Right now, a foreign shareholder can't own more than 50 percent of a joint venture established in China.

More than two years ago, China's Ministry of Industry and Information Technology expressed his desire to loosen up restrictions applied to foreign automakers' joint ventures. However, that didn’t happen and as a consequence foreign shareholders are not currently allowed to own more than 50 percent of a joint venture established in China with a local car manufacturer.

That could change in the near future taking into account Xu Shaoshi, chairman of the National Development and Reform Commission, said a couple of days ago the Chinese government is looking for ways to lift the cap altogether. Volvo’s parent company Geely through the voice of its chairman Li Shufu is one of the main supporters of the idea. He believes lifting the 50-percent limit would intensify competition which consequently would prove to be beneficial for consumers.

On the opposite side is the China Association of Automobile Manufacturers as it believes local marques would be “killed in the cradle” by the more independent foreign companies.

It remains to be seen whether the cap will be removed in the world’s biggest car market, one where reports are indicating Tesla is interested in establishing a joint venture with Jinqiao Group, a Shanghai government-owned company. However, Elon Musk announced a couple of days ago via Twitter they haven’t signed anything yet, so those talks about a $9 billion agreement to build a factory in China are only rumors at this point.

As a final note, it’s worth mentioning that all foreign manufacturers interested in setting up shop in China are obliged to form a joint venture with a domestic company as per a mandate dating back to 1994. The 2016 Peugeot 308 Sedan pictured here is a recent example, as it's a China-only model developed by the joint venture between PSA and Dongfeng.

Source: Bloomberg.com

Be part of something big