China Lifts Stake Caps on Foreign Motorcycle, Battery Makers

  • Foreign manufacturers in free-trade zones exempt from limit
  • Government considering similar measures for foreign carmakers

China’s central government said it’ll exempt foreign makers of motorcycles and batteries from ownership limits in their manufacturing operations, revising a key industrial policy just as rulemakers consider similar measures for car companies.

The amended rules governing foreign investment will apply to foreign companies setting up in the free trade zones of Shanghai, Tianjin, Guangdong and Fujian, the central government said in a statement Tuesday. Manufacturers such as Yamaha Motor Co. and Samsung SDI Co. previously were required to partner with local companies and could own as much as 50 percent of joint ventures.

The exemption comes as motorcycle sales fell 15 percent in the first half. The government stopped short of including foreign automakers, which are subject to the same investment limits. The 50:50 rule, as it’s commonly known, is a central industrial policy introduced in 1994 to ensure that China’s then-fledgling auto industry can benefit from technology transfer by jointly operating factories with global auto companies such as Volkswagen AG and General Motors Co.

“It will hurt a lot if the investment limit was lifted for the auto industry, especially for the big state-owned companies that have been dependent on foreign brands for so many years,” Zhang Zhiyong, a Beijing-based independent auto industry analyst. “Once removed, it could lead to big losses for them and result in job cuts.”

The policy has been criticized in recent years for shielding state-owned companies from competition and reducing the drive to build their own brands. Its supporters say the rule gives China’s automakers a chance to build enough scale and develop technology to withstand global competition.

The debate over whether it’s the right time to revise the policy was reignited after Xu Shaoshi, chairman of the National Development and Reform Commission, said in June the government is looking into lifting the 50 percent cap.

China will make timely revisions to the regulation based on the trial operations that follow the announced amendments, the government said in the statement.

— With assistance by Yan Zhang, and Tian Ying

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