China eases car industry into fast lane
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China is opening up for business, President Xi Jinping has indicated, singling out carmakers as a major beneficiary of what could be Beijing’s biggest policy shift in decades.
In a speech this week — seemingly designed to defuse growing trade tensions between the US and China — Xi said controls on ownership of car businesses in China would be eased.
Although best received by the automotive industry — China overtook the US as the world’s largest car market almost a decade ago — the news boosted markets around the world, coming as part of a series of initiatives directed at a range of industries.
The move, Xi said as he spoke at the south China Boao Forum — the Asian equivalent of the Davos gathering of world leaders — was part of a “new phase of opening up” the Chinese economy. He sought to reiterate the regime’s line that China was a reluctant part in the trade spat with the US.
“Cold War mentality and zero-sum games are becoming increasingly obsolete and outdated,” the Chinese premier said as he eased fears of a trade war. “Economic globalisation is an irreversible trend of the time. The door of China’s opening up will not close, it will only open wider and wider.”
The prospect of opening up the Middle Kingdom to more international trade lifted markets, which have wobbled in recent weeks as they priced in the potential for fresh tariffs.
Automotive companies worldwide saw their shares kick up a gear in response. In the global $1.8 trillion a year industry, China is the world’s largest market, with sales of 24.2 million cars last year. America, the next biggest market, saw 17.3m sales last year. However, accessing Chinese buyers means foreign carmakers have to set up 50:50 joint ventures with local businesses. Action on joint ownership of companies was light on detail, Xi saying only that restrictions would be eased “as soon as possible”. However, it is significant because until now the rules have put the brakes on carmakers’ appetite for investing in China.
Elon Musk, the billionaire founder of Tesla, has openly complained about joint venture rules in China, and is in negotiations with officials about what kind of deal his company could seal to build a plant there. Critics of China say it insists on the arrangements so that its relatively immature carmakers can learn from Western and Japanese manufacturers only to then exclude them from the market.
China is also a burgeoning market for electric vehicles as the country tries to tackle its pollution problems. This led to the Beijing Government offering incentives to encourage development of zero-emission electric vehicles.
Xi also signalled that China would lower import tariffs on cars. Currently, cars built overseas but sold in China are hit with a 25 per cent import duty, while parts for cars coming from abroad face a 15 per cent charge on top of the 10 per cent customs duty.