The liberalisation meets a long-time demand of the United States and other countries seeking better access for their companies in the world's biggest market for cars and one of the largest for air travel.
The country will this year end shareholding limits for new energy vehicle firms such as those that produce electric cars, the National Development and Reform Commission (NDRC) said Tuesday (April 17).
The move will be followed by commercial vehicles in 2020 and passenger cars in 2022.
China currently restricts foreign auto firms to a maximum 50% ownership of joint ventures with local companies.
China's fifth-largest auto maker BAIC, which has a joint venture with Mercedes-Benz and another with South Korea’s Hyundai, collapsed over 10% in Hong Kong, while Brilliance China Automotive shed more than 9%.
Guangzhou Automobile Group (GAC), which has joint ventures with Italian-American carmaker Fiat Chrysler and Japan's Toyota, slumped 10% – the daily limit – in Shanghai before slightly recovering.
It closed down 8.4% in Shanghai and 8.45% in Hong Kong, where it is also listed.
GAC is China's number six carmaker and it invested 1.2 billion yuan (B5.96 trillion) with a Chinese partner to develop smart new energy cars last year.
The nation’s biggest carmaker SAIC Motor Corporation, partner of Volkswagen and General Motors, ended down 0.06% after having shed more than 4% during trading.
The seventh biggest carmaker Geely, whose Chinese billionaire boss Li Shufu became the largest single shareholder of Mercedes-Benz maker Daimler in February, dived 4.24% in Hong Kong.
Chinese electric car manufacturer BYD closed down 4.15% in Hong Kong and was 0.26% lower in Shenzhen.
The NDRC also said the shipbuilding industry would this year scrap foreign ownership restrictions on firms designing, making and repairing vessels.
The news saw China State Shipbuilding Corp. fall 2.35% in Shanghai while China Shipbuilding Industry Co. ended flat after spending most of the day in negative territory.
The NDRC will also lift restrictions on foreign ownership of aircraft manufacturing firms this year, including those that make large-body commercial airliners, regional jets, helicopters and drones.
The news also weighed on aircraft and equipment makers during the day but they rebounded at close boosted by an overall rise in technology and small companies.