Why is the CCP Imposing Huge Fines on Foreign Companies?
Recently, the Chinese Communist Party (CCP) authorities
fined six foreign infant formula companies nearly 670 million
yuan ($109 million) in total for anti-competitive behavior.
This marks another attack against foreign companies
by the CCP government,
following its fines against Samsung and other five
foreign companies for the same reason this January.
In doing this, does the CCP simply intend to protect
the interests of consumers by enforcing anti-monopoly laws
as is usually done in western countries,
or there are other motives behind the move?
Experts will share their analysis below.
Days ago, the CCP’s National Development and
Reform Commission (NDRC) imposed a huge anti-trust fine of
670 million yuan ($109 million)
to six foreign infant formula companies.
This is the largest fine the CCP has ever issued
against foreign companies.
The companies subject to the fine are Biostime, Abbott,
Mead Johnson, Dumex, Friesland Campina and Fonterra.
The CCP officially announced that those companies
had violated its anti-monopoly law with anti-competitive behavior and price fixing;
therefore they were fined 1% to 10% of
their sales amount in the past year.
He Junqiao, Chinese business observer: “If China’s (the CCP’s)
government truly wants to enforce the anti-monopoly law,
it should do the same to all those state-owned companies,
instead of solely imposing a huge fine on several foreign infant formula companies.
As we all know, there exist serious quality problems with
China’s companies producing infant milk powder.”
If this argument is correct, then what really motivates
the CCP to aggressively fine those foreign companies?
He Junqiao says that Chinese people have to pay nearly the
highest prices in the world for the many everyday essentials,
including drinking water, electricity, oil, and so on.
All these life-essential industries are precisely
under the monopoly of state-owned enterprises.
Zhang Qingxi, economics professor at Taiwan University:
“In any case, foreign companies, especially milk producers,
definitely abide by the law better than their Chinese peers.
Firstly, the CCP authorities fined those companies
as a show to the Chinese to see.
Secondly, I think it is intended to protect the interests of
domestic producers by punishing foreign ones,
under the pressure from inside China.”
The CCP government has been attacking foreign companies
in various ways for some time.
This March, a party mouthpiece media accused Apple Inc.
for being “greedy and extremely arrogant”.
In the same month, its quality inspection department also
“figured out” a gearbox problem of Volkswagen,
forcing the company to recall over 380,000 vehicles in China.
Back in early January, Samsung and other five foreign
electronic companies were fined of 144 million Yuan for anti-competitive behavior.
Since Sep 9th, 2012, a large group of Taiwanese business
owners started a daily protest at a regular time in front of Taipei Railway station.
They told stories of how they were persecuted by the CCP
and ended up losing all of their possessions in mainland China.
According to Taiwan’s mainland affairs council, the major
problem is the CCP’s criminal persecution against Taiwanese
business owners, threatening the safety
of both their life and property.
Zhang Qingxi: “The CCP’s approach of attracting investment
is to give some preferential treatment to you initially.
However, if you become a big success, then they will plot to
control your company, sometimes even by directly taking it.
Personally I think there are many reasons for this,
such as demoralization of the whole society.
A major problem is that there is no restriction
on the power of the authorities.”
Since 2011, foreign companies started to retreat from China
in waves due to increasing labor costs, an end to tax benefits,
and the appreciation of yuan, among other reasons.
In only five trading days ahead of Jun 5th, 2013,
about 834 billion dollars left China’s stock market.
This is the largest outflow of foreign investment for China
since the financial crisis in January, 2008.
Some outside observers comment that this indicates
an end to the “China Dream” for foreign companies.
Xie Tian, professor at Aiken Business School, University
of South Carolina: “The CCP has always been blatantly
violating human rights and never rules the country by law.
Working with such a regime, you may make profits for
a period of time, but will suffer a lot more in the end.
Now western companies start to taste the true
bitterness in China.”
The CCP’s mouthpiece media claimed that Mead Johnson
and two other companies out of the six milk powder
producers had announced that they would pay the fines.
New Zealand’s Fonterra was reported to say that it
accepts and will fully coordinate with the decision.
Xie Tian: “This is indeed a strange thing.
Among those companies there is also an American one.
In general, they shouldn’t easily accept any administrative
fine without their violations being proved.
However, we haven’t seen any firm evidence shown
by the CCP government.
As the fine can be related to scandals of the
whole Chinese milk powder industry,
those companies may worry about further retaliation
from the CCP and therefore do something to protect themselves.”
Xie Tian says that the CCP may also aim at shifting
the public attention by imposing the huge fines on these companies.
The CCP might attempt to create the illusion that
the party is acting in the welfare people of the people,
so as to hide the real problems under its governance.