[The Chinese authorities said that in the next five years they would ease rules that have long required carmakers like General Motors, Toyota and Volkswagen to link up with a local partner before building a factory in China. For manufacturers of electric cars, as well as for companies that make jetliners, helicopters and drones, Beijing plans to move even faster, eliminating foreign ownership limits this year.]
By Keith Bradsher
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Tesla would be the
immediate big winner from the changes that China announced
on Tuesday. Credit
Johannes Eisele/Agence France-Presse — Getty Images
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SHANGHAI
— Beijing and Washington
have threatened each other with tariffs for weeks, raising the prospect of a
trade war. But on Tuesday, China took a step to lower tensions, offering to
make it easier for foreign automakers and aerospace manufacturers to own
factories in the country.
The Chinese authorities said that in the next
five years they would ease rules that have long required carmakers like General
Motors, Toyota and Volkswagen to link up with a local partner before building a
factory in China. For manufacturers of electric cars, as well as for companies
that make jetliners, helicopters and drones, Beijing plans to move even faster,
eliminating foreign ownership limits this year.
Opening up the electric-car sector is a
potential boon for Tesla Motors, which has already identified a site in
Shanghai for a factory but has not wanted a partner for fear of losing control
of its technology. Big automakers, especially Volkswagen, have also been
preparing to set up large electric-vehicle subsidiaries in China as Beijing has
made clear that it will use a mix of subsidies and penalties to shift the
market sharply toward more electric cars.
Loosening limits for electric carmakers and
aerospace manufacturers is notable because those are two areas where Beijing
and Washington have been increasingly at loggerheads. The sectors are among 10
industries in Beijing’s Made in China 2025 plan, which calls for extensive
government support to expand China’s production and self-sufficiency in
everything from microchips to robotics.
President Trump’s trade officials last month
accused the Chinese government of using bureaucratic licensing and approval
procedures to compel American companies to give up valuable trade secrets.
Chinese officials deny those claims.
Beijing’s offer on Tuesday to make it easier
for foreign aircraft manufacturers to set up wholly owned factories in China
might even increase worries in the national security community in Washington
about further transfers of the technology needed to retain America’s military
edge.
Easing electric car limits may not be enough
to bring the Trump administration to the negotiating table, much less reach a
deal. The White House has expressed more interest in creating jobs in the
United States than in making it easier for American companies to build
factories overseas.
It also isn’t clear whether the measures —
part of a series of moves to relax trade rules for carmakers — will win over
the auto industry.
China has previously said it would also lower
tariffs on imported cars, but has not specified when or by how much. Much of
the global auto parts industry has already moved to China to avoid those
tariffs.
G.M., Volkswagen and others have learned to
profit handsomely with their local partners, which have developed fairly few
homegrown models attractive enough to win over Chinese customers. And foreign
automakers may want local partners anyway to smooth potential political
problems and to win access to Chinese subsidies.
The latest move, announced on Tuesday by
China’s top economic planning agency, follows through on a long-promised effort
by Beijing to further open its markets to foreign companies.
The planning agency, the National Development
and Reform Commission, said in a statement that rules requiring a Chinese
partner would be lifted this year for the electric-car industry, in 2020 for
the production of trucks and other commercial vehicles, and in 2022 for all
cars made in China.
China also said on Tuesday that it would
eliminate foreign ownership restrictions this year on its shipbuilding
industry. But that industry is in disarray, saddled with overcapacity and heavy
debts after more than a decade of large loans from the state-controlled banking
industry.
The move on Tuesday by Beijing nevertheless
came with a warning. As expected, China also took steps to impose steep duties
on imports of sorghum from the United States, an action that could hurt farmers
in states where Mr. Trump enjoys political support. The White House has
threatened to levy tariffs on $150 billion in Chinese-made goods, and Beijing
has promised to retaliate, dollar for dollar.
The immediate big winner from the decision on
car manufacturing would be Tesla. Going into the Chinese market without a joint
venture partner would mean that Tesla could keep better control of its
technology and retain all the profits. That also means Tesla would have to foot
the entire investment cost.
“They don’t need to negotiate with any party,
but the bad news is they have to invest 100 percent of their own money,” said
Yale Zhang, the managing director of Automotive Foresight, a Shanghai
consulting firm, referring to Tesla.
General Motors quickly issued a statement on
Tuesday indicating that it was not eager to buy out its partners, notably the
powerful and state-controlled Shanghai Automotive Industry Corporation. “G.M.’s
growth in China is a result of working with our trusted joint venture
partners,” the statement said. “We will continue to work with our partners to
provide high-quality products and services to consumers.”
Volkswagen also said in a statement that it
was committed to continuing its joint ventures, but that it would explore
whether new opportunities were possible. The German company has been making
ambitious plans to build electric cars in China, and only has a loose and
deliberately temporary joint venture with Anhui Jianghuai Automobile Group to
do so.
Cui Dongshu, the secretary general of the
China Passenger Car Association, which represents the country’s domestic
industry, said that Chinese automakers had developed a lot of expertise
recently in electric cars. “For the short term, they still face huge
pressures,” he said on Tuesday. “For the long term, automakers will adapt to
the new environment and make our auto industry more competitive.”
China has been the only carmaking nation of
any significance that requires joint ventures with local companies. Even
countries like Brazil and India, which have some of the world’s highest
barriers to imports, do not have similar joint venture requirements.
Beijing insisted on the special rule when it
joined the World Trade Organization in 2001. Chinese trade negotiators wanted
to make sure that the country’s automakers, which were tiny by international
standards then, would not be crushed by foreign competition.
A Chinese Commerce Ministry official
suggested at a conference in 2013 that the joint venture rule might be lifted,
noting that China wanted to see its automakers start exporting to the West. The
Chinese industry responded furiously, contending that they were not yet ready
to compete on the world stage and were more worried about retaining their
alliances at home with foreign automakers. The idea was dropped.
But the top executive at a Chinese automaker
with no foreign partners argued at the time that the rule should be scrapped.
Li Shufu, the founder of Geely, a large carmaker in Zhejiang Province in
eastern China, said in an email interview in early 2014 that the rule should be
abandoned. “The cap has hindered fair, open and transparent competition, which
undermines the interests of consumers and the overall competitiveness of the
Chinese auto industry,” he wrote.
In any case, Chinese automakers may have less
to fear now from international competition in electric cars, a rapidly growing
market for which they are already among the world’s dominant producers.
Follow Keith Bradsher on Twitter:
@KeithBradsher.
Ailin Tang contributed research.
