The Chinese government has released a new auto policy that is applauded as more transparent but is designed to slow auto sales
China's automobile industry released a much-anticipated new policy with rules expected to slow investment and consolidate the auto industry. The policy also encourages car buying through new traffic laws enacted by local governments. The Policy-Maker, the National Development and Reform Commission, claims this policy will help create a healthier auto industry and cites seven distince differences from the 1994 policy, including abolishing market-share requirements for local vehicles, which stated that by 2010 half of all new cars must be built in China. The policy also favored large manufacturers over China's aging producers. Companies in other industries will not be allowed to buy failing manufacturers and new producers
will need to invest at least 2 billion yuan ($241 million) accordind to the new policy.
The policy harms importers by closing a tax loophole. Previously, foreign companies imported cars in bulk and stored them in a holding area only paying taxes as the cars were sold. Now taxes must be paid as they are imported. Chinese investors must now also own 51% of any joint venture and that a Chinese company must be the largest investor if more than two are involved.
General Motors applauded the policy as more transparent and predicted it would result in a healthier industry, despite the fact that new liscencing policies designed to limit the number of vehicles will result in higher prices and lower sales.