As the biggest auto manufacturer in the world, China's auto industry attracts capital from across the world. But now the government has issued a new policy on foreign investment in whole auto manufacturing sector.

China overtook the United States to become the world's No.1 auto market in 2009. In 2011 sales in the Chinese market hit a record 18 and a half million units, an increase of 2.45% year on year. But starting from Jan.30, the government will withdraw its support of foreign investment in whole car manufacturing. Many are seeing a strategic shift on the horizon.

"From the Chinese perspective, the withdrawal of support could be understood as kind of a restriction. At this stage, for China, what it needs now may not only be the production of whole cars, but more new technologies aimed at the cars's key components and related sectors. In addition, China may want to focus on the current configuration of its auto industry, and cultivate domestic car brands."

Some of the world's biggest car manufacturers have long operated in this huge market. Although the pace of growth slowed down in 2011, car manufacturers still experience considerable gains.

For instance, in 2011, GM sold more than 2.5 million vehicles in China, up 8.3% percent year on year. Volkswagen sold 1.72 million cars in China at a 13.8 percent growth. In fact, some industry experts say the the new policy will not have a significant impact on foreign manufacturers.

"As we know, the vast majority of foreign car makers from Europe, the U.S. and Japan have set up join-ventures in China, only a few could be affected, like Subaru. Thus, we may not see any huge impact coming soon."

Meanwhile, authorities have confirmed that China will encourage foreign investment in auto parts manufacturing, such as engines, and suspension systems. New energy cars and related technologies will also be supported by the government. And these could expand opportunities for manufacturers.

"If car makers manufacture hybrid and electric cars in China, and auto parts manufacturers also establish their enterprises in China, which will make procurement of components more convenient, and relatively reduce the cost of making new-energy cars."

Faced by oil supply pressure and energy-saving goals, compact cars and new energy vehicles will continue to gain momentum in China's markets in the near future.