Bottom line: Beijing should mete out stiff punishment, including big fines and jail sentences, for companies that fraudulently obtained subsidies under the government’s program to promote new energy vehicle development.
Chery accused of fraud in new energy car scandal
What started as a wave of criticism against new energy car makers for producing mediocre products that nobody wanted is rapidly becoming a major scandal, with reports that many of those companies submitted fake information in order to get lucrative government subsidies. The scandal netted major car makers King Long and Chery last week, and reports have emerged that even industry leader BYD (HKEx: 1211; Shenzhen: 002594 )may be suspected of illegally obtaining government grants.
Such trickery is an extension of another trend that sees Chinese companies rush into unfamiliar sectors that Beijing has targeted for development, often resulting in a flood of mediocre or inferior products into the market. Such rushes not only create big market disruptions, but also result in huge sums of wasted investment and slow down development of emerging industries. Read Full Post…
Bottom line: A new anti-bribery probe against the medical device divisions at Siemens, GE and Philips will end with a quiet settlement, as China scales back a wave of probes that have raised complaints about discrimination against multinationals.
Foreign medical device makers fall under China microscope
Summer time is fast approaching, which means it’s time for China’s latest crackdown on foreign firms to start heating up. Such crackdowns are becoming an annual tradition, and have even developed a certain cyclicity that sees them begin in late spring, then reach a fever pitch in summer before fading in the fall. This year could continue that pattern, following reports that the medical device units of global conglomerates Siemens (Frankfurt: SEIGn), General Electric (NYSE: GE) and Philips (Amsterdam: PHG) are all being probed over whether they bribed hospitals and other medical professionals to achieve their current market dominance. Read Full Post…
Bottom line: China job cuts at GSK and Tesla reflect broader adjustments that major multinationals are making as Beijing cleans up its business climate and fails to meet many of its aggressive targets for new sectors.
GSK, Tesla take tough medicine with job cuts
Two high-profile multinationals are slimming down in China, with word that British drug giant GlaxoSmithKline (London: GSK) and US electric car superstar Tesla (Nasdaq: TSLA) have both made major job cuts to their local operations. Both cases acknowledge the difficulties of navigating the tricky China market, which superficially looks quite large and full of potential but in reality is quite fraught with obstacles.
Despite their differences, these 2 cases actually share some fundamental similarities based on unrealistic expectations many foreign firms have when they come to China. GSK’s woes stem from a bribery scandal that dates back almost 2 years, in which Beijing exposed and later punished the company for systematically bribing doctors and other medical professionals to purchase its drugs. Such practice is common in China, but Beijing is trying to clean up the business landscape. Read Full Post…
The following press releases and media reports about Chinese companies were carried on March 10. To view a full article or story, click on the link next to the headline.
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GSK (London: GSK) Cuts China Staff, Ends Cash Awards For Sales Model (Chinese article)
LightInTheBox (NYSE: LITB) Reports Q4 And Full Year 2014 Financial Results (PRNewswire)
Tuniu (Nasdaq: TOUR) Announces The Acquisitions Of Two Travel Agencies (Globe Newswire)
Qihoo 360 (NYSE: QIHU), Xueda (NYSE: XUE) Form Internet Education JV (English article)
58.com (NYSE: WUBA) Acquires Minority Stake In Interior Decoration Service Platform (PRNewswire)
Bottom line: The NDRC should force Qualcomm to change some of its licensing practices but not force it to lower prices in its upcoming antitrust settlement against the company.
Qualcomm judgment coming soon
All eyes will be on China’s anti-monopoly regulator in the days ahead, when it’s expected to rule in a case involving the pricing and licensing policies of global smartphone chip leader Qualcomm (Nasdaq: QCOM). The case is the latest in a string of recent similar antitrust probes by Beijing against major companies. But it’s also quite different because it involves licensing practices for proprietary technology, which aren’t typically included in the conventional definition of monopolies. Read Full Post…
China’s anti-corruption campaign has accelerated into the private sector over the last few weeks, with shares of sportswear retailer Anta (HKEx: 2020) and online video provider LeTV (Shenzhen: 300104) both tumbling after reports emerged that their top executives might be under investigation for illegal activities. In both cases the worries later appeared to be unfounded, but other signals have indicated the movement is indeed creeping into the private sector. Read Full Post…
One of the highest profile cases in a recent series of probes against multinationals in China has reached an emphatic but reasonably just conclusion, with word that Beijing has fined British drugmaker GlaxoSmithKline (London: GSK) nearly half a billion dollars and handed several of its top local executives suspended jail sentences. I was never a big fan of this investigation, which saw GSK pursued for bribing doctors and other medical professionals to buy its drugs. That’s not because I think GSK was innocent in this case, but rather because I think the company was unfairly singled out for punishment for corrupt practices that are widespread in China’s business culture. Read Full Post…
If telecoms equipment giant Huawei was trying to convince the world it’s not closely linked to Beijing, then its new campaign to root out internal corruption certainly looks like a bad strategic move. Of course I’m being just slightly facetious, as any good corporation should always be vigilant against corruption within its workforce. But in terms of public perception, this new internal anti-corruption campaign seems strikingly similar to the much larger and high-profile campaign being waged throughout China by the 2-year-old administration of President Xi Jinping. Read Full Post…
Most of the recent flood of probes against foreign firms have been of the civil variety, resulting in stiff fines for anti-competitive behavior but few or no criminal charges and prison time. But that trend could be changing, with officials at car maker Volkswagen (Frankfurt: VOWG) and a former major meat supplier to McDonald’s (NYSE: MCD) and KFC (NYSE: YUM) being probed or charged with crimes that could end with lengthy prison terms. It’s probably still too early to say if criminal charges against executives at major multinationals will become a trend. But if it does, it could certainly send a new chill into China’s rapidly worsening relationship with western businesses and governments. Read Full Post…
I’ve been writing regularly about the flood of anti-monopoly probes against western firms recently, so it seems only appropriate that I end the week with a flurry of new headlines involving cases against chipmaker Qualcomm (Nasdaq: QCOM), luxury car maker Audi (Frankfurt: VOWG), and a long-overdue response from a major western business group. In the first news bit, the anti-monopoly investigator has reportedly nabbed a government insider who was helping Qualcomm in the case against it. The second bit has media reporting the regulator is preparing to levy a large but relatively manageable fine against Audi. And the third bit has the EU’s local chamber of commerce calling on China to stop bullying its members. Read Full Post…
Mercedes under microscope for after-sales practices
It’s a new day, which means it’s time for yet another government investigation into foreign firms that are coming under increasing scrutiny for both their products and business practices. This time it’s luxury automaker Mercedes-Benz (Frankfurt DAIGn) that’s coming under the microscope for anti-competitive pricing in China. Word of this latest probe comes just a week after software giant Microsoft (Nasdaq: MSFT) revealed it is being probed for monopolistic business practices. (previous post)
Other major western multinationals have been probed for similar anti-competitive behavior in the latest year-long campaign, and still others have been targeted over allegations of corruption. Yet another group has been blacklisted from selling to to government organizations over concerns their products could create national security risks. Read Full Post…
