CHINA'S move to take finished automobiles off a list of industries where foreign investment is encouraged will not affect existing Sino-foreign joint ventures in China's auto sector, an official with the country's top economic planner said.
The National Development and Reform Commission and the Ministry of Commerce jointly issued a new guideline for foreign investment last week, moving "finished car manufacturing" from the "encouraged" list to the "approved" list.
An NDRC official explained that the move was the result of excesses in both production capacity and finished automobile companies in China.
"It was a normal adjustment in light of the development of China's auto industry," said the official with the NDRC's department in charge of foreign investment, who declined to be named. "There is no issue of tightening up, nor will it affect the operations of existing joint ventures in China," added the official.
China has been the world's largest auto producer and market by volume since 2009.
Sales hit 18.06 million units in 2010, while output rose to 18.26 million units.
The country has more than 130 finished automobile producers, more than any other in the world, but the companies are scattered and not strong enough, as mergers and acquisitions have been slow.
Lured by market booms in previous years, many Chinese firms made ambitious plans to expand production capacity. But they may have run into a cooling-off period this year caused by the expiration of car purchase incentives and worsened by the government's macro tightening measures.
China's auto sales rose just 2.56 percent year-on-year to 16.82 million units in the first 11 months of 2011, down from 34 percent in 2010 and 42 percent in 2009, according to the China Association of Automobile Manufacturers.
The government has controlled approvals of new finished auto projects more rigorously in the past two years to curb overcapacity, the official said.
China is the biggest market for major global auto companies such as Volkswagen and General Motors. About 70 percent of domestically made cars are produced by Sino-foreign joint ventures in China.