Uncertainty over anti-monopoly investigations

While China's anti-monopoly investigations have been welcomed by European academics, business leaders have called for fairness and openness to reduce uncertainty.

Duncan Freeman, a senior researcher at the Brussels Institute of Contemporary China Studies, said China's efforts to fight against monopolies were in line with its endeavors in market-oriented reform.

"The actions can be seen as an effort to limit the power of monopolists in the Chinese economy, to expand the role of the market by increasing competition and to gain a 'reform dividend' to counterbalance slower economic growth, and have less reliance on the traditional methods used to stimulate the economy," Freeman said. He said the increased anti-monopoly activities of the Chinese authorities were one aspect of a wider strategy related to restructuring the Chinese economy.

His views were shared by Anna Stahl, a research fellow at the EU-China Research Center of the College of Europe. She said this year's series of investigations contrasted to situations in the past, when it was rare for the government to investigate anti-monopoly matters or issue fines against companies engaged in monopolistic practices. She said this showed that China's anti-monopoly enforcement had been weak so far, especially when compared to the United States and Europe.

Stahl said in the past, several multinationals took advantage of loopholes in China's anti-monopoly laws, which was against the interests of both Chinese and foreign consumers.

Antitrust investigations in the automobile and telecommunications sectors spread to other industries, including a number of cement and medical companies. Most major global automakers, including General Motors, BMW, Volkswagen's Audi division, Daimler's Mercedes-Benz, Tata Motors' Jaguar Land Rover, Fiat's Chrysler as well as Toyota and Honda, were targeted in China's antitrust investigations. Most announced price cuts for vehicles or spare parts in the past two months.

"As China is currently witnessing an economic slowdown, it is important for the Chinese government to show to its citizens that it makes efforts in terms of consumer protection," Stahl said.

Stahl and Freeman both said that the campaign was related to China's tighter control over management and focus on anti-corruption measures in State-owned enterprises."Both the actions aim to put both foreign and Chinese business operations under the legal framework," said Freeman. "When the government uses anti-monopoly actions that also focus on State-owned enterprises it is a strong tool to open the economy to non-State players."

Stahl said the use of anti-monopoly laws against SOEs and other enterprises indicated that there was serious intention to regulate them. The anti-corruption campaign and the anti-monopoly initiatives instigated by the Chinese government showed that the new leadership was aware of possible negative implications of some businesses and their practices on the development of the country. "The recent policy initiatives show the willingness of the new Chinese leadership to set stricter rules for both foreign investors and domestic businesses," she said. However, other observers, especially business leaders, expressed concern about the fairness and openness of the anti-monopoly investigations.

"Nobody disagrees with the Chinese authorities' desire to protect its consumers. However, the methods used to achieve these aims, whereby foreign companies have been very publicly targeted while their domestic competitors have been either virtually ignored or dealt with very quietly, does not create a level playing field for business," said Guy Dru Drury, chief representative of the Confederation of British Industry in China. The CBI is the UK's top business lobbying organization. Drury said he was still confident about investments in China. "To ignore a market that is growing at 7.5 percent per year would be simply negligent."

"Fairness and openness in accordance with the law is essential for business confidence. The anti-monopoly investigations are largely targeting multinational corporations, so for the vast majority of SMEs operating in China this is not a major issue," he stressed. Drury's opinions were echoed by David Fouquet, senior associate of the Brussels-based European Institute of Asian Studies. He said European observers noticed that some European and other Western firms and a number of Chinese companies were also implicated.