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China's auto sector rules could ward off new firms: Analysts

Published on Dec 31, 2011 6:00 AM

BEIJING (AFP) - China's decision to 'withdraw support' for foreign investment in its auto sector is unlikely to see global firms leave the country but will make it harder for new carmakers to enter, analysts say.

The guidelines - released by the National Development and Reform Commission (NDRC), the top economic planner, late on Thursday - signal an end to incentives for foreigners and discourage fresh projects in China.

The move comes as sales in the world's biggest market slump and Beijing tries to shore up the economy by helping domestic companies and opening up other industries to foreigners such as environmental technology.

'The government is signalling that it is worried about overcapacity (in the auto industry) and that it will reserve any new capacity to local brands or new energy vehicles,' said Mr John Zeng, director of forecasting for research firm LMC Automotive.

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