China Foreign Investment: Automotive Manufacturing

On 30 June 2019, the 2019 edition of the Special Management Measures for the Market Entry of Foreign Investment (the “2019 FDI Negative List”) was published by the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) jointly – this came into effect on 30th July 2019. Together with the newly released Foreign Investment Law (to come into effect from 1st January 2020), the trend points to a strong commitment of the Chinese government to further open its doors to attract foreign investment in China.

With the revised 2019 FDI Negative List, foreign investors can invest in an industrial sector which does not fall into the 2019 FDI Negative List and they will be treated in the same manner as domestic investment.

Highlights are outlined below.

Foreign investors will be able to set up their controlled or wholly-owned subsidiary in China to manufacture:

  • special vehicles and new-energy vehicles
  • commercial vehicles from 2020
  • passenger vehicles from 2022

Prior to 2022, a foreign investor is limited to establishing no more than two joint ventures or WFOEs (as the case may be) to manufacture one type of vehicles. However, from 2022, this restriction will no longer apply. This presents a very positive regulatory movement for international investors which look to gain a foothold or expand their operations in the largest automotive market in the world.

Partner, Norton Rose Fulbright Beijing

Partner, Norton Rose Fulbright Shanghai