The Effects Of Competition And Policy On The Behaviors Of The Foreign Multi-party Joint Venture In Double Markets In China’s Automobile Industry

The automobile industry has always been one of the important pillar industry of China, and it occupies an important position in the national economy. After years of development, the production capacity, research and development capabilities and brand diversity of enterprises have made great progress. However, this does not cover up the failure of the development mode of automobile industry in China. Since the reform and opening up, many global auto companies which led by multinational automotive giant such as Volkswagen, General Motors, Toyota have entered the Chinese market. At the same time, China’s domestic automobile enterprises have also determined the development strategy of "market for technology", and have set up a joint venture in China with multinational auto giants. As a result, most foreign-funded enterprises and domestic enterprises cooperate with more than one enterprise. The phenomenon that vehicle market has Multi-party joint venture emerges in China. After years of development, China’s vehicle market has basically been occupied by joint venture brands. On the other hand, as the formation of China’s vehicle market has Multi-party joint venture, auto parts located upstream also generates the similar phenomenon. Foreign auto parts enterprises and local parts enterprises have set up joint venture brands that accounted for most of the market share in China. The most interesting point is that, Volkswagen, Toyota and other auto giants, almost without exception, have set up a joint venture in the upstream parts market of engines, transmissions and other key components while their joint venture brands have occupied the Chinese vehicle market. The joint ventures are controlled by foreign investors. Thus the automobile industry in China has formed a deform pattern of multi-party joint ventures in the double markets. In this pattern, multinational automotive giant such as Volkswagen, General Motors, Toyota can take advantage of a variety of means to reap more profits. And they can squeeze living space of local enterprises. So most of the profits of the automobile industry in China inflow into the foreign enterprises.This paper focuses on analysis of the anti-competitive effects in this pattern that multi-party joint ventures in the double markets. The article is divided into five parts and organized as follows:the first part introduces the course of development and the status quo of joint ventures in China’s vehicle market, and then describes the status quo of joint ventures in China’s auto parts market. The second part provides background information on joint venture of China’s vehicle market from both domestic and foreign, and then elaborated systematically the rationale of multi-party joint ventures in the double markets. The third part focuses on economic effects of multi-party joint ventures in the double markets. Foreign giants play a role in promoting technological progress of China’s automobile industry. Otherwise, the hidden knowledge inflows have positive impact on the improvement of staff quality, enterprise management level and industry overall level. The fourth part introduces anti-competitive behaviors of multi-party joint ventures in the double markets. The behaviors include five types, for instance, Control of the board of directors and major operators, control of key technologies, the implementation of the transfer of profits, mutual restraint of the number of partners as well as constraints from the whole industry chain of China’s automobile industry. Then I analyzed the anti-competitive effects of these behaviors. The fifth part gives some policy recommendations including two sides, one for the domestic enterprises and the other for the foreign-funded enterprises.