Page 40 - 2017 White Paper
P. 40
7 White Paper on the Business Environment in China
GDP. A Newsweek media report indicates that it is a“critical ruling body. He is largely surrounded by reform-minded
part of the reform process for Beijing is essentially flipping advisers and has given no sign that he will retreat from
those numbers” with market forces, not the government, his agenda. He has until 2020 to get what he wants done,
dictating where resources should go in China’s economy and the government is moving on key areas like financial
and market forces, not the government, allocating credit reform and a host of other issues, such as allowing private
(Powell 2014). companies to move into sectors now dominated by state-
owned firms” (Powell 2014).
Newsweek notes that “the subsidized system has led
to overcapacity across the manufacturing spectrum in Part of this market transition is the perceived uneven
China’s economy. That in turn increases deflationary enforcement of China’s six-year-old anti-monopoly law.
pressure, as too few companies have the pricing power
to increase profits. Banks tend to lend money almost According to Businessweek, a 2014 report by the US-
unthinkingly to favored local employers—often state- China Business Council shows that 86% of member
owned themselves, usually big employers in any case, companies are “concerned about Beijing’s anti-monopoly
with close ties to local party officials. Since local party enforcement activity” and 30 % “fearing it will be used
officials were usually evaluated by the growth in jobs against them”. The report said that China has stepped
created in their own districts, all the incentives were up investigations into the auto industry and conducted
aligned in one direction: more. More investment, more “dawn raids” at foreign IT companies (Roberts 2014). Also
factories, more jobs—and more debt” (Powell 2014). according to Businessweek, a separate 2014 survey by
Beijing’s American Chamber of Commerce in China found
According to Newsweek,“to its credit, President Xi’s new that 60 % of respondents “believe foreign business is less
government has already started to cool bank lending”. welcome in China than before”, up from 41% late last
Before interest rates can be completely liberalized, year. Nearly half of those surveyed said they have been
however, a deposit insurance system needs to be set up. targeted in pricing or anticorruption campaigns (Ibid.).
Newsweek cites Zhang Ming, a senior research fellow at
the Chinese Academy of Social Sciences in Beijing, who The U.S. Chamber of Commerce, the U.S. China Business
quotes officials from the People’s Bank of China and says Council, the European Union Chamber of Commerce in
that a national deposit insurance company will be set China and the American Chamber of Commerce in China
up by early 2015. Setting up national deposit insurance, all lodged complaints within a few weeks of each other in
Zhang says, “would pave the way for small and medium- September 2014 (Yang and Laurie 2014).
sized banks to fall into bankruptcy without triggering
widespread panic or runs on the remaining banks”. In August 2014, Chinese regulators had levied fines
Newsweek notes that China’s Central bank governor Zhou of US$200 million on 10 Japanese auto-part makers
Xiaochuan has said deposit rates would therefore be set for alleged price manipulation. Audi AG, BMW AG and
free “within two years” (Powell 2014). Mercedes-Benz parent Daimler AG also suffered similar
pricing probes. Both Microsoft Corp and Qualcomm Inc.
When The Going Gets Tough were investigated for potential monopolistic activity.
BMW, Audi and Daimler responded to the investigations
It is patently obvious that going ahead with the by cutting prices. Both Qualcomm and Microsoft said
reform program is bound to inflict pain in some very that their firms are abiding by laws in China and are
powerfully entrenched interests in the Chinese economy, cooperating with authorities (Yang and Laurie 2014).
so all China watchers’ eyes fall inevitably on the man in
the driving seat. In September 2014, at a meeting with foreign
executives at the China International Fair for Investment
Since assuming the post of general secretary of the and Trade (CIFIT) in Xiamen, an annual event organized
Communist Party in November 2012, Newsweek observes by China’s Ministry of Commerce, Vice Premier Wang
that President “Xi Jinping has launched a tougher than Yang declared that China is not targeting foreign
expected crackdown on corruption, which has included multinationals in the enforcement of its anti-monopoly
an investigation of the family of a fellow member of law. Mr. Wang said that of 335 pricing investigations
the Politburo Standing Committee, China’s highest conducted by the National Development and Reform
Commission (NDRC) as of September 2014, only 33
40
GDP. A Newsweek media report indicates that it is a“critical ruling body. He is largely surrounded by reform-minded
part of the reform process for Beijing is essentially flipping advisers and has given no sign that he will retreat from
those numbers” with market forces, not the government, his agenda. He has until 2020 to get what he wants done,
dictating where resources should go in China’s economy and the government is moving on key areas like financial
and market forces, not the government, allocating credit reform and a host of other issues, such as allowing private
(Powell 2014). companies to move into sectors now dominated by state-
owned firms” (Powell 2014).
Newsweek notes that “the subsidized system has led
to overcapacity across the manufacturing spectrum in Part of this market transition is the perceived uneven
China’s economy. That in turn increases deflationary enforcement of China’s six-year-old anti-monopoly law.
pressure, as too few companies have the pricing power
to increase profits. Banks tend to lend money almost According to Businessweek, a 2014 report by the US-
unthinkingly to favored local employers—often state- China Business Council shows that 86% of member
owned themselves, usually big employers in any case, companies are “concerned about Beijing’s anti-monopoly
with close ties to local party officials. Since local party enforcement activity” and 30 % “fearing it will be used
officials were usually evaluated by the growth in jobs against them”. The report said that China has stepped
created in their own districts, all the incentives were up investigations into the auto industry and conducted
aligned in one direction: more. More investment, more “dawn raids” at foreign IT companies (Roberts 2014). Also
factories, more jobs—and more debt” (Powell 2014). according to Businessweek, a separate 2014 survey by
Beijing’s American Chamber of Commerce in China found
According to Newsweek,“to its credit, President Xi’s new that 60 % of respondents “believe foreign business is less
government has already started to cool bank lending”. welcome in China than before”, up from 41% late last
Before interest rates can be completely liberalized, year. Nearly half of those surveyed said they have been
however, a deposit insurance system needs to be set up. targeted in pricing or anticorruption campaigns (Ibid.).
Newsweek cites Zhang Ming, a senior research fellow at
the Chinese Academy of Social Sciences in Beijing, who The U.S. Chamber of Commerce, the U.S. China Business
quotes officials from the People’s Bank of China and says Council, the European Union Chamber of Commerce in
that a national deposit insurance company will be set China and the American Chamber of Commerce in China
up by early 2015. Setting up national deposit insurance, all lodged complaints within a few weeks of each other in
Zhang says, “would pave the way for small and medium- September 2014 (Yang and Laurie 2014).
sized banks to fall into bankruptcy without triggering
widespread panic or runs on the remaining banks”. In August 2014, Chinese regulators had levied fines
Newsweek notes that China’s Central bank governor Zhou of US$200 million on 10 Japanese auto-part makers
Xiaochuan has said deposit rates would therefore be set for alleged price manipulation. Audi AG, BMW AG and
free “within two years” (Powell 2014). Mercedes-Benz parent Daimler AG also suffered similar
pricing probes. Both Microsoft Corp and Qualcomm Inc.
When The Going Gets Tough were investigated for potential monopolistic activity.
BMW, Audi and Daimler responded to the investigations
It is patently obvious that going ahead with the by cutting prices. Both Qualcomm and Microsoft said
reform program is bound to inflict pain in some very that their firms are abiding by laws in China and are
powerfully entrenched interests in the Chinese economy, cooperating with authorities (Yang and Laurie 2014).
so all China watchers’ eyes fall inevitably on the man in
the driving seat. In September 2014, at a meeting with foreign
executives at the China International Fair for Investment
Since assuming the post of general secretary of the and Trade (CIFIT) in Xiamen, an annual event organized
Communist Party in November 2012, Newsweek observes by China’s Ministry of Commerce, Vice Premier Wang
that President “Xi Jinping has launched a tougher than Yang declared that China is not targeting foreign
expected crackdown on corruption, which has included multinationals in the enforcement of its anti-monopoly
an investigation of the family of a fellow member of law. Mr. Wang said that of 335 pricing investigations
the Politburo Standing Committee, China’s highest conducted by the National Development and Reform
Commission (NDRC) as of September 2014, only 33
40
