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New Chinese Policy May Force Foreign Automakers to Share Technology

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On: Mon, Sep 20, 2010 at 8:56AM | By: Sherry Christiansen

 New Chinese Policy May Force Foreign Automakers to Share Technology

According to a recent Wall Street Journal article, China is creating a plan that may force foreign automakers to disclose their secrets regarding new electric vehicle technology. How? China is attempting to be the world’s leader in the growing light vehicle market. China's Ministry of Industry is writing a 10-year plan designed to enable the country to be a leader in hybrid and electric-car technology.

China’s proposition demands that foreign auto manufacturers become involved in affiliations with Chinese companies that hold majority stakes. China is currently the world’s largest automotive market, the most profitable market for many automakers across the globe.  According to a recent automotive news report, “under China industrial policy, foreign automakers typically have to establish joint ventures with Chinese automakers to gain access to the market.”

While it’s true that China has the biggest automotive market, as far as imported sales are concerned, the country has not produced enough of their own vehicles to compete with companies like Toyota Motor Corporation, Ford Motor Company, or General Motors.  According to the Wall Street Journal, “Chinese government officials see the electric and hybrid initiative as an opportunity to create such an automaker.”

The 10-year plan includes a $15 billion investment in electric vehicle production and infrastructure to create charging stations, as well as several global automotive companies that plan to build 3 million hybrid vehicles by the year 2020, as well as globally producing and distributing auto parts such as electric hybrid batteries and motors.

One foreign auto executive stated, “the Ministry of Industry's draft unnecessarily raises the hurdle for our plans for producing an electric car in China, because China is likely to become a major market for electric cars and plug-in hybrids by 2020, foreign automakers will need to build such vehicles in China, the unidentified executive told the paper.

“The new pending policy would make the process unnecessarily more cumbersome and complicated," he also stated.
China’s automotive industry has continued to flourish in the face of a crippled industry in many parts of the world, including the United States and Europe, and Chinese leaders have begun to attempt to exchange technological information for “market access,” according to the Journal.

The Journal also stated that “U.S. Chamber of Commerce warned that China's policies are forcing foreign technology companies to anguish over balancing today's profits with tomorrow's survival."

According to Chinese premier Wen Jiabao, "China is committed to creating an open and fair environment for foreign-invested enterprises." Jiabao also stated, "Foreign-invested enterprises in China on the whole enjoy a good environment and have reaped good returns."

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