China Defends Probes Against Foreign Firms

Beijing answers foreign discrimination complaints

After saying little or nothing about its wave of anti-competitive probes against some of the world’s top firms, China is finally breaking the silence with its justification for actions that have targeted everyone from software giant Microsoft (Nasdaq: MSFT) to leading US car maker General Motors (NYSE: GM). The justification is coming via the state-owned English-language newspaper the China Daily, and argues that such investigations are common in the west and aren’t targeted against foreign firms. This long-overdue explanation also hints that Beijing may be worried about a potential action by the US and European Union, who may be preparing to complain to the World Trade Organization (WTO) that Beijing discriminates against western companies.

The foreign business community has watched with concern over the past year as a a growing number of major multinationals was investigated by Beijing for anti-competitive behavior, most often for charging prices the regulator considered too high. The wave of actions began a year ago by targeting foreign makers of powdered milk sold in China, and more recently has spread to car makers and tech giants like Microsoft and leading cellphone chipmaker Qualcomm (Nasdaq: QCOM).

Most foreign companies have confirmed the investigations and said they were cooperating, but have said little else publicly for fear of harming their prospects in the huge China market. The European Union Chamber of Commerce has been one of the few to speak out publicly about the probes, voicing its concerns last year and more recently last week that its members were being treated unfairly and weren’t allowed to defend themselves in the cases against them. (previous post)

China’s National Development and Reform Commission (NDRC) and its State Administration of Industry and Commerce (SAIC), which are conducting most the probes, are highly secretive and haven’t spoken publicly about the cases except to warn companies not to interfere. They continue to maintain that silence, but Beijing is now defending itself with a series of articles in the latest edition of the China Daily, which often functions as a mouthpiece for the central government in sensitive cases like this.

The newspaper’s Monday edition includes 3 major articles on the issue, including stories on the front page and also the lead story of its business section. The business page story comes under the headline “Consumer concerns core of the issue”, with a sub-headline “Antitrust probes are not targeted at foreign firms, to result in fairer prices.” (English article)

The articles quote a range of experts, both Chinese and foreign, though the main voice is a professor at the prestigious Chinese Academy of Social Sciences who advised the government on its anti-monopoly law introduced in 2008. The gist of the articles is that many of the business practices coming under the scrutiny are illegal in the west and would have come under similar probes in the US and Europe. Consumer protection is the ultimate goal in all of the cases, the articles argue, adding that Chinese firms are also being investigated.

As a longtime Chinese media watcher, I can say that this series of articles was almost certainly ordered by government officials in Beijing, who probably also instructed the China Daily on the content and who should be quoted. Whether or not this explanation will satisfy anyone is a different matter. Beijing should at least be commended for finally explaining its stance, perhaps in an attempt to be more transparent. But that said, I doubt this particular explanation will do much to placate those who see the wave of probes as discriminatory against foreign firms. That means we could see the US and EU jointly file a complaint with the WTO in the next couple of months.

Bottom line: China should be commended for finally explaining its stance in a wave of probes against foreign firms, but that’s unlikely to deter the west if it is planning to file a complaint with the WTO.

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