Whether to decrease proportion of shares held by Chinese partners when establishing automotive joint ventures in China has sparked debates in this country recently.

 

Miaowei, minister of Chinese Ministry of Industry and Information Technology, said:” we insist on that Chinese partners should hold not less than 50% of shares when establishing automotive joint ventures. But this won’t be able to last more than eight years.” on the 2016 China Auto Forum on April 25. In this way, Chinese automakers should accelerate to improve brand awareness for better responding to competition foreign brands will bring.

 

China’s government laid out the policy for China auto industry that foreign partners would not have majority shares in automotive joint ventures in 1994. And foreign automakers could not set up more than two joint ventures for vehicles of the same model. Thanks to both of these two government regulations, Chinese automakers have earned some time to develop themselves. However, these regulations have also given rise to controversies. For example, proportion of shares of automotive joint ventures was also mentioned in the ongoing China-America Bilateral Investment treaty negotiation.

 

Whether to lift limitations on shareholdings of foreign partners will have a great impact on Chinese automakers in a short time remains unknown. Existing partnership built up on the basis of the policy stipulated in 1994 will not end in short time. Moreover, some joint ventures choose to continue their existing partnership, even if they may be able to make some adjustment on proportion of shareholdings later. 

 

Then, Chinese partners will still have a certain initiative and voice in the negotiation when it comes to changing partnership. Furthermore, Chinese automakers have grown to some extents overall by investing on developing SUVs since last year. They have chosen to develop their own brands rather than only cooperating with foreign brands.

 

Only by developing themselves to be strong enough can Chinese automakers take up more market shares in the Chinese automotive market.