A controversial policy directing the future of China’s booming motor vehicle industry will be released within three months, dropping a clause favouring local players over foreign ones, state media said, according to Reuters.

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The news agency noted that the government began circulating last year a draft of the policy, which stipulated at the time that Chinese carmakers must control half the market by 2010, threatening the likes of Volkswagen and General Motors.


The official China Daily cited industry sources as saying that had been stricken from the policy, which was still being revised, Reuters said.


Industry executives have reportedly protested this clause would have gone against World Trade Organisation commitments pledging a level playing field.


China’s main car companies – Shanghai Automotive Industry Corp., First Automotive Works and Dongfeng Motor Corp. – now make a vast majority of their cars with foreign partners and the new policy document also drops a clause forcing foreign carmakers to separate sales channels for locally made and imported models, the newspaper said, according to Reuters.

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But a requirement that foreign companies can only take half of a joint venture will stay, the China Daily reportedly said, even though, in practice, the government has been letting the likes of Honda control plants that mainly export.


Reuters noted that China has pledged to slash tariffs on imported vehicles to 25% by July 2006 from 40% to 50% now, and abolish all quotas by 2005.


Imported cars made up less than 10% of national sales of about two million units last year, but Beijing is worried this could become a flood once tariffs go down and quotas are removed, the report added.


Taxes on imported parts, about 28% on average now, would fall to 10% by 2006, Reuters said.