China Vows to Drop Foreign-Ownership Caps by 2022

China’s central government says it will phase out its current limits on foreign ownership of domestic companies by 2022.

Current rules have limited foreign carmakers from owning more than 50% of Chinese operations since 1994. The practice was imposed to force partnerships with domestic companies, thereby helping them learn how to compete against established foreign manufacturers.

Beijing says it will remove the ownership cap for makers of plug-in hybrids and all-electric cars this year. The limit will be lifted for commercial vehicle and passenger car producers in 2020 and 2022, respectively.

Last week President Xi Jinping declared that China was willing to end its ownership caps “as soon as possible.” He also pledged to “significantly” reduce China’s 25% import tax on foreign-built vehicles. Both gestures are in response to trade pressure being applied to China by the Trump administration.

Whether foreign carmakers will jump to take full control of their joint ventures isn’t clear. Some analysts say the partnerships are now so well established that ending them would be too disruptive.

Reuters reports that General Motors, Honda and Nissan are among carmakers who say they have no immediate plans to change the structure of their partnerships in China.