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For Now, Foreign Automakers Must Continue to Operate in China Only in Joint Ventures

China's mostly state-owned automakers want to persuade the country's Commerce Ministry to retain a requirement seldom found in other top manufacturing nations: Foreign automakers may assemble cars in China only through 50-50 joint ventures with domestic partners.

For Now, Foreign Automakers Must Continue to Operate in China Only in Joint Ventures

The multinationals have not asked to be set free. Instead, the Commerce Ministry raised the idea of dropping the requirement last autumn, fearing that industrialized nations would use the restrictive rules as justification for protectionism someday if China starts exporting large numbers of cars. But the big state-owned companies are less interested in exports than in having the multinationals tied to their partners indefinitely ó and collecting the sizable profits that come with those relationships.

The industry is not entirely in agreement. Slightly smaller automakers started by entrepreneurs do not have the same incentives to maintain the status quo since they generally donít have joint venture partners. They are also much more eager to move into foreign markets, through exports and overseas acquisitions.

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