Abstract
This study assesses the link between policy regulation and the performance of foreign investors in the Chinese automobile industry. The key question we try to answer is: how can Chinese policymakers enhance the positive contribution that MNCs bring to the local automobile makers and avoid negative damaging consequences? The formulation of an open-up industrial policy concerning this sector in China, the role of FDI inflows in shaping it and the interaction between the Chinese authorities and foreign investors as the driving force of the policy reform are analysed.