Use the Lexology Getting The Deal Through tool to compare the answers in this article with those from other jurisdictions.



Describe the significance of, and developments in, the automotive industry in the market.

Since 2009, China has been the world’s largest automotive market and vehicle manufacturing country. The total vehicle output and sales volume in 2016 exceeded 28 million units. The Chinese automotive sector has become a pillar industry given its contribution to China’s GDP. It involves over 100 industries in China.

Since China’s accession to the WTO, the Chinese automotive market has experienced unprecedented growth. With steady improvements in product quality, the growth of Chinese automotive brands compounded and these brands have started to tap into the international market. Chinese brands have also gained an increasing edge in segmented markets such as commercial vehicles and sport utility vehicles. China has also made significant strides in the field of new-energy vehicles (NEVs). There is little doubt that the Chinese automotive market has matured but not necessarily levelled off. Market demand will continue to outpace other consumer markets. The following trends have been observed from consumer/customer base and behaviour which are likely to indicate the future direction of the Chinese automotive industry:

Though China’s economy is currently facing some downward pressure, it is widely believed that China will sustain an annual economic growth rate of about 6 to 7 per cent for the next decade.

Rapid urbanisation, rising family incomes and an increased desire for vehicle ownership will all contribute to the growth of new buyers. Chinese consumers will have a bigger appetite for better models and roomier cars.

Chinese consumers will place greater emphasis on vehicle safety and accessories. Affordability at the cost of safety and luxury will be much less the norm for automotive manufacturers.

Consumption of NEVs will grow more quickly than other developed markets because Chinese consumers will associate NEVs with better air quality. Pollution in China has been a societal crisis for the past five years. In an effort to reduce gas emissions by petrol and diesel vehicles, the Chinese government has put forward a series of preferential measures to promote NEVs, such as offering tax exemptions for purchase of NEVs by consumers and setting up ‘green channels’ for the application of licence plates for NEVs in certain major cities where the issuance of licence plates is managed under a rigid quota system.


What is the regulatory framework for manufacture and distribution of automobiles and automobile parts, such as vehicle-type approval process as well as vehicle registration and insurance requirements?

China’s automotive manufacturing sector is still heavily regulated. Approval from China’s National Development and Reform Commission (NDRC) is generally required for building a new automotive manufacturing plant, and the building of a new sedan plant by a Chinese-foreign equity joint venture also requires the approval of China’s State Council.

After the plant has been established, the manufacture and distribution of automobiles are then subject to a special ‘access permit for automobile manufacturers and their products’, which is issued and administered by China’s Ministry of Industry and Information Technology (MIIT). To qualify for such manufacturing permit, an automotive maker must meet all the requirements set out by MIIT, including demonstrating capabilities on product design and development, product production facility, product production consistency and quality control, and product sale and post-sale service. MIIT periodically publishes a list of the manufacturers and products for which the permits have been granted (Automobile Register). After the manufacturing permit is obtained, each vehicle model produced by licensed manufacturers must be registered with the Automobile Register before it can be sold on the market. To be registered, the automobile product:

  • must meet the relevant standards (as set out in the Items and Underlying Standards for Compulsory Standards Inspection of Automobile Products issued by MIIT);
  • must secure the China Compulsory Certification (CCC); and
  • must pass inspection performed by a qualified inspection institution.

Further, the vehicles to be sold must be registered in the National Environmental Protection Catalogue and, where applicable, the local Environmental Protection Catalogue, which might set a higher standard for registration. The issuance of on-road permits (vehicle registration licence) and licence plates is administered by the vehicle administration office under the local Public Security Bureau (PSB) based on the Automobile Register and CCC certification.

The production of automobile parts, on the other hand, follows a different licensing regime. First of all, for many types of automobile parts, a production licence issued by China’s Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) is required. Second, the product must be manufactured in accordance with the compulsory standards, known as Guobiao or GB, formulated and kept by the Standardisation Administration of China. Those auto parts subject to CCC must also undergo a specific accreditation process.

All vehicle owners must purchase the mandatory liability insurance for automobile transportation accidents before their vehicles can be lawfully registered with the PSB. The base insurance premium rate and the insurance terms are uniformly set by the China Insurance Regulatory Commission. Vehicle owners are free to decide whether to purchase additional commercial property and liability insurance.

Development, manufacture and supply

How do automotive companies operating in your country generally structure their development, manufacture and supply issues? What are the usual contractual arrangements?

There are basically two corporate structures for foreign automotive companies wishing to operate in China.

One is the joint venture structure, whereby overseas automotive companies partner with large Chinese state-owned or privately owned automotive groups. In fact, the joint venture model is the only lawful way for foreign automakers to build cars in China and the supply of passenger vehicles is currently dominated by joint ventures. Under this model, overseas automakers - mainly from the US, Europe, Japan and South Korea - localise their brands and share in the profits with their JV partners.

The other structure is the wholly foreign-owned enterprise (WFOE) model. This allows foreign companies to establish wholly owned subsidiaries without a Chinese partner. This model cannot be used for automakers, but is possible for automotive parts manufacturers. The advantage of the WFOE model is that the foreign automotive company has full autonomy in deciding on all strategic and operational issues. However, because of the lack of a Chinese partner with an inside track, this can limit ability to tap into the local market and in many cases supply to the local government, which itself is a highly sought-after customer base.

There are two sources of supplies: imported and local. In the automotive parts market, foreign companies, including localised foreign-invested companies, are the key players in technology-heavy areas such as electronic components including power steering, electronic braking, suspension systems and engine management systems, while local suppliers have a clearer advantage in areas such as vehicle windows. Branded automakers may impose certain constraints on small-scale automobile parts suppliers. Historically, for example, they were able to require these suppliers to sell parts only to their branded vehicles. Except for several large automobile parts suppliers, most local suppliers have made and sold their products to automakers under an exclusive OEM arrangement. However, under the Automobile Sales Administration Measures (Automobile Sales Measures) enacted by China’s Ministry of Commerce (MOFCOM) on 1 July 2017, such practices may no longer be acceptable, as these measures generally prohibited automakers from preventing automotive parts makers and importers from supplying their products to others.


How are vehicles usually distributed? Are there any special rules for importers, distributors, dealers (including dealer networks) or other distribution partners? How do automotive companies normally resolve restructuring or termination issues with their distribution partners?

Prior to the enactment of the Automobile Sales Measures and with the exception of parallel imports, car sales in China were primarily made through the so-called branded sales and service system under the Implementing Measures for Administration of Branded Sales of Automobiles, issued in 2005. Under such branded sales and service system, an automaker may itself, or may authorise a sole distributor to, establish a branded sales and service network by using a unified shop name, logo or trademark. While a domestic automaker may sell cars by itself, an overseas automaker must establish a local presence or authorise a domestic entity to act as its sole distributor to sell cars in China. The sole distributor may further authorise several sub-dealers to engage in automobile sales and service activities. In other words, a dealer must be authorised by either the automaker or the sole distributor to sell cars and car parts. The 4S (sales, spare parts, service and survey) model is the dominant model for passenger vehicles sales in China.

Unless otherwise agreed upon in an authorisation contract, neither an automaker nor a sole distributor may sell cars directly to end users within territories which it has authorised another dealer to cover. Only an authorised dealer may sell cars to end users and, subject to the consent of the automobile supplier, to other dealers. The law does provide that automobile suppliers may not interfere with the business activities of dealers outside the scope of the authorisation contract, and may not impose compulsory sales targets or tie-in sales of popular or unpopular brands or models.

Such an arrangement gives automakers and their sole distributors more leverage in negotiating their contractual arrangements with other distributors and dealers. In reality, the terms of many distribution agreements are automaker- or sole distributor-friendly, often enabling the automaker or sole distributor to unilaterally and freely terminate the agreement without justification and, in some cases, compensation. This makes it easier for automakers or sole distributors to restructure their distribution network in light of any change in their marketing strategy or business needs.

The introduction of the Automobile Sales Measures is likely to reshape China’s automobile sales and post-sales service market. Under the Automobile Sales Measures, for the first time it is possible for dealers to distribute motor vehicles without pre-authorisation of the automakers under certain circumstances. It also allows dealers to purchase cars from other authorised dealers for resale and sell imported vehicles through a parallel import scheme. In addition, the Automobile Sales Measures permit the establishment of automobile post-sales service providers that do not have in-house sales functions. These providers reportedly have a higher profit margin than those with an in-house automobile sales function. At this point, it remains to be seen how and to what extent the reform introduced under the Automobile Sales Measures will be implemented. It is, however, widely expected that, alongside the previously dominant single-brand 4S store networks, additional automobile distribution and post-sales service channels that are relatively independent from automakers and their sole distributors will be made available to consumers in China. As a result, competition in the Chinese automobile market is predicted to intensify and the bargaining power of automakers and their sole distributors might be diminished. It is also anticipated that the Automobile Sales Measures will boost the sales of automobiles in rural area where the profit margin is typically lower and too costly for 4S store networks to cover.

Mergers, acquisitions and joint ventures

Are there any particularities for M&A or JV transactions that companies should consider when preparing, negotiating or entering into a deal in the automotive industry?

Mergers, acquisitions and consolidations in the automotive industry are encouraged by the Chinese government. However, there are still restrictions and certain hurdles to keep in mind. Buyers and sellers should be aware that an acquisition of existing purely domestic automobile manufacturers or distributors or foreign-invested whole vehicle manufacturers is still subject to governmental approval, while only record-filing is required for acquiring foreign-invested automobile distributors or auto parts manufacturers. If the target company or a merging company is a JV or a foreign investor is acquiring a domestic vehicle manufacturer to form a JV, the parties shall be careful that the 50 per cent cap on foreign ownership is strictly enforced.

Merger control filing might be another major concern, since many of the players in the market are global automotive makers and might have significant market share in a specific segment. Another major issue is how to protect the foreign brand or trademark when being used in China. Licensing of such brands requires careful consideration and strategy.

Incentives and barriers to entry

Are there any incentives for investment in the automotive market? Are there barriers to entry into the market? What impact may new entrants into the market have on incumbents?

The biggest barrier to foreign investment in the automotive industry is China’s Foreign Investment Industrial Guidance Catalogue (the Catalogue), which every foreign investor is subject to. Under the latest version of the Catalogue which came into effect in 2017, manufacturing of assembled vehicles and special-use vehicles is categorised as a restricted sector, and foreign ownership in such manufacturers is capped at 50 per cent. It also provides that the same foreign investor can invest in no more than two joint ventures that manufacture the same category of vehicles (including passenger vehicles and commercial vehicles). However this restriction does not apply when (i) the foreign investor, jointly with its local joint venture partner, acquires or merges with other automobile manufacturers in China, or (ii) the foreign investor sets up joint ventures that manufacture assembled vehicles purely powered by electricity. In other words, foreign investors are not permitted to establish WFOEs to manufacture assembled vehicles and to set up operations solely on their own: they may only do so by partnering with Chinese counterparts. It is worth noting that, on 4 June 2017, NDRC and MIIT jointly issued the Opinions on Accomplishing the Administration of Automotive Investment Project, which provide that as a general principle, the Chinese government will not approve the establishment of any new traditional petrol and diesel vehicle manufacturer.

Another major barrier is the capital requirement for investment in the automotive industry. This amount applies to both foreign and domestic investors and varies depending on the category of automotive products to be manufactured. For example, the total investment amount of an investment project for the establishment of a new automobile manufacturer must be no less than 2 billion yuan, of which 800 million yuan must come from the investor’s own funds. Barriers used to exist in the administrative process as well. Prior to 1 October 2016, setting up foreign-invested automobile distribution companies was subject to MOFCOM’s foreign investment approval process, while domestic distributors were only required to record-file with MOFCOM. As from 1 October 2016, however, such approval is legally no longer required as a result of the liberalisation of the foreign investment regime from a government approval to a record-filing system.

Note that some sectors of the automotive industry have recently been labelled as encouraged in the 2017 Catalogue. These include the manufacturing of engines, key components, electronics and some car parts of NEVs. In terms of incentives, if an automaker qualifies as a High and New Technology Enterprise in China, it will be granted a preferential enterprise income tax rate of 15 per cent, reduced from the regular rate of 25 per cent. In addition, certain R&D expenditure may be deducted from the its pre-tax revenue.

The fact that the manufacturing of assembled vehicles was put in the restricted category is a strong signal that the Chinese government is set to solidify its policy to support domestic car manufacturers. But since most of the major foreign automakers have secured a spot in China, this restriction seems to have arrived a little late as existing automakers have already passed the capital-intensive market entry stage. New entrants will face the above-mentioned restriction and will be somewhat hamstrung. Opportunities for foreign investors fall within the automobile parts segment, where high-quality, environmentally friendly and innovative products will find strong demand.

Product safety and liability

Safety and environmental

What are the most relevant automotive-related product compliance safety and environmental regulations, and how are they enforced? Are there specific rules for product recalls?

Automobiles and automotive-related products are among the most highly regulated in China’s product quality/liability regime. As briefly mentioned above, CCC must be secured before whole vehicles and applicable automobile parts (either domestically manufactured or imported) can be sold in the Chinese market. Under the current version of the CCC Catalogue, promulgated by China’s Certification and Accreditation Administration (CNCA), whole vehicles including passenger cars, trucks, trailers and motorcycles, and components including tyres, vehicle windows, rear-view mirrors, safety belts, seats and door locks, all require CCC prior to sale in China. CCC-related regulations are actively enforced by the CNCA. Manufacturers securing CCC must apply CCC marks to their products (including applicable modifications) and are subject to routine CNCA inspections once a year.

For whole vehicles, however, CCC is only the first regulatory step en route to market. For consumers to be able to actually drive the cars on the road, the products must also receive emissions type approvals per standards set by the Ministry of Environmental Protection, and local and regional environmental protection bureaus. As vehicle emissions are regarded as a major contributor to China’s air pollution situation, China has recently taken action to strengthen its vehicle emissions standards. From 1 January 2018, all motor vehicles imported into, distributed and registered in China shall comply with the Stage V motor vehicle emissions standards, replacing the previous Stage IV motor vehicle emissions standards implemented in 2010, which lagged behind their European equivalents for five years.

Apart from the above, manufacturers, sellers, and other parties in the distribution chain - such as the parties that provide transportation, warehouse services, and repair and maintenance to automotive products, among others - are also subject to various post-sale product quality and safety monitoring and reporting obligations pursuant to the Product Quality Law, the Consumers’ Interests and Rights Protection Law, and the Tort Law of China. If a product is determined to contain a defect, the laws require primarily that manufacturers, or their domestic importers if the car is foreign-made, conduct a public recall, pursuant to guidelines and procedures set up in the Regulations for the Administration of Recalls of Defective Automotive Products (the Recall Regulations) and the implementing rules of the Recall Regulations. The Recall Regulations cover both motor vehicles and trailers and apply to automobiles produced or sold in China only. The requirement to recall is triggered when automotive products contain a defect, defined as a situation where the products are determined to contain unreasonable risks endangering personal and property safety, or when the products fail to comply with mandatory national or industrial standards that safeguard personal and property safety. Under the Recall Regulations, manufacturers are also required to promptly evaluate and investigate potential defects when they become known, and AQSIQ will also notify the manufacturers about potential defects when it becomes aware of them through reports or its own investigation. Manufacturers or operators in the distribution chain refusing to cooperate with AQSIQ during the defects investigation and recall process will be subject to penalties, and automotive manufacturing permits may be revoked in serious circumstances.

Product liability and recall

Describe the significance of product liability law, and any key issues specifically relevant to the automotive industry. How relevant are class actions or other consumer litigation in product liability, product recall cases, or other contexts relating to the automotive industry?

The Contract Law, the Product Quality Law, the Consumers’ Interests and Rights Protection Law, and the Tort Law of China are the primary pieces of legislation setting out the bases for product liability in civil law cases, which generally are divided into contract actions and tort actions. A potential breach of contract claim exists between a consumer and the party that directly sells the automotive product to him or her. By comparison, a tort cause of action can be asserted by anyone who has allegedly been injured by a defective product against any party in the distribution chain that allegedly caused the damage. In particularly serious product liability cases, the state may also pursue criminal charges pursuant to the Criminal Law of China.

Chinese civil procedure recognises a ‘joint action’ or ‘representative action’, but this is substantially different from a US-style class action. A Chinese joint action allows for more than one claimant who shares the same legal relationship against the defendant or defendants. The court’s judgment in such a case applies only to those expressly serving as parties in the case, not all similarly situated litigants. Moreover, we are not aware of a joint or representative action ever being used in China for a large-scale litigation; nor are they typically used for consumer or product liability litigation.

Apart from this, the 2013 amendments to the Civil Procedure Law also allow qualified parties, such as national or provincial-level consumer interests and rights protection organisations, to represent groups of consumers in ‘public interest litigation’ against defendants of product defect claims. In practice, neither joint actions nor public interest actions for automotive product defects are seen commonly. Mass consumer claims are primarily resolved through public recall actions under the supervision of the Chinese government, or are filed against manufacturers and sellers on a case-by-case basis.


Competition enforcement

What competition and antitrust issues are specific to, or particularly relevant for, the automotive industry? Is follow-on litigation significant in competition cases?

The Anti-Monopoly Law of China (AML) enacted in 2008 prohibits restrictive agreements, abuses of dominance and anticompetitive mergers. The NDRC and State Administration of Industry and Commerce (SAIC) are empowered to investigate price-related and non-price related anticompetitive conduct respectively, while MOFCOM is in charge of merger control. In terms of enforcement efforts, notably since 2014, we have witnessed a series of NDRC enforcement actions against automotive companies in China for both horizontal and vertical anticompetitive agreements. In August 2014, the NDRC levied record fines of 1.2 billion yuan against eight Japanese auto parts producers and four bearing manufacturers for fixing prices of certain components sold to the joint ventures operated by three world-leading automakers and OEMs in China. Later in September, the local Shanghai and Hubei branches of the NDRC fined three other top automakers and their distributors for vertical price restraints pertaining to spare parts and repair services. In April and September 2015, local branches of the NDRC in Jiangsu and Guangdong respectively fined another global auto manufacturer and an auto manufacturing joint venture for vertical price restraints. We expect the wave of NDRC enforcement actions will continue in the next couple of years given the NDRC’s active initiative and hard stance against monopolistic practices. Also, the automotive industry will likely remain a major target under stringent scrutiny.

In terms of legislative efforts, in March 2016, the NDRC published draft antitrust guidelines for the automotive industry and invited public comments. The draft guidelines address a broad range of antitrust-related issues in the automotive industry, with a particular focus on vertical restraints in spare parts distribution and aftersales. When finalised, we expect that the guidelines may substantially reshape the legal landscape of the automotive industry in China.

Follow-on litigation has been very rare in the antitrust field in China, and we are not aware of any such action in the automotive sector.

Dispute resolution mechanisms

What kind of disputes have been experienced in the automotive industry, and how are they usually resolved? Are there any quick solutions along the supply chain available?

The majority of disputes in the automotive industry arise as a result of product liability issues and other contractual issues, such as supply chain disruptions or other commercial disputes. Parties involved usually include: automobile manufacturers, suppliers, dealers, service providers, consumers and any other third parties who may suffer injuries or losses. Employment issues and intellectual property issues are also commonplace.

These disputes will be resolved by litigation, arbitration or court mediation. In some major cities in China, there are arbitration or mediation centres specifically chosen by state-run industry associations or quality inspection institutions to resolve automotive-related disputes, such as the automobile industry consumer arbitration centres in Shanghai, Hangzhou, Wuhan, Nanjing, Harbin and Changchun. The government also provides personnel, contract templates and expert opinions to those who need help in this area.

The 2013 amendments to the Civil Procedure Law also introduced pre-suit preliminary injunctions. In practice, however, courts are not accustomed to issuing preliminary injunctions, and typically hold parties to a very high standard prior to issuing any injunction.

Distressed suppliers

What is the process for dealing with distressed suppliers in the automotive industry?

There is no set formula for dealing with distressed suppliers in the automotive industry in China. Practically speaking, some of the steps that can be taken are:

  • negotiating and documenting a security agreement with the distressed supplier; and
  • negotiating new supply agreements with prospective purchasers of the troubled supplier’s business.

When suppliers are likely to become bankrupt, before the court officially accepts the bankruptcy application, the manufacturer (if unsecured) can initiate an action against the supplier for debt repayment and apply for preservation measures. In practice, the court will often ask the applicant to provide security for its application for preservation measures.

Intellectual property disputes

Are intellectual property disputes significant in the automotive industry? If so, how effectively is industrial intellectual property protected? Are intellectual property disputes easily resolved?

Along with the rapid expansion of China’s automotive industry, the number of intellectual property disputes has also been on the rise. Both domestic and international automotive companies have acted as claimants in intellectual property disputes over the past years.

China has a well-established IP protection legal framework and IP rights owners should familiarise themselves as to how the system operates. IP rights owners need to identify and register registrable IP rights where they can to beef up their IP portfolios in China and ensure enforceability of such rights. The China aspect should form a part of any international filing strategy. Trade secrets are another valuable asset in the automobile industry and both contractual and physical protective measures should be adopted. Periodical training of employees and suppliers also plays a key role in pre-empting leakage of confidential information.

China has been undergoing a series of judicial reforms in the IP disputes area. In particular, China has now established specialised IP Courts in Beijing, Shanghai and Guangzhou to hear technical cases such as disputes over patent rights and trade secrets. Going forward, there are also plans to move the appellate-level jurisdiction over IP cases from the provincial Higher People’s Courts to a newly established nationwide IP Court of Appeal based in Beijing. In addition, while specific performance and injunctions have generally been difficult to ascertain as legal remedies in China, Chinese courts have become more willing to grant preliminary injunctions and to exercise their discretionary powers to order defendants to substantiate their denials in some cases. We expect to see the reform resulting in greater consistency and increased predictability of case outcomes, as well as improved court efficiency.

Employment issues

Trade unions and work councils

Are there specific employment issues that automotive companies should be aware of, such as with trade unions and works councils?

Unlike some countries, China does not recognise independently run trade unions but rather unions (including some industry-­specific unions, which do not cover the auto industry) formed under the auspices of the All-China Federation of Labour Unions, a central quasi-governmental body. A union formed within an enterprise or company is therefore part of the All-China Federation of Labour Unions. Its formation is more top-down and less grassroots. This has important implications for automotive companies operating in China and managing their relationships with the enterprise union. While the enterprise union’s goal is to advance and protect the rights of employees, it can also serve as a mediator of employee disputes and act as a conduit between management and staff. They tend to be less confrontational than trade unions in the automotive industries in other jurisdictions.

It is not possible to terminate an employee at will. Employers in China may unilaterally terminate an employment contract only under certain statutory grounds. Some of these grounds allow the employer to terminate immediately without the need to pay severance. These grounds include but are not limited to where the employee is in serious breach of the labour rules and regulations of the employer or the employee commits a serious dereliction in the performance of his or her duties or commits graft causing severe damages to the employer. Other grounds allow the employer to terminate upon 30 days’ notice (or 30 days’ pay in lieu of notice) with the obligation to pay severance. These include circumstances when the employee is unable to fulfil his or her job obligations even after receiving training or being transferred to another position or, due to non-work related illness or injury, the employee is unable to perform his or her original work or other tasks assigned by the employer after the expiry of the statutory medical treatment period.

While the law enumerates the grounds under which an employer may terminate an employee, defending such terminations before a labour arbitration tribunal can be rather challenging. This is largely owing to the pro-employee environment in China.

New technologies

Legal developments

What are the most important legal developments relating to automotive technological and mobility advances?

In the race towards innovation in automated driving, the Chinese government has invested heavily over the years in driverless car technology and developing automated driving vehicles is a key focus in the Chinese government’s automotive industrial development plan. Under the Medium and Long-Term Development Plan for the Automotive Industry jointly issued by the MIIT, the NDRC and China’s Ministry of Science and Technology on 6 April 2017, it is planned that by 2020, at least 50 per cent of new automobiles in China will be equipped with a driver assistance system, partial driving automation system or conditional driving automation system; and by 2025 the percentage will be increased to 80 per cent and vehicles equipped with high driving automation and full driving automation systems will be launched in the market. Such plan is also reflected in the Draft Strategy for Innovative Development of Smart Automobiles issued by the NDRC on 5 January 2018 to solicit public comments.

Judging from the State Council’s Circular on the New-Energy Vehicle Industry Development Plan for 2012-2020 and China’s 13th Five-Year Plan, NEVs are top of the Chinese government’s agenda. The Chinese central government has provided substantial incentives to the NEV sector in the past few years, mainly in the form of financial subsidies to NEV manufacturers, to local governments that purchase NEVs, and a combination of tax breaks and free registration for consumers who buy NEVs. In recent years, the central government has established a comprehensive policy framework to support the NEV sector, ranging from policies on research, technology innovation, finance and tax incentives to infrastructure. For instance, in January 2016, China issued a Circular on the Reward Policy of New Energy Vehicle Charging Infrastructure and Strengthening the Popularisation and Application of New Energy Vehicles during the 13th Five-Year Plan Period. The circular points out that in order to promote the construction of power charging infrastructure for NEVs and encourage the spread of NEVs, the central finance department will continue to subsidise the provincial-level governments for the construction and operation of power charging infrastructure, and promote the adoption of NEVs on a large scale. On 27 September 2017, the MIIT, MOFCOM, China’s Ministry of Finance, China’s General Administration of Customs and AQSIQ jointly issued the Measures for the Parallel Administration of the Average Fuel Consumption and New Energy Vehicle Credits of Passenger Vehicle Enterprises (Parallel Credits Measures), which came into effect on 1 April 2018. Under the Parallel Credit Measures, if a passenger vehicle enterprise manufactures or imports more than 30,000 (inclusive) traditional energy powered (eg, gasoline-powered) passenger vehicles annually, it will be assigned an annual NEV credit target. Such target can be met by a passenger vehicle enterprise by manufacturing NEVs to obtain NEV credits or purchasing NEV credits generated by other enterprises under a quota trading scheme. In the meantime, traditional energy powered vehicle manufacturers and large-scale importers will also be assigned an annual average fuel consumption credit target. Automakers and importers are required to stay under that target in terms of the average volume of fuel consumption generated by the traditional energy powered vehicles they manufacture and import into China. With a view to incentivising auto makers and importers to shift their focus to NEVs, the aforesaid NEV credits obtained by them can be used to offset against actual Average fuel consumption credits, so as to help the relevant enterprises to achieve their average fuel consumption credit targets. With the positive and negative incentives provided under the Parallel Credit Measures, it is predicted that China’s NEV industry will soar.

In July 2012 China’s Ministry of Transport (MOT) issued an Intelligent Transportation Development Strategy (2012-2020), and in 2015, the Chinese government inaugurated the ‘Made in China 2025’ initiative to transform the country into an innovation hub. It is anticipated that China could dominate the field of Internet of Vehicles, a new phrase that denotes internet-connected cars that can entertain passengers, coordinate with other vehicles and transportation systems, self-navigate and even drive autonomously. Car-sharing businesses have experienced explosive growth in China. To regulate such businesses, the MOT, MIIT, MOFCOM, AQSIQ, China’s Ministry of Public Security, the SAIC and China’s State Internet and Information Office jointly issued the Interim Measures for the Administration of Online Taxi Booking Business Operations and Services (Online Taxi Measures) on 27 July 2016. The Online Taxi Measures set out the licensing requirements for online taxi booking business platforms and vehicles and drivers engaging in car-sharing businesses. The Online Taxi Measures also provide that the local transport authority in each city may impose additional criteria when issuing licences to vehicles and the drivers engaging in car-sharing businesses. While the Online Taxi Measures legitimise the car-sharing business in China, many find that the requirements under the relevant implementing rules of the Online Taxi Measures in certain cities are difficult to satisfy, suggesting that legitimacy does not necessarily mean easy entry.