China to curb foreign investment in auto industry image

China will no longer encourage foreign investment in car manufacturing in order to allow for „healthy development” of its car market whose growth slowed to a tenth of 2010’s pace.

The government is reconsidering its priorities for foreign investment, downgrading the auto industry and putting more emphasis on emerging fields and local companies. The change comes after seven years of benefits for foreign investors, including reduced tariffs on imported plant equipment. However, foreign investment in more fuel-efficient vehicles will still be encouraged, according to a statement from the National Development and Reform Commission and the Ministry of Commerce.

“It might be more difficult for carmakers to get approval for new plants in the future unless they have an investment in new-energy vehicles,” Jenny Gu, an analyst with LMC Automotive, was quoted as saying by Bloomberg.

China, the world’s largest car market, has attracted billions of dollars in plant investments and research spending from global automakers. General Motors, Volkswagen, Toyota and many others have operated in China for years through joint ventures with local partners and automakers.

According to the National Development and Reform Commission, China needs to focus more on strategic new industries to make its manufacturing more sophisticated and be more competitive globally.