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back to index backASIAtalk June,  2005


Automotive industry affected by recent guideline changes in China

The Ministry of Commerce and the State Development and Reform Commission recently revised two guideline catalogues that affect automotive industry investment in China.

The revision of the Catalogue for Guiding Foreign Investment in Industries (Foreign Investment Catalogue”) has changed the incentive structure for certain types of investment.

The Foreign Investment Guide classifies different types of investment into four categories: prohibited, restricted, permitted, encouraged. Investment classified as encouraged” often qualifies for certain tax breaks and VAT reductions.

The new Foreign Investment Catalogue has added the following types of investment to the encouraged category”:

• Development and Research regarding entire cars & car engines;

• Manufacture of Certain Car Parts

• Electronic Assembly and Manufacturing of Cars;

Removed from the encouraged category are the manufacture of entire motorcycles, motorcycle engines and certain other key motorcycle and car parts. Furthermore, a second catalogue encouraging investment in twenty central and western provinces in China has been revised to encourage the manufacture of car parts (with tax incentives provided) in certain specific interior regions.

Source: China Alliance - GAI

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