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Xi Jinping said, four years from now, restrictions that have been preventing US car manufactuters from fully owning local companies will come to an end.
I am wondering about the benefit for China in this arrangement.
Can anyone shed some light on this topic?
I believe this stems from both growing Chinese confidence in their auto industry and the demand for electric cars in China. First, as a bit of background, China has always had tight control of their regulated economy, and believe that government supervision of the economy is necessary. China has always given preference to Chinese citizens in running businesses (Source). The "50-50 rule", that auto-makers cannot own more than 50% of a venture (and own no more than 2 ventures), was originally designed to protect a growing Chinese auto-industry when it opened up to foreigners in 1994. Forcing foreign automakers into joint ventures allowed Chinese companies to learn the technology from their foreign partners and grow their brands, instead of allowing established foreign automakers to dominate the market.
According to the LA Times article, this signals that China now has more confidence in their auto industry-- and indeed, they have made great improvements in recent years-- as GAC Motors plans to enter the US market by 2019, whereas previous Chinese companies had struggled with high US safety standards and other barriers to enter the market. Allowing more competition in the auto market will result in better/cheaper cars available for Chinese consumers.
Next, there is huge demand for electric vehicles in China (likely related to Chinese pollution issues)-- as 1 in 3 Chinese people are willing to buy an electric car, and 40% of global investment in electric cars occurs in China. These changes will also bring electric vehicle companies like Tesla to China, as Tesla is now working with the Shanghai government on a deal to build a wholly owned factory in the city’s free-trade zone. This would also allow Tesla to produce cheaper electric cars with a factory in China, so China stands to gain domestically from this move as well. This would result in more electric cars, less pollution, and jobs for factory workers in China.
