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The 50:50 equity share requirement may disappear after 2010

China’s strict equity share requirement for setting up whole vehicle joint ventures may be eliminated after 2010, according to Zhang Xiaoyu, deputy director of the China Confederation of Machinery Industry and director of SAE China.
 
Zhang made the statement at the gala welcome dinner on April 16 of CBU/CAR 13th annual international conference in Beijing. Zhang delivered a keynote presentation to over 100 delegates from around the world that attended the three-day Presidents’ Forum to discuss the theme of Automotive Manufacturing in China: OEM & Supplier Strategies in the Next Decade.
 
Speaking on “Perspectives on China’s Auto Industry in 2020,” Zhang said that after close to 30 years of reform and opening up, China is in a new stage in its development to move into a “moderately prosperous society by 2020.” The country’s per-capita GDP will hit $5,000 at today’s exchange rates with completion of its industrialization, according to Zhang.
 
As a long-term official with the central government in charge of the automotive sector, Zhang reviewed the phenomenal change of China’s automobile market. “Thirty years ago,” he told the conference, “China made 140,000 units of automobiles, mostly trucks, or 0.3 percent of the world’s total production. In 2000, the numbers grew to two million and 3.5 percent and again in 2007, to 8.88 million and 11.8 percent, becoming the world’s third largest automobile manufacturing country only after the U.S. and Japan.”
 
The future potential of China’s automobile market, according to Zhang, goes hand in hand with China’s urbanization, which will rise from the current 40 to 60 percent by 2020. “Private ownership of automobiles will increase by 10-15 percent and 20 percent of China’s vehicles will be sold overseas,” he said.
 
Asked about if the Chinese government would one day relinquish the current regulation of 50:50 equity share between Chinese and overseas automakers in setting up a vehicle joint venture assembly plant, Zhang reviewed the history of the two automotive industry policies adopted in 1994 and 2004, which mandated the 50:50 equity share requirement.
 
“The first Automotive Industry Policy was published in 1994,” Zhang said, “and by 2004 as China had become a member of the WTO for three years, the government had to revise that policy and issued a new Automotive Industry Development Policy in the same year.”
 
“In the new policy, China gives up the 50:50 equity share requirement on setting up engine and other key component joint ventures. I believe that the 2004 Policy would be valid at most till 2010,” Zhang said.
 
This would be in line, he said, with China’s reform goal of “giving better play to market forces in allocating resources to China’s auto industry.”

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