as trade tensions simmer

Reuters  |  BEIJING/SHANGHAI 

By Shirouzu and Jourdan

BEIJING/(Reuters) - 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 and

In a move welcomed by Germany's powerful car industry, China's 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 by 2022.

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 banned American companies from selling parts to Chinese on Monday.

Germany's BMW, which has a big stake in trade relations between and as the biggest exporter of vehicles from the to China, welcomed the

"We believe a more free and flexible business environment will benefit both Chinese and foreign companies in and the Chinese economy. will continue pursuing mutual benefit and with the local partners," the carmaker said.

added it remained committed to expanding a joint venture with China's BBA and was still discussing how to structure a new partnership for its brand with China's

Analysts said the main beneficiaries, at least in the short term, would be manufacturers focused on new-vehicles, including U.S. Tesla, which has been seeking to set up its own plant in

chief 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.

declined to comment.

The looser rules are likely to raise pressure on domestic carmakers, potentially hitting the likes of 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, chief at consultancy

"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 to sever those ties."

A for Germany's said: "We will carefully analyse whether this opens up new opportunities for and its brands."

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.

JOINT VENTURES

A senior said last week the U.S. carmaker, even without ownership caps, would not cut ties with local partner The source, who asked to remain anonymous because of the sensitivity of the matter, added GM would not be as successful in on its own.

In a statement on Tuesday, GM said its growth in 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."

A Co said the automaker was encouraged by the announcement and looked forward to learning more. Japan's said it would monitor developments and plan accordingly.

said its business had grown on the back of strong local tie-ups. "At the moment we have no plans to change our capital relationship," a said.

will also scrap limits on foreign ownership in the shipbuilding and aircraft industries in 2018, the (NDRC) said.

and did not immediately respond to requests for comment.

The highly symbolic moves in autos come after said last week would scrap ownership limits "as soon as possible."

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.

The has banned American companies from selling parts to telecoms for seven years, creating a new fissure in Sino-U.S. ties.

(Reporting by Shirouzu in and in SHANGHAI; Additional reporting by Naomi Tajitsu, and Monitoring Desk; Edward Taylor and Ilona Wissenbach in Frankfurt; Nick Carey and Joe White in Detroit, Editing by and Alistair Bell)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, April 17 2018. 22:01 IST
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