China said on Dec. 29 that it will "withdraw support" for foreign investment in auto manufacturing to encourage domestic industry in the world's largest car market.
Some of the world's biggest car firms, including General Motors, Honda and Volkswagen, have long had operations in China, but the state news agency said Beijing would "withdraw support for foreign capital in auto manufacturing."
The move, announced by the National Reform and Development Commission and the Ministry of Commerce, comes as auto sales slump and Beijing tries to shore up the domestic economy against a forecast slowdown.
The new obstacles to foreign auto makers, due to go into effect on January 30, come "because of the need of the healthy development of domestic auto making," the NDRC and commerce ministry said, according to Xinhua. The report did not provide specific details of what the withdrawal of support might amount to, nor were they immediately available from either organisation's web site.
But the measure comes as China's auto sales slow and just 10 days after Saab was forced into bankruptcy following successful efforts by GM to block Chinese companies from acquiring the Swedish car maker.
Sales in the world's biggest auto market rose more than 32% last year to a record 18.06 million units, but the sector has since lost steam after Beijing phased out sales incentives such as tax breaks for small-engine cars.
Auto sales in China slid 2.4% in November from a year earlier to around 1.66 million vehicles, marking the second straight monthly decline.
China, which overtook the United States to become the world's top auto market in 2009, has become increasingly important for global players such as GM and Volkswagen.
As China's overall auto sales have dropped, some foreign firms have fared well, with GM showing a more than 20 % sales rise in November from a year earlier, bolstered by strong demand for passenger cars. In the first 11 months of this year, GM sold around 2.35 million vehicles in China, up more than 8% from the same period last year.
In September, GM China Group president Kevin Wale forecast China's total auto sales will reach 19 million units this year, marking growth of around 5% from the record 18.06 million units sold last year.
Industry group the China Association of Automobile Manufacturers also expects growth in car sales for the whole of 2011 to be just 5%, down from an earlier forecast of 10%-15%.
The moves against the international auto sector come fast on the heels of Beijing's decision earlier this month to hike tariffs on U.S. passenger cars and sports utility vehicles with engine capacities of 2.5 liters or more.
China challenged the U.S. to bring a complaint to the World Trade Organization.
The NDRC and commerce ministry also said China will ease restrictions on foreign investment in some sectors while lifting caps on the proportion of foreign capital in others. In the first 11 months of 2011, China attracted $103.77 billion in foreign direct investment, up 13.15% from a year earlier, Xinhua said.
Signs that China's economy is in for a hard year ahead are seen in government forecasts which halve the export growth on which the nation's economy heavily depends, as economic turmoil in Europe and the United States bites.
Copyright Agence France-Presse, 2011
