China says will curb 'haphazard and redundant' auto investment

By Yilei Sun and Norihiko Shirouzu

TIANJIN, China (Reuters) - China will strictly prevent 'haphazard investment and redundant development' in the automobile industry, an official from the state planning agency said on Saturday, apparently referring to proposed rules on automakers' investments in new capacity.

Nian Yong, head of the National Development and Reform Commission's (NDRC) Department of Industrial Coordination, said the agency will soon publish and implement a new set of investment rules.

Among other things, the new rules "will restrict industrial investment project management standards, strengthen regulation, prevent haphazard investment and redundant development," he said.

China is looking to fix seemingly perpetual excess capacity in the country's auto industry which is showing signs of worsening.

Nian's remarks, which were made during his speech at an automotive industry conference in Tianjin, come as the industry has sought to dial down the proposed NDRC rules, which were published in July in draft form to seek public comment.

It's not clear when the new rules would take effect, or whether the NDRC would agree to water them down from the draft, which some automaker officials described as alarming.

On Friday, another NDRC official at the same conference indicated the agency might make some compromises.

"We have made some quite big modifications (to the proposed rules) after we received the industry's feedback," NDRC official Gu Ziming said.

The move to curb excess capacity comes as domestic and international automakers in China announce plans to increase their production. Japan's Nissan Motor Co and Toyota Motor Corp have both announced plans to significantly boost production in China.

According to the draft rules, China's state planning agency is looking to place a limited ban on investments in new "greenfield" capacity to produce traditional gasoline-fueled cars, as well as electric battery cars - unless a carmaker meets certain conditions.

Among them, automakers would have to have a healthy, above-industry-average business in terms of capacity utilization and research and development investment, and a commitment to electric cars.

(Reporting by Yilei Sun and Norihiko Shirouzu; Editing by Kim Coghill and Toby Chopra)