CORRECTED-China car lobby opposes rule change on foreign ownership

Tue Dec 3, 2013 7:46am EST

(Corrects full names of Ford and Toyota in seventh paragraph, fixes typo in penultimate paragraph and drops extraneous word in final paragraph)

By Samuel Shen and Norihiko Shirouzu

SHANGHAI/BEIJING Dec 3 (Reuters) - China's auto lobby has fiercely opposed a possible move by Beijing to ease restrictions on foreign ownership in the car industry, saying that the move would seriously weaken the position of indigenous carmakers.

Dong Yang, secretary general of the China Association of Automobile Manufacturers (CAAM), said that if foreign ownership rules were relaxed, Chinese carmakers would lose control of joint ventures they now own and run jointly with global automakers.

"Foreign ownership being capped at 50 percent is the red line we must not cross because we need to protect our Chinese brands," Dong said in a statement posted on the CAAM website. The statement was dated Monday.

"From another perspective, current restrictions have not dampened global carmakers' enthusiasm whatsoever to invest in China, so why should we be more open?"

CAAM's opposition comes in the wake of indications by several Chinese policymakers that they are considering relaxing foreign investment rules in China's automobile industry.

CAAM is one of China's biggest industry associations representing the automotive industry. Its nearly 2,000 members include China's massive state-owned automakers such as SAIC Motor, FAW Group and Dongfeng Motor Group.

China has required global automakers including General Motors Co, Ford Motor Co, Volkswagen AG and Toyota Motor Corp to form joint ventures in order to produce cars in the country, hoping that Chinese carmakers can absorb foreign technology and management expertise to become more competitive.

The Ministry of Commerce told a media briefing in Beijing last month that the government would likely relax foreign investment restrictions soon in areas including auto manufacturing.

In addition to the 50-percent ownership cap, the current policy calls for foreign automakers to set up a jointly-run technical centre in China and to transfer certain technology to their local partners.

At an automotive conference in Wuhan in October, Chen Lin, the Commerce Ministry official who oversees international automotive investment policy, acknowledged that unlike China, automakers investing in most countries around the world are not required to form a joint venture with a local partner to own and operate any assembly plants in their markets.

"We do see this imbalance of policy," Chen told a panel discussion at the auto forum, urging Chinese automakers to study the impact from a possible lifting or easing of the joint venture rule. "It would be a life issue" for them, Chen said.

In his statement, CAAM's Dong urged Chinese policymakers to think twice before making such life-and-death decisions, calling on the government to protect local brands.

"The government shouldn't rush to make decisions that would have a huge impact on the (auto) industry," and needs to study the issue and solicit opinions from various parties as much as possible.

Foreign name plates dominate Chinese roads, with home-grown brands capturing only a 30 percent share of the market collectively. (Editing by Jeremy Laurence and Tom Pfeiffer)

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