Limiting foreign investment has other reasons

　　There has been much debate over the issue of limiting foreign investors' share percentage in new energy car key components.  Several issues need clarification: first, is this going to trigger WTO disputes? Second, since industry insiders all know that "limiting foreign investors' share percentage" cannot effectively enhance domestic car makers' R&D capacity, is there some other strategic reasons for doing so? Third, is the government correcting its mistake in its 30-year-old policy of "exchanging market for technology" by posing a limit on foreign investment?　　

　　"Limiting foreign investment" does not violate WTO rules

　　The Ministry of Commerce told reporters that China can make relevant decisions as long as it has not made any promise in this area. China only promised three things regarding automobile and components policy; first, lift any restrict on the type of automobiles that foreign companies can manufacture in two years; second, raise the share holding percentage of foreign car makers in getting approval from province-level government; third, lift the share holding percentage of foreign partner in engine manufacturer starting from the day China joins WTO.

　　Someone close to the China joining WTO negotiations told reporters that in general, WTO does not intervene with the drafting and revision of "Foreign investment industry catalog" in a member country and the member country can make policies that encourage, limit or prohibit foreign investment according to its own needs in economic security, technology introduction and industry protection. When China joined WTO, the automobile and component industries were still at their infancy, China managed to get better protection conditions.

　　Limiting foreign investment ≠ obtaining core technology

　　For "limiting foreign investment", the mainstream industry voice seemed supportive, but there are different opinions when it comes to whether such a policy can help domestic companies in gaining core technology. Independent critic Zhong Shi told reporters that even with a foreign investment limit, foreign car makers are not going let Chinese partner touch core technology because all multinationals are very cautious about technology leak. Foreign new energy cars that have their key components manufactured in China are only using the venue provided by the Chinese side, no matter it is a joint-venture or a solely-owned foreign company. According to Zhong, the reason behind this policy is more about the market than technology. Although the current new energy market is full of uncertainty, but the government needs to prepare for the long-term market. With the R&D capacity of multinationals, domestic companies are probably going to hand over the entire cake once the market matures. "Limiting foreign investment" at least can save one big lice for domestic companies.

　　According to Chen Wenkai, in the short-term, this policy will have some protective effect. But in the long run, the only way for domestic car component manufacturers to obtain core technology is to become the "original suppliers", working with multi-national car makers in developing the "original platform" of a new model, which is very difficult. In order to do this, the government has to lift the share holding limit on foreign partner of a joint venture. Attempted by the huge market and in the face of competition, joint ventures will have to further localize and domestic companies will benefit from the localization of joint ventures' high-end R&D talents. Why is Li Shufu calling for the lift of the limit? He knows very well what Geely has been doing to improve its quality and technology.

　　(Translator: Qinghua/Wade)

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