China’s policy of requiring foreign car makers to form local joint ventures is “like opium” for local firms and is failing to foster world-class indigenous automakers, according to a former minister.
He Guangyuan, who once was China’s machinery and industry minister, also said state-owned carmakers rely heavily on their foreign partners and would get “addicted forever”.
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He told Yahoo.com: “From central authorities to local governments, everyone has been trying hard to bring in foreign investment. But so many years have passed and we don’t even have one brand that can be competitive in the auto world.”
It is rare for current or former senior government officials to publicly criticise policy. China opened up to foreign automakers 30 years ago, requiring them to take local partners and hold no more than a 50% stake in the joint venture (JV).
Chrysler’s Jeep was one of the first western automakers to establish a JV in the country.
As a result, even top domestic maker SAIC gets around 60% of its sales from made-in-China General Motors and Volkswagen cars. The country has become the number one market for both those companies and China is now the top market for GM’s Buick brand.
But Chinese indigenous brands have been losing ground locally. At the end of July, sales of all domestic brand models fell 5.4% year on year despite a 7.5% rise in the overall passenger car market.
Despite attempts by policymakers to encourage the development of Chinese-developed vehicles JVs have simply taken existing foreign models and made only minor changes.
