New foreign auto investment rules begin in China

China is no longer offering support for foreign investment in auto manufacturing as new rules took effect on Monday which seek to encourage domestic automakers.

The National Development and Reform Commission (NDRC) and the Commerce Ministry released new guidelines on December 30 that signal an end to incentives for foreign carmakers and discourage new projects in China. A spokesman for the NDRC confirmed the new regulations took effect on Monday. “It’s a government decree that has legal force,” he told AFP.

Sales in the world’s biggest car market are slumping and China tries to revive the economy by helping domestic companies and opening up other industries to foreigners such as environmental technology. New car sales growth slowed in 2011 after Beijing withdrew incentives and some cities imposed restrictions on car numbers. Sales rose just 2.5 percent to 18.51 million units last year, the China Association of Automobile Manufacturers announced earlier this month, compared with an increase of more than 32 percent in 2010.

New obstacles to foreign automakers are imposed „because of the need of the healthy development of domestic auto making,” state news agency Xinhua announced at the time. The move means the government will withdraw support for foreign capital in auto manufacturing. Despite the new rules, Renault said this month it plans to begin production in China with its local partner Dongfeng as early as 2014. Volkswagen also announced this month plans to build a plant in the eastern city of Ningbo.