Opening to benefit supply side reform

China's latest easing of its rules for foreign investment, a move toward a more open market policy, will bring in heated competition, but will not put too much pressure on local manufacturers, industry insiders said.

The State Council said on Tuesday it will temporarily allow foreign manufacturers to establish wholly owned companies in several key industries, including motorcycles, batteries, steel and high-speed train facilities and equipment in China's free-trade zones in Shanghai, Tianjin, Guangdong and Fujian.

"It will promote healthy competition, and benefit supply-side structural reform," said Zhao Zhongxiu, vice-president of the University of International Business and Economics.

China boasts a huge market, said the professor, adding that the move may result in better products to meet high-end domestic demand. Meanwhile, it will help further enhance China's manufacturing standards.

Tianneng Group, China's largest battery manufacturer, said that the move will not affect its business as it has developed full and mature production lines and technological innovation in lithium battery.

Zhang Shuquan, president of Shenzhen BAK Battery Co Ltd, a company with core business in lithium batteries and electric vehicles, said Chinese new-energy battery companies need to upgrade their business in the short term, as there will be more foreign investment in the sector in the coming years.

"The amended rules governing foreign investment in the motorcycle and battery sectors will definitely have an impact on domestic players, which may help accelerate technological upgrading," Zhang said.

Zeng Zhiling, managing director of LMC Automotive Consulting Co Ltd, said China's motorcycle industry will not be greatly affected by the move, as the country is already a major producer of motorcycles.

And the purchase and use restrictions in many big cities will also limit the auto sales.

As for batteries, Zeng said the most important point is not manufacturing, but entering the catalog of subsidies. Both electric carmakers and battery makers can only get subsidies from the government after entering the catalog.

Qiu Quanlin in Guangzhou contributed to this story.