China has announced that it will review its policies covering foreign investment in the automotive sectoy as aprt of efforts to meet industry development targets set in the Tenth Five-Year Plan (2001-2005), said to Yang Hua, head of the Planning and Development Department of the State Bureau of Machine-Building Industry.
The readjustment will be made in the following fields:

- To further expand the scale of utilization of foreign funds, especially in area of automotive parts production. The current conditions of market access may be further eased, to encourage the inflow of foreign funds into the area.

- To open up more channels for the inflow of foreign funds. In addition to founding foreign-funded enterprises, other means of fund raising will be used, such as floating shares, issuing bonds and various forms of loans. The channel of using foreign funds will be further standardized.

- To use policy means to promote the development of Sino-foreign joint venture companies. For example, second-generation products of Sino-foreign joint ventures should be products of joint development. There will be new policies for the work, otherwise there will emerge imbalance between enterprises relying on themselves in developing new products and those importing new models from other countries.

- Importing new models and developing new products will be carried out at the same time. Joint ventures are asked to digest and use their imported technology to develop new products and manufacture their own brand products of China property right.

So far, there are over 600 automotive joint ventures set up in China with companies from over 20 countries and regions, with foreign investment exceeding US$20 billion.

Yang said that foreign companies investing in the automotive industry had earned got high returns from the Chinese market by using their advantages of capital, technology and products and taking advantage of China's high tariff rate and restriction on import.

Yang also listed major problems in the utilization of foreign funds by the automotive industry. They include:

- Duplication of imported projects, which has caused difficulties for the industry in terms of standardization, serilization and interchangeability of auto parts, localization of completed vehicles and auto parts, and large-scaled production of self-developed products;

- Being keen on assembly with imported parts, but not attaching importance to digesting imported technology and localization of auto parts;

- Foreign investors trying to control joint venture companies by exploiting intellectual property rights, making the domestic automotive industry unable to form its own capability of product development;

- More stress on investment in complete vehicle production, but less in parts manufacture;

- Small investment which has prolonged the time for Chinese enterprises to build up rational economies of scale.