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Will global automakers drop Chinese partners?
Automotive News

YANG JIAN
June 30, 2014 13:32 CET

Under China's regulations, foreign automakers may not own more than 50 percent of their joint ventures with Chinese partners. But that may change. Since President Xi Jinping took office early last year, he has repeatedly pledged to shore up China's economic growth by opening up the domestic market.

Heeding the pledge, a spokesman for the Ministry of Commerce said last year that the government would someday relax its 50 percent ceiling on foreign automakers' ownership of their joint ventures.

China, already a World Trade Organization member, is negotiating a series of free-trade pacts. Trade deals such as the Trans-Pacific Partnership agreement -- under negotiation with the United States and other countries -- eventually could force Beijing to eliminate all restrictions on foreign automakers operating in China.

Now the question is: Will global automakers ditch their Chinese partners if they are allowed to? If BMW accurately reflects the sentiments of global automakers, the answer is no.

BMW said this week it had extended its 50-50 joint venture with Brilliance China Automotive Holdings until 2028. BMW was under no pressure to do so because the agreement wasn't due to expire until 2018. So why did BMW renew the partnership four years before its expiration? The company clearly has concluded that its joint venture is working pretty well. In the first five months, BMW Group has sold 185,000 units in China, up 25 percent year on year.

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I think after the unfair rule is dropped, current 'ventures' will continue with the 50% split, but that's just until foreign automakers are able to build new manufacturing plants without the forced 50% partnership.

What the new Chinese president has figured out is the force 50% partnerships are hurting the Chinese auto manufacturers, by eliminating the need to innovate, since under current law the 'competition' is forced to 'give' away technology/knowledge that in many cases cost billions and took many years of experience to acquire.
 
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