China Drops 50% Ownership Cap for Motorcycles, Batteries

China’s central government has decided to exempt motorcycle and battery makers from a 22-year-old rule that limits foreign ownership in Chinese companies to 50%.

The new policy will apply to foreign companies that create free trade zones in Guangdong, Fujian, Shanghai or Tianjin, Bloomberg News reports.

The government says it will phase in the new rule slowly. The original 50% limit on foreign ownership was set in 1994. Its goal was to force foreign companies to partner with domestic businesses, thereby enabling the latter to gain technological prowess.

But the policy has been criticized in recent years for shielding local companies from developing their own brands or becoming more competitive in their own right. Last month the chair of the National Development and Reform Commission said the government was reviewing the 50% rule.

Analysts predict China will eventually lift the 50% cap for foreign carmakers. But the timing isn’t clear. Proponents of the 50:50 rule say China’s domestic vehicle manufacturers need more time to develop enough volume and technical capabilities to compete with foreign rivals, Bloomberg notes.