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5 White Paper on the Business Environment in China
percent market share by total volume in 2012.”30 state to adjust regulatory policy to best guide the domestic
Danish brewer Carlsberg, meanwhile made headlines by economy according to development goals, the issue at hand
for foreign investors is not the policy itself but the way in
expanding its ownership of the domestic Chongqing Brewery which it is implemented. In this case, the revisions to the
for a total stake of 60 percent. “As majority shareholder it Catalog for the Guidance of Foreign Invested Enterprises
will be easier for Carlsberg to implement e ciency programs were released to the public (in Chinese) on November
to increase pro tability, and integrate the business with its 7, 2007, and e ective December 1, 2007, placed foreign
existing breweries in China,” Reuters observed.36 participation in “Construction and operation of high-ranking
hotels, villas, high-class o ce buildings and international
“ e Chinese beer market is estimated to be worth around exhibition centers” under the “Restricted” category. e 23
451 billion yuan ($74 billion) in 2013 with a volume of 53 days between rst notice and the new rules becoming e ective
billion liters, analysis agency Euromonitor said.”36 is an extremely short period of time for companies to asses and
react to the new environment. While this particular change
Finally, international co ee behemoth Starbucks was may not a ect the many foreign companies managing locally-
attacked on apparently political grounds in a high-pro le owned properties, this method may continue to undermine
CCTV broadcast accusing the company of unfair pricing. investor con dence in other—encouraged—sectors.
“ e 18-minute Starbucks report, which appeared to use “Regulations on Travel Agencies”
hidden cameras, showed CCTV reporters in Beijing, Chicago In March of 2009 People’s Daily reported that according
and Mumbai asking people on the street what they thought
about the price and value of Starbucks co ee,” writes Reuters. “It to new regulations that were to take e ect on May 1, 2009,
criticized the Seattle-based company for charging higher prices foreign investors would be permitted to own and operate
than in others markets, which it said helped Starbucks earn “fat” travel agencies within China. e paper reported that:
pro t margins given its costs in China were not very high.”37
According to promises China made for entry into the
e piece was reportedly instigated by a non-editorial WTO, the new regulation stipulates that in addition
executive and appeared to be part of a series of attacks on to Chinese-foreign equity and contractual joint
foreign brands which also included attacks on Apple, ventures, foreign investors can also set up foreign
Samsung Electronics, Yum! Brands’ KFC restaurants and travel agencies. An o cial from the National Tourism
GlaxoSmithKline in addition to carmakers Audi, Subaru and Administration said foreign travel agencies will be
Jaguar Land Rover.37 entitled to national treatment in the three major
tourism markets—inbound, outbound and domestic
It was quickly criticized for its unprofessionalism. “Internet tours.39
users chided the network for tackling a minor issue compared
to China’s many challenges. Economists said CCTV had Of note, however, is that foreign enterprises will not,
failed to grasp the concept of supply and demand, noting it at rst, be permitted to operate outbound tours—a clear
was normal for a company to charge di erent prices for its competitive advantage in their favor due to their experience
products in di erent countries.”37 and expertise outside of China—until they have operated for
two years “without receiving administrative punishment for
“Chinese government bodies and state-owned rms are infringing on tourists’ legal rights and interests.”39
usually too sensitive to investigate, putting foreign companies
in the ring line for hard-hitting corporate stories,” experts In September 2010 these regulations were revised to allow
told Reuters.37 foreign-domestic joint-ventures to organize outbound tours
for Mainland citizens, with the requirement that a deposit of
While foreign investment by major multinational corporations 1.2 million yuan must be paid in order to obtain a license for
looks to remain strong, vagaries in franchising law may provide the activity, among others. Wholly-foreign owned enterprises
a hurdle to small- and medium-sized enterprises looking to apparently remain prohibited from organizing outbound
enter China, even as growth in consumer spending ability and a tours for Mainland citizens, as no changes for that category
projected 150 million new urban consumers by 201538 reinforce are articulated in the release.40
China’s importance as a strategic location globally.
Draft Law to Combat “Sharp Practices by Travel Agents”
Notable Policy Activity As of August 2012, the National People’s Congress was
2007 Revision of the Catalog for the Guidance of Foreign reviewing a draft law that would “clearly [state] the rights
Invested Enterprises
Note: is section has been left intact from the 2008 edition
to supplement the discussion of declining foreign investment in
the hospitality industry above
As always, while it is clearly the prerogative of the Chinese
204
percent market share by total volume in 2012.”30 state to adjust regulatory policy to best guide the domestic
Danish brewer Carlsberg, meanwhile made headlines by economy according to development goals, the issue at hand
for foreign investors is not the policy itself but the way in
expanding its ownership of the domestic Chongqing Brewery which it is implemented. In this case, the revisions to the
for a total stake of 60 percent. “As majority shareholder it Catalog for the Guidance of Foreign Invested Enterprises
will be easier for Carlsberg to implement e ciency programs were released to the public (in Chinese) on November
to increase pro tability, and integrate the business with its 7, 2007, and e ective December 1, 2007, placed foreign
existing breweries in China,” Reuters observed.36 participation in “Construction and operation of high-ranking
hotels, villas, high-class o ce buildings and international
“ e Chinese beer market is estimated to be worth around exhibition centers” under the “Restricted” category. e 23
451 billion yuan ($74 billion) in 2013 with a volume of 53 days between rst notice and the new rules becoming e ective
billion liters, analysis agency Euromonitor said.”36 is an extremely short period of time for companies to asses and
react to the new environment. While this particular change
Finally, international co ee behemoth Starbucks was may not a ect the many foreign companies managing locally-
attacked on apparently political grounds in a high-pro le owned properties, this method may continue to undermine
CCTV broadcast accusing the company of unfair pricing. investor con dence in other—encouraged—sectors.
“ e 18-minute Starbucks report, which appeared to use “Regulations on Travel Agencies”
hidden cameras, showed CCTV reporters in Beijing, Chicago In March of 2009 People’s Daily reported that according
and Mumbai asking people on the street what they thought
about the price and value of Starbucks co ee,” writes Reuters. “It to new regulations that were to take e ect on May 1, 2009,
criticized the Seattle-based company for charging higher prices foreign investors would be permitted to own and operate
than in others markets, which it said helped Starbucks earn “fat” travel agencies within China. e paper reported that:
pro t margins given its costs in China were not very high.”37
According to promises China made for entry into the
e piece was reportedly instigated by a non-editorial WTO, the new regulation stipulates that in addition
executive and appeared to be part of a series of attacks on to Chinese-foreign equity and contractual joint
foreign brands which also included attacks on Apple, ventures, foreign investors can also set up foreign
Samsung Electronics, Yum! Brands’ KFC restaurants and travel agencies. An o cial from the National Tourism
GlaxoSmithKline in addition to carmakers Audi, Subaru and Administration said foreign travel agencies will be
Jaguar Land Rover.37 entitled to national treatment in the three major
tourism markets—inbound, outbound and domestic
It was quickly criticized for its unprofessionalism. “Internet tours.39
users chided the network for tackling a minor issue compared
to China’s many challenges. Economists said CCTV had Of note, however, is that foreign enterprises will not,
failed to grasp the concept of supply and demand, noting it at rst, be permitted to operate outbound tours—a clear
was normal for a company to charge di erent prices for its competitive advantage in their favor due to their experience
products in di erent countries.”37 and expertise outside of China—until they have operated for
two years “without receiving administrative punishment for
“Chinese government bodies and state-owned rms are infringing on tourists’ legal rights and interests.”39
usually too sensitive to investigate, putting foreign companies
in the ring line for hard-hitting corporate stories,” experts In September 2010 these regulations were revised to allow
told Reuters.37 foreign-domestic joint-ventures to organize outbound tours
for Mainland citizens, with the requirement that a deposit of
While foreign investment by major multinational corporations 1.2 million yuan must be paid in order to obtain a license for
looks to remain strong, vagaries in franchising law may provide the activity, among others. Wholly-foreign owned enterprises
a hurdle to small- and medium-sized enterprises looking to apparently remain prohibited from organizing outbound
enter China, even as growth in consumer spending ability and a tours for Mainland citizens, as no changes for that category
projected 150 million new urban consumers by 201538 reinforce are articulated in the release.40
China’s importance as a strategic location globally.
Draft Law to Combat “Sharp Practices by Travel Agents”
Notable Policy Activity As of August 2012, the National People’s Congress was
2007 Revision of the Catalog for the Guidance of Foreign reviewing a draft law that would “clearly [state] the rights
Invested Enterprises
Note: is section has been left intact from the 2008 edition
to supplement the discussion of declining foreign investment in
the hospitality industry above
As always, while it is clearly the prerogative of the Chinese
204
