Amid trade rift, China to allow full foreign auto ownership

BEIJING (AP) – Facing the risk of a trade fight with the United States, China announced plans Tuesday to allow full foreign ownership of automakers in five years.

The change would scrap rules that require global automakers to work through state-owned partners – an arrangement that forces those foreign companies to share technology with potential competitors in China. It was unclear whether Beijing’s action might mollify U.S. President Donald Trump, who has threatened to slap tariffs on $150 billion of Chinese goods in response to complaints that Beijing pressures foreign companies to hand over technology.

The possibility of a trade war between the world’s two largest economies has shaken financial markets and could threaten the steady economic growth that is buoying most of the regions of the world.

“If you keep poking at the economic expansion, it could turn around and bite you,” Maurice Obstfeld, the International Monetary Fund’s chief economist, told reporters Tuesday as the IMF issued its latest forecast for global growth. There aren’t “going to be any winners coming out of a trade war.”

The lending agency kept its forecast for global economic growth this year at 3.9 percent, which would be the fastest pace since 2011. But Obstfeld warned that that bright outlook depends on avoiding a major trade conflict.

In China, the move to open the auto industry reflects growing official confidence in the country’s young but fast-growing automakers and a desire to make the industry more flexible as Beijing promotes the development of electric cars.

Automakers had been awaiting details since President Xi Jinping announced last week that ownership restrictions would be eased and auto import duties reduced. Some analysts saw Xi’s promise as an attempt to placate Trump. But Chinese government spokespeople said the plans had nothing to do with Beijing’s trade dispute with Washington.

Tuesday’s announcement coincided with a Commerce Ministry order to importers of U.S. sorghum to post bonds to pay possible anti-dumping duties in a separate dispute. It said preliminary results of a trade inquiry had found that U.S. sorghum, a grain used as animal feed and in liquor distilling, was sold at improperly low prices that hurt Chinese farmers.

In the meantime, limits on foreign ownership of electric vehicle producers will be eliminated this year, the Cabinet’s planning agency said. That change will be followed by a similar repeal for makers of commercial vehicles in 2020 and for passenger vehicles in 2022.

“Following a five-year transition period, all ownership restrictions will be lifted,” said the announcement by the National Development and Reform Commission.

Until now, such major global automakers as General Motors Co. and Volkswagen AG have been allowed to own no more than 50 percent of a joint venture with a Chinese partner. And they were limited to two ventures.

Foreign automakers complied as the necessary price to access to China’s populous market, which passed the United States in 2009 as the world’s biggest by number of vehicles sold. Sales of sedans, SUVs and minivans last year totaled 24.8 million units. About 55 percent of them were American, European, Japanese and Korean brands.