BEIJING, Apr 17 (AFP): China announced Tuesday a timeline to open up its manufacturing sector including scrapping ownership limits for foreign automakers, shipbuilders and aircraft firms-addressing a contentious issue in its trade dispute with the United States.
The liberalisation meets a longtime demand of the US and other countries seeking better access for their companies in the world's biggest car market and one of the largest markets for air travel.
China currently restricts foreign auto firms to a maximum 50 per cent ownership of joint ventures with local companies.
The country will this year end shareholding limits for new energy vehicle firms such as those that produce electric cars, according to the National Development and Reform Commission (NDRC).
The move will be followed by commercial vehicles in 2020 and passenger cars in 2022, when it will also abolish restrictions limiting foreign automakers to two joint-venture partners, the NDRC said in a statement.
"After a five-year transition period, the auto sector will lift all restrictions," it said.
Auto analysts said the new rules will have the most immediate benefit for electric car makers, especially those with a less established presence in China.
One car company likely to gain is electric car giant Tesla led by entrepreneur Elon Musk, who this year had asked US President Donald Trump for help on the market access issue, alluding to the troubles his firm has faced producing in China.
"It has instant impact for firms like Tesla," said Li Yanwei, an analyst with the China Automobile Dealers Association Expert Committee.
"China is the world's biggest electric car market so it has a great deal of attraction to any auto company. The demand for electric cars is very small in other countries," he said.
"Auto companies can now keep their secrets and they can earn higher profits," Li said. Under the current setup, foreign carmakers must transfer proprietary technology to the joint venture companies they set up-the issue of forced technology transfer has been a top concern for the Trump administration.
"China's full opening of the manufacturing industry is a clear indication of our opposition to trade and investment protectionism, and shows our clear support to widening and deepening the development of economic globalisation," the NDRC said in the announcement.
"Through the full liberalisation of the manufacturing industry, we will support Chinese and foreign companies in achieving common development on a level playing field," the NDRC said.
It said it hoped the liberalisations would encourage greater exchanges of capital, technology, management and personnel of Chinese and foreign firms.
President Xi Jinping announced the plans for the auto industry last week without giving any timeline.
Xi's announcement was among a series of measures seen as potential concessions to Trump in the face of a potential trade war, including a pledge to lower car tariffs this year.
Still, after Xi struck the conciliatory note in his speech, Trump showed no indication he would back down from imposing the threatened tariffs on $150 billion worth of Chinese goods, and Beijing said it was ready to hit back in kind.
Officials in Washington say they have grown wary of China's endless promises that often result in little action. The NDRC announcement could allay those complaints by giving specific dates for completion of the reforms.
The NDRC said the shipbuilding industry would this year scrap foreign ownership restrictions on firms designing, making and repairing vessels.
The NDRC will also lift restrictions on foreign ownership of aircraft manufacturing firms this year, including those that make large-body commercial airliners, regional jets, helicopters, drones and blimps.
The commission said it would also release a new negative list for foreign investment in the first six months of the year, to "substantially relax foreign investment access". A negative list includes all the industries with foreign investment restrictions. The new list will include the already announced opening of the financial services and auto sectors, and expand to include further opening for the energy, resources, infrastructure, transportation, and other sectors, the NDRC announcement said.
But in another move that could exacerbate tensions, China decided Tuesday to slap provisional anti-dumping duties on imports of US sorghum, saying its domestic industry has suffered from "substantial damage".
Meanwhile, China's economy grew more than expected in the first quarter as it withstood headwinds from Beijing's fight against financial risk and pollution, and trade tensions with the United States.
While acknowledging the potential negative impact of a US trade war officials on Tuesday warned the country faced greater downside risk at home, citing the need for reforms.
The world's number two economy expanded 6.8 percent in January-March, better than the 6.7 per cent tipped in an AFP survey of economists and the same as the previous three months.
It is also much better than the annual rate of around 6.5 percent targeted by the government.
Growth remained resilient even as Beijing kicked its war on smog into a high gear during the winter months by cutting production for many steel smelters, mills and factories.
"The national economy maintained the momentum of steady and sound development," said Xing Zhihong, a spokesman for the National Statistics Bureau. "The economic performance continued to improve and the economy was off to a good start."
Fears of a China-US trade war have been simmering in recent weeks, with Washington and Beijing exchanging threats of tit-for-tat levies on hundred of billions of dollars worth of goods.
US President Donald Trump has issued the warnings as part of his "America First" protectionist agenda that has focused on what he calls unfair practices by China that are killing American jobs.
Last week his Chinese counterpart Xi Jinping sounded a conciliatory note, promising to reduce tariffs on cars and open up the economy further.
For the past decade, about 20 per cent of China's exports have been ferried to the US, according to Moody's Investors Services, which forecasts a material macroeconomic impact if Trump makes good on his threats with the consequences vibrating beyond China's end exporters and deep into the economy.
While a tariffs spat with Trump has yet to make a significant impact, Commerzbank economist Hao Zhou warned "the overall growth is still under pressure".
"The trade tensions are likely to persist over the foreseeable future, clouding the trade and growth outlook."
Xing at the statistics bureau acknowledged the cloud of "international economic uncertainties" but said "China-US trade frictions do not pose a problem for China's economy".
Instead, he pointed to domestic risks to growth.
"The problems of unbalanced and inadequate development in China are acute and the tasks for reform and development are daunting," he said.
After years of breakneck growth driven by exports and debt-fuelled investment, authorities are increasingly worried about a possible credit crisis and are stepping up their battle against financial risk.
And the forecast-beating growth will give policymakers room to push through measures to battle those hazards and also address pollution.
Last week, the central bank released data showing total financing grew at 10.5 per cent in March, the slowest pace on record, according to China-focused economist Andrew Polk.
"We think a further (economic) slowdown is on the cards before the end of the year," said Julian Evans-Pritchard of Capital Economics, pointing to the drags "from tighter fiscal policy and slower credit creation" that will weigh on activity.
But China is counting on its 1.4 billion consumers to pick up the slack.
Retail sales grew 9.8 per cent in the first quarter on-year, beating forecasts of 9.7 per cent in a Bloomberg News survey.
Output at China's factories and workshops expanded 6.8 percent for the first quarter, matching the expansion seen during the same period last year, but below the 6.9 per cent forecast by Bloomberg News. Industrial production grew six percent in March.
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