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A foreign company's experience of China depends on the type of business it operates. Those in high-profile industries that the government considers crucial to China's future can often face the toughest bureaucratic resistance. Foreign carmakers have always faced stiff restrictions. They can build factories in China only in joint ventures with local partners, and in most cases that means the government, since the Chinese auto industry is dominated by state-owned enterprises. A carmaker then needs approval from Beijing just to increase production capacity. Despite these outdated restrictions--India, Indonesia and other major emerging markets allow foreign car companies to own 100% of their operations--those that jumped into the Chinese market early have built giant businesses. General Motors, for one, sold a record 2.5 million cars in China last year, making the American giant the No. 1 foreign automaker in the world's biggest car market.
However, companies that are now trying to enter the market, like Chrysler, may find a bumpier road. Apparently perturbed that foreign car companies dominate the local market, Chinese policymakers have tried to slow them down by making it more difficult to win the necessary approvals. Unable to get a green light for its proposed joint venture, Japan's Fuji Heavy Industries, the maker of Subaru cars, announced in May that it would put its plans for a Chinese production hub on hold indefinitely. "Things that were easy are less easy," says Michael Dunne, president of Hong Kong--based auto consultancy Dunne & Co. Foreign carmakers "have to work harder to get what they want. Free access is not part of the equation."
Since early 2011, the government has encouraged foreign carmakers to launch local Chinese brands if they want approval to increase production capacity. Many have complied. They may also have to pledge to manufacture electric or other eco-friendly vehicles to expand further, perhaps with a higher level of ownership of the critical technologies for their Chinese partners. With companies that are already thriving in the Chinese market, bureaucrats have become much more intrusive in their demands. Volkswagen, one of the largest foreign players in China, announced in April that it would build a $210 million factory in the far western region of Xinjiang. The move was billed as a head start in a promising new market, but industry sources say the German car giant came under pressure from the government to invest in the remote desert area as part of Beijing's plans to bolster development there.
In a written response to questions submitted by TIME, the National Development and Reform Commission (NDRC) stated that "China has no intention to slow down the development of foreign automobile producers in the Chinese market."
National Champions