Beijing in the Drivers Seat?

Reposted from The Wall Street Journal

Beijing in the Driver’s Seat?

G.E. Anderson | January 5, 2012 | The Wall Street Journal (opinion)

Some foreign businesses have complained over the past year or two that the business environment in China has become less friendly. And now it might appear as though the auto industry is the latest addition to the “not welcome” list. Beijing’s National Development and Reform Commission, responsible for economic planning, recently announced it would stop supporting foreign investment in car manufacturing.

But appearances can be deceiving. This is really a story of how, while the investment climate might not become “better” or “worse,” it does become different, and foreigners will have to adapt.

On its face, the announcement suggests Beijing will not approve any more joint ventures between foreign and domestic auto companies (such arrangements are a precondition for foreign investment in the industry), and those that do have ventures will get no more approvals to expand their Chinese ventures. This would be a blow to companies such as General Motors that look to China for a significant amount of future growth.

But there is reason to believe the policy is not all it claims to be, and that Beijing simply is trying to change the terms of foreign auto investment, not ban foreigners altogether. To understand this, it’s important to understand why the foreign auto makers were originally welcomed in China.

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