China Closer to Removing Cap on Foreign JVs

China’s central government is moving closer to removing a rule that currently limits foreign ownership in joint ventures to 50%.

The chairman of China’s National Development and Reform Commission tells Bloomberg News the government is considering an adjustment. A commerce ministry official told Chinese carmakers in 2013 that they should prepare for a time when they won’t be so shielded. At the time, domestic brand controlled only 30% of the Chinese passenger-car market.

China imposed the rule in 1994 to protect domestic carmakers from direct competition from far more experienced manufacturers overseas. Thus all foreign producers must partner with one or more domestic carmakers. The China Assn. of Automobile Manufacturers has opposed changing the rule.

Bloomberg notes that last year domestic-brand car sales in China increased for the first time in five years. The increase has been aided in part by a government ruling that foreign carmakers must help their domestic partners launch locally branded models.