Why China's Auto Industry Doesn't Take the Road to Autonomy
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October 04 23:07:42, 2025
One of the Joint Venture Policy Makers' Self-Defense: A Realistic Choice
Chen Bin recalled that back then, he used the Xiali car as an example and asked a leader from FAW-Carbon Institute: If they concentrated all their FAW resources, could they develop a model like the Xiali? The answer was "impossible."
The rapid growth of China's auto industry has drawn widespread attention, both inside and outside the sector. However, it has also sparked some criticisms and doubts about the path taken by Chinese automakers over the past few decades. Despite more than 20 years of implementing the "market-for-technical" strategy, independent brands have not achieved significant breakthroughs, and reliance on foreign capital remains high.
On September 16, Chen Bin, deputy director of the Industry Department at the National Development and Reform Commission, shared his views at the 2006 China Automotive Industry Development International Forum. As a government official who played a key role in shaping major automotive policies, he discussed the rationale behind the joint venture model.
Joint ventures and cooperation are the only way forward.
As one of the main participants in the formulation of automotive policies before and after, Chen Bin believes that opening up the auto industry was a historical and realistic decision. He responded to those who questioned why China did not focus more on independent development rather than joint ventures two decades ago.
In 1994, despite the formation of a "three big and three small" structure in China’s auto industry, the newly issued "Auto Industry Industrial Policy" clearly encouraged the use of foreign capital to develop the domestic auto industry. During the drafting process, Chen Bin invited leaders from major domestic research institutes to assess whether China could develop competitive products independently.
He used the Xiali car as a case study and asked the FAW-Carbon Institute leader if they could build a model like Xiali by leveraging all their internal resources. The answer was still "impossible." When pressed for reasons, the response pointed to the power platform issue.
Chen Bin then asked if the state could assist in introducing a platform, would they be able to develop a similar model? Again, the answer was no. This wasn't just FAW's perspective; leaders from other major companies, including Dongfeng, echoed the same sentiment.
He also mentioned that during the "Seventh Five-Year Plan," FAW tried to develop its own light vehicles without external support, but it took seven years and the result was uncompetitive. Meanwhile, companies like Qingling and Jiangling succeeded by importing engines from Isuzu, making substantial profits.
This experience reinforced the need for foreign collaboration, leading to the inclusion of encouraging foreign investment in the industrial policy.
50% to 50% is a company's choice.
There have been ongoing discussions about the share ratios in Sino-foreign joint ventures. Chen Bin emphasized that the policy never mandated a strict 50-50 split. Instead, it required that the Chinese share must not fall below 50%. He clarified that this was not a government-imposed rule, but rather a decision made by the companies themselves.
For example, when the FAW-Volkswagen joint venture was established, the Chinese share was 60%, not 50%. The 50-50 rule was not set by the government but was chosen by the companies based on their operational needs.
Another regulation stated that foreign companies could not establish more than two joint ventures or cooperative enterprises with the same type of vehicle in China. Chen Bin believed these rules were appropriate and had helped elevate the overall level of China’s auto industry.
Over the past 20 years, foreign investment has significantly boosted China’s automotive capabilities. Through cooperation, the quality of domestic auto production reached international standards, and the parts industry expanded dramatically. This laid the foundation for future independent development.
Chen Bin concluded that many challenges faced by the industry are not solely due to specific industrial policies, but are shaped by the broader national innovation system and policy environment during that period.