China encourages automakers to build plants in western region
A surprise policy shift in China is expected to give a boost to Volkswagen Group, General Motors and other foreign automakers planning to expand production.
China said it would encourage foreign investment in vehicle manufacturing in its western region, reversing a policy to remove automaking from a list of industries qualifying for government incentives.
Starting June 10, foreign auto investment will be given preferential treatment, the National Development and Reform Commission said in a statement Friday, without giving more details. The policy was one of several measures taken by the central government to encourage labor-intensive projects in the central and western regions, which attracted $19.2 billion (118 billion yuan) in overseas investment last year.
The announcement follows official figures this week that showed foreign direct investment growth slowed in April, highlighting concern about China's economic outlook.
"The change in policy direction is meant to boost foreign investment and economic growth rather than for the need of the auto industry," said Zhang Xin, an analyst with Guotai Junan Securities Co. in Beijing. "It could well cause an increase in excess capacity and make it more difficult for local automakers to compete with foreign companies."
Foreign automakers received preferential treatment for seven years on their Chinese plants until 2011, when the NDRC removed the industry from its list of favored industries for investment to clamp down on overcapacity.
Automakers are expected to produce more than 20 million vehicles in China this year, and new assembly plants are under construction. Volkswagen said Thursday it has begun construction of a new assembly plant in Changsha in southern China, part of its 9.8 billion-euro (77 billion yuan) investment in new models and production capacity.
Meanwhile, General Motors said this month that it has won regulatory approval to build a $1.3 billion (8 billion yuan) Cadillac factory in Shanghai.
Starting June 10, foreign auto investment will be given preferential treatment, the National Development and Reform Commission said in a statement Friday, without giving more details. The policy was one of several measures taken by the central government to encourage labor-intensive projects in the central and western regions, which attracted $19.2 billion (118 billion yuan) in overseas investment last year.
The announcement follows official figures this week that showed foreign direct investment growth slowed in April, highlighting concern about China's economic outlook.
"The change in policy direction is meant to boost foreign investment and economic growth rather than for the need of the auto industry," said Zhang Xin, an analyst with Guotai Junan Securities Co. in Beijing. "It could well cause an increase in excess capacity and make it more difficult for local automakers to compete with foreign companies."
Foreign automakers received preferential treatment for seven years on their Chinese plants until 2011, when the NDRC removed the industry from its list of favored industries for investment to clamp down on overcapacity.
Automakers are expected to produce more than 20 million vehicles in China this year, and new assembly plants are under construction. Volkswagen said Thursday it has begun construction of a new assembly plant in Changsha in southern China, part of its 9.8 billion-euro (77 billion yuan) investment in new models and production capacity.
Meanwhile, General Motors said this month that it has won regulatory approval to build a $1.3 billion (8 billion yuan) Cadillac factory in Shanghai.
