China car lobby opposes rule change on foreign ownership


(Corrects full names of Ford and Toyota in seventh paragraph,fixes typo in penultimate paragraph and drops extraneous word infinal paragraph)

By Samuel Shen and Norihiko Shirouzu

SHANGHAI/BEIJING, Dec 3 (Reuters) - China's auto lobby hasfiercely opposed a possible move by Beijing to ease restrictionson foreign ownership in the car industry, saying that the movewould seriously weaken the position of indigenous carmakers.

Dong Yang, secretary general of the China Association ofAutomobile Manufacturers (CAAM), said that if foreign ownershiprules were relaxed, Chinese carmakers would lose control ofjoint ventures they now own and run jointly with globalautomakers.

"Foreign ownership being capped at 50 percent is the redline we must not cross because we need to protect our Chinesebrands," Dong said in a statement posted on the CAAM website.The statement was dated Monday.

"From another perspective, current restrictions have notdampened global carmakers' enthusiasm whatsoever to invest inChina, so why should we be more open?"

CAAM's opposition comes in the wake of indications byseveral Chinese policymakers that they are considering relaxingforeign investment rules in China's automobile industry.

CAAM is one of China's biggest industry associationsrepresenting the automotive industry. Its nearly 2,000 membersinclude China's massive state-owned automakers such as SAICMotor, FAW Group and Dongfeng Motor Group.

China has required global automakers including GeneralMotors Co, Ford Motor Co, Volkswagen AG and Toyota Motor Corp to form joint ventures in orderto produce cars in the country, hoping that Chinese carmakerscan absorb foreign technology and management expertise to becomemore competitive.

The Ministry of Commerce told a media briefing in Beijinglast month that the government would likely relax foreigninvestment restrictions soon in areas including automanufacturing.

In addition to the 50-percent ownership cap, the currentpolicy calls for foreign automakers to set up a jointly-runtechnical centre in China and to transfer certain technology totheir local partners.

At an automotive conference in Wuhan in October, Chen Lin,the Commerce Ministry official who oversees internationalautomotive investment policy, acknowledged that unlike China,automakers investing in most countries around the world are notrequired to form a joint venture with a local partner to own andoperate any assembly plants in their markets.

"We do see this imbalance of policy," Chen told a paneldiscussion at the auto forum, urging Chinese automakers to studythe impact from a possible lifting or easing of the jointventure rule. "It would be a life issue" for them, Chen said.

In his statement, CAAM's Dong urged Chinese policymakers tothink twice before making such life-and-death decisions, callingon the government to protect local brands.

"The government shouldn't rush to make decisions that wouldhave a huge impact on the (auto) industry," and needs to studythe issue and solicit opinions from various parties as much aspossible.

Foreign name plates dominate Chinese roads, with home-grownbrands capturing only a 30 percent share of the marketcollectively. (Editing by Jeremy Laurence and Tom Pfeiffer)

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