Much has been written already about the take-over of Nanjing Automotive by Shanghai's SAIC, making it into the largest car producer in China. One element has been ignored in this giant step into maturity for China's automotive industry: the industry has now fully shed off its provincial ties, making it into a real Chinese company.
Shanghai's SAIC decided in the early 1990s to get rid of its own car plants when it signed a joint venture with first Volkswagen and later in the decade GM. Initially China's car plants sold mainly to their own provinces and "exporting" cars to another province was made very unattractive by taxes that protected the car industry in each province. It explained why halfway the 1990s more than 90 percent of the cars in Shanghai were Volkswagen Santana's.
Shanghai was one of the first provinces to abolish taxation on non-Shanghainese cars, hoping its example would be followed by other provinces.
The tie-up between Shanghai and Nanjing is a clear sign that, at least for cars, internal borders are shifting towards more cooperation.
What it means for foreign companies like Volkswagen and GM is still unclear, but with the assets of Nanjing Automotive, SAIC might again become a domestic playing in its own right.
Update: The Guardian summarizes the latest developments and sees in SAIC new style and potential international competitor.
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