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It's not just car companies but foreigners cannot own the majority of ANY company. I can understand why China did this because they don't want to end up like ma

It's not just car companies but foreigners cannot own the majority of ANY company. I can understand why China did this because they don't want to end up like many of the developing countries where most of the economic engines of their country are owned by foreigners. You see this happening in the "banana republics" of the world. It also has the benefit of implicitly forcing technological transfer when it is coupled with high tariffs on imports. Foreign companies end up "partnering" with locals to avoid the tariffs but the joint company is ultimately Chinese majority owned. It's hard to argue that these policies have not benefited the Chinese or at least prevent some of the downsides of economic liberalization and "free" trade. With all that in mind, however, other countries would be fools to allow this sort of economic asymmetry to continue. Especially at this point, when China is the second largest economy (and largest when adjusted by PPP), China doesn't need this kind of protection and is simply not playing fair. I don't know if tariffs are the best way of leveling the playing field but some sort of rebalancing and leveling of the playing field must happen because otherwise it is simply a rigged game. There is even a very good argument that can be made that direct, unfettered foreign investment now would benefit China given its large consumer base with money to spend. Otherwise, the Chinese consumer is simply indirectly subsidizing Chinese corporations who made not have to compete as hard because of these protections.

zhte415 7y ago
> foreigners cannot own the majority of ANY company. This is incorrect, and has not been the case for a very long time, please don't spread FUD. Wholly Owned Foreign Enterprise https://en.wikipedia.org/wiki/Wholly_Foreign-Owned_Enterprise https://en.wikipedia.org/wiki/Wholly_Foreign-Owned_Enterpris...
- hangonhn 7y ago
  Except you left out the really important restriction that they cannot directly sell to domestic Chinese market. So they're still subject to import tariffs. In fact there's a whole industry of consultants who specializes in helping these companies "export and import" their goods back to China. I guess they may save on the shipping costs and employ cheaper Chinese labor. But the whole point of companies opening factories in China is to be able to sell to the huge Chinese consumer market without being hit by tariffs.
  - zhte415 7y ago
    WFOEs can sell to Chinese businesses, consumers, government (and they can sell overseas, and overseas companies can sell to WFOEs or domestically). There's a lot of circularity in your comment. A company can be wholly foreign owned. A foreign owned company can sell in China, it can declare tax and issue receipts, employ people, rent office or factory space, build a building, the whole hog. I'm not sure where what niche you are in regarding import/export taxes, opening factories, and employing cheap labour all in one gulp of air. Wholly foreign owned companies in China are legal entities and have been for a long time, your comment "foreigners cannot own the majority of ANY company" is factually wrong and is FUD. Do you have an agenda with these comments? Please don't make HN political.
    - hangonhn 7y ago
      My comment wasn't as precise/nuanced as it should have been but was meant as an add-on of the parent's comment. What I meant is that the ownership restriction doesn't just apply to car companies but other industries as well -- although I do see now how that could have been read differently. WFOE cannot sell directly to Chinese consumers. The way WFOE sell to the Chinese domestic is essentially by "exporting" and "importing" its own products again, thus subject to taxes on such activities ( https://www.set-up-company.com/joint-venture-vs.-wfoe:-which-is-a-better-option-for-establishing-a-business-in-china.html https://www.set-up-company.com/joint-venture-vs.-wfoe:-which... -- "Scope of Business" Wish I could find a better source on this). A friend of mine interned at one of these firms that basically specializes in these creative "re-import" businesses but I don't know what these firms are called. Not sure why my comments generates such a reaction from you that you accuse me of FUD or being political. It's certainly not intended as such. I study Chinese history as a hobby, especially modern history. I have friends and family who do business in China (and own businesses in China). My comments were intended to add more information and background to the original comment by combining what I've read and what I've heard. But sometimes intentions and outcomes don't match up. Apologies if my comments injected too much of my own perspective on the subject.
      - zhte415 7y ago
- NicoJuicy 7y ago
  And you can't win government contracts with that, because they favor Chinese companies only ( so not published anywhere) And you aren't going to realistically sell anything, because Chinese companies always win. And after partnering, you can't easily get your money outside of China, that was why BTC was extremely popular there, untill it got regulated. Even for an individual, the limit is 50.000$/year for exchanging money. Give me an example of something that launched there that was not a luxury clothing good ( eg. D&G) Even something as steam needs a local partner to launch there. So the "wholly owned" thing is not a solution. It just "exists" for the sake of an argument. My parent company sells in the entire world except China because of that ( and some very small other countries). So I'm not exactly an outsider, it was my question to the "top guys", sort of speak :) It was also what I thought before I asked it. So yeah, it is a thing without a doubt.
rytor718 7y ago
I've never understood the logic of "playing fair". No one plays "fair". Please name me 1 country who plays "fair". China does what everyone else does, but usually better in the long game. I both admire it and am terrified by it. We helped make this game. And we can't simply talk about fairness when we're not the benefactors.
- NicoJuicy 7y ago
  It's not the same game, it's state capitalism.
- hangonhn 7y ago
  Agreed. But that's not what I really mean. Perhaps it was a bad choice of words on my part. But if most of us see the asymmetry of the relationship, then we should do what we can to rebalance it so that the relationship is to the benefit of both. Or maybe what I should say is that if our trade relationship is not to the long term benefit of our country, we should seek to renegotiate it.
  - DiogenesKynikos 7y ago
    Some would say the major asymmetry is that the United States is a developed economy, while China is a developing economy. China has been able to develop by attracting foreign investment, based on its low wages and good infrastructure. However, China doesn't want to get stuck in this low stage of development, and wants to actually develop domestic companies that can compete internationally. Completely opening up the internal market is not necessarily a good way to achieve that goal. Most developed countries got to where they are now with the aid of protectionist policies. Toyota wouldn't exist if Japan had completely opened its market. GM, Ford and Chrysler would have strangled Toyota in the bathtub.
dis-sys 7y ago
Rather than keep spreading incorrect info, how about just relax and watch how Tesla's 100% owned factory gets built in China? See below for some weekly drone footage of Tesla Gigafactory 3 in Shanghai under construction [1]. [1] https://www.youtube.com/user/jasonyangsha/videos https://www.youtube.com/user/jasonyangsha/videos
- hangonhn 7y ago
  Yeah that did come to mind but I wasn't sure if it was true so I didn't mention it. Do you know how this happened for Tesla or have any background on it? Was this an exception that was done for Tesla or the first of a new trend? Edit: https://techcrunch.com/2018/10/17/tesla-inks-deal-for-gigafactory-3-in-china/ https://techcrunch.com/2018/10/17/tesla-inks-deal-for-gigafa... Seems like this is the start of a trend and the rules for joint ventures have changed. I stand corrected.
DiogenesKynikos 7y ago
> It's not just car companies but foreigners cannot own the majority of ANY company. That was the case decades ago, but it hasn't been the case for a long time. For several decades, China has been progressively removing ownership restrictions from different sectors of the economy. It removed restrictions on auto parts in 1993. It removed restrictions on automobiles last year. Foreigners can actually own majority stakes in most sectors now. Tesla is an example of this. They do not operate as a joint venture in China.

zhte415 7y ago

> foreigners cannot own the majority of ANY company. This is incorrect, and has not been the case for a very long time, please don't spread FUD. Wholly Owned Foreign Enterprise https://en.wikipedia.org/wiki/Wholly_Foreign-Owned_Enterprise https://en.wikipedia.org/wiki/Wholly_Foreign-Owned_Enterpris...

hangonhn 7y ago
Except you left out the really important restriction that they cannot directly sell to domestic Chinese market. So they're still subject to import tariffs. In fact there's a whole industry of consultants who specializes in helping these companies "export and import" their goods back to China. I guess they may save on the shipping costs and employ cheaper Chinese labor. But the whole point of companies opening factories in China is to be able to sell to the huge Chinese consumer market without being hit by tariffs.
- zhte415 7y ago
  WFOEs can sell to Chinese businesses, consumers, government (and they can sell overseas, and overseas companies can sell to WFOEs or domestically). There's a lot of circularity in your comment. A company can be wholly foreign owned. A foreign owned company can sell in China, it can declare tax and issue receipts, employ people, rent office or factory space, build a building, the whole hog. I'm not sure where what niche you are in regarding import/export taxes, opening factories, and employing cheap labour all in one gulp of air. Wholly foreign owned companies in China are legal entities and have been for a long time, your comment "foreigners cannot own the majority of ANY company" is factually wrong and is FUD. Do you have an agenda with these comments? Please don't make HN political.
  - hangonhn 7y ago
    My comment wasn't as precise/nuanced as it should have been but was meant as an add-on of the parent's comment. What I meant is that the ownership restriction doesn't just apply to car companies but other industries as well -- although I do see now how that could have been read differently. WFOE cannot sell directly to Chinese consumers. The way WFOE sell to the Chinese domestic is essentially by "exporting" and "importing" its own products again, thus subject to taxes on such activities ( https://www.set-up-company.com/joint-venture-vs.-wfoe:-which-is-a-better-option-for-establishing-a-business-in-china.html https://www.set-up-company.com/joint-venture-vs.-wfoe:-which... -- "Scope of Business" Wish I could find a better source on this). A friend of mine interned at one of these firms that basically specializes in these creative "re-import" businesses but I don't know what these firms are called. Not sure why my comments generates such a reaction from you that you accuse me of FUD or being political. It's certainly not intended as such. I study Chinese history as a hobby, especially modern history. I have friends and family who do business in China (and own businesses in China). My comments were intended to add more information and background to the original comment by combining what I've read and what I've heard. But sometimes intentions and outcomes don't match up. Apologies if my comments injected too much of my own perspective on the subject.
    - zhte415 7y ago
NicoJuicy 7y ago
And you can't win government contracts with that, because they favor Chinese companies only ( so not published anywhere) And you aren't going to realistically sell anything, because Chinese companies always win. And after partnering, you can't easily get your money outside of China, that was why BTC was extremely popular there, untill it got regulated. Even for an individual, the limit is 50.000$/year for exchanging money. Give me an example of something that launched there that was not a luxury clothing good ( eg. D&G) Even something as steam needs a local partner to launch there. So the "wholly owned" thing is not a solution. It just "exists" for the sake of an argument. My parent company sells in the entire world except China because of that ( and some very small other countries). So I'm not exactly an outsider, it was my question to the "top guys", sort of speak :) It was also what I thought before I asked it. So yeah, it is a thing without a doubt.

rytor718 7y ago

I've never understood the logic of "playing fair". No one plays "fair". Please name me 1 country who plays "fair". China does what everyone else does, but usually better in the long game. I both admire it and am terrified by it. We helped make this game. And we can't simply talk about fairness when we're not the benefactors.

NicoJuicy 7y ago
It's not the same game, it's state capitalism.
hangonhn 7y ago
Agreed. But that's not what I really mean. Perhaps it was a bad choice of words on my part. But if most of us see the asymmetry of the relationship, then we should do what we can to rebalance it so that the relationship is to the benefit of both. Or maybe what I should say is that if our trade relationship is not to the long term benefit of our country, we should seek to renegotiate it.
- DiogenesKynikos 7y ago
  Some would say the major asymmetry is that the United States is a developed economy, while China is a developing economy. China has been able to develop by attracting foreign investment, based on its low wages and good infrastructure. However, China doesn't want to get stuck in this low stage of development, and wants to actually develop domestic companies that can compete internationally. Completely opening up the internal market is not necessarily a good way to achieve that goal. Most developed countries got to where they are now with the aid of protectionist policies. Toyota wouldn't exist if Japan had completely opened its market. GM, Ford and Chrysler would have strangled Toyota in the bathtub.

dis-sys 7y ago

Rather than keep spreading incorrect info, how about just relax and watch how Tesla's 100% owned factory gets built in China? See below for some weekly drone footage of Tesla Gigafactory 3 in Shanghai under construction [1]. [1] https://www.youtube.com/user/jasonyangsha/videos https://www.youtube.com/user/jasonyangsha/videos

hangonhn 7y ago
Yeah that did come to mind but I wasn't sure if it was true so I didn't mention it. Do you know how this happened for Tesla or have any background on it? Was this an exception that was done for Tesla or the first of a new trend? Edit: https://techcrunch.com/2018/10/17/tesla-inks-deal-for-gigafactory-3-in-china/ https://techcrunch.com/2018/10/17/tesla-inks-deal-for-gigafa... Seems like this is the start of a trend and the rules for joint ventures have changed. I stand corrected.

DiogenesKynikos 7y ago

> It's not just car companies but foreigners cannot own the majority of ANY company. That was the case decades ago, but it hasn't been the case for a long time. For several decades, China has been progressively removing ownership restrictions from different sectors of the economy. It removed restrictions on auto parts in 1993. It removed restrictions on automobiles last year. Foreigners can actually own majority stakes in most sectors now. Tesla is an example of this. They do not operate as a joint venture in China.