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U.S. companies in some industries face special restrictions in China

What the process of doing business in China involves isn’t the same for all businesses. For one, it can vary based on what industry a company is in. Businesses in some industries can face special challenges when it comes to expanding into the Chinese market. For example, in certain industries, there are special restrictions on what types of business operations foreign companies are allowed to have in China.

So, when a U.S. company is looking to extend its operations into China, it can be critical for it to understand what particular issues are present for it in relation to such market entry given things like the industry it is in. If it is in an industry in which there are special restrictions, it can be crucial for it to be aware of what impacts the restrictions have on its options for pursuing its goals related to doing business in China. This underscores how important having well-tailored legal advice can be for a U.S. company when looking to enter the Chinese market.

Now, what sorts of restrictions on foreign businesses are present in China is something that can shift over time. It appears such a shift might soon be occurring when it comes to the auto industry.

Under current policy in China, foreign automakers can’t have wholly-owned operations in China. Rather, they are required to enter into joint ventures with local businesses if they want to have an operational presence in the country.

Reportedly, China is considering making an exception to this rule when it comes to the makers of electric vehicles. A proposal is being discussed which would make it so foreign automakers could establish wholly-owned operations related to electric vehicles in the country’s free trade zones.

It is thought that the plan, if approved, could end up being implemented as soon as next year. One wonders if China will ultimately decide to carve out this exception to its restrictions on foreign automakers.

Source: Bloomberg, “China Considers Opening Up to Foreign Electric Carmakers,” Sept. 19, 2017

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