Easing of Foreign Investment Rules a Move Towards a More Open Market Policy

Easing of Foreign Investment Rules a Move Towards a More Open Market PolicyThe latest easing of rules for foreign investment is considered a move towards a more open market policy that will bring in heated competition but will not place too much pressure on local manufacturers. The State Council stated that it will temporarily allow foreign manufacturers to establish wholly owned companies in key industries in China’s free trade zones in Tianjin, Fujian, Guangdong and Shanghai. This will promote healthy competition and will also benefit the supply side of the structural reform.

China is boasting of a large market, anf that the move in easing up might result in better products that meets high end domestic demand and will help further enhance China’s manufacturing standards. Tianneng Group the largest battery manufacturer in China said that the move will not affect their business since it has already fully developed a mature production line and technological innovation in lithium battery. While on the other hand Shenzhen BAK Battery Co. with core business in lithium batteries and electric vehicles said that new energy battery companies need to upgrade its business in the short term since there will be more foreign investment in the sector to come in the following years.

The amended rules that govern foreign investment in the motorcycle and battery sectors definitely feel the impact on domestic players and will help accelerate their technological upgrading. Several companies such as LMC Automotive Consulting Co, will not be affected since China is already a major producer of motorcycles, but for batteries the important part is not in the manufacturing but in the entering the catalog of subsidies since both electric car makers and battery makers get subsidies only from the government once entering the catalog.

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