Since July, Chinese regulators have launched anti-trust investigations into several well-known foreign companies operating in China, including telecommunications company Qualcomm, computing giant Microsoft Corp. and Audi dealers under the auspices of FAW-Volkswagen Automobile Co. Ltd.
Such investigations have been carried out in accordance with Chinese law in a bid to maintain regular market order. However, some foreign media outlets have misconstrued such actions as attempts to subdue the competitiveness of foreign companies.
Anti-trust actions are common events in a mature market. After it joined the World Trade Organization in 2001, China realized that monopolizing activities had become an increasingly large obstacle in furthering national economic development. The country then put its own Anti-Monopoly Law into effect in 2008 based on the experiences of European countries and the United States, which have long employed strict measures to fight market monopolization.
After the Anti-Monopoly Law was put into place, Chinese regulators first investigated domestic companies such as instant noodles producer Master Kong, and premium liquor makers Moutai and Wuliangye—all of which were subsequently punished for driving out market competition.
Recent anti-trust moves focusing on foreign companies have come about partly due to the unique roles they have played in the development of the country. Since the start of China's reform and opening-up drive in the late 1970s, local governments have rolled out preferential policies to attract foreign companies, including providing free or low-priced land and offering tax reductions, which have given them privileged treatment and helped them achieve dominance in their respective markets.
It should be noted that foreign companies have become an integral part of the Chinese economy and contribute greatly to China's economic and social development. Restraining their growth and success is not in the country's interests.
And yet, some foreign companies have taken advantage of these favorable positions to engage in anti-competitive activities like price fixing, disturbing market order and according poorer treatment to local consumers. For example, a Mercedes-Benz car is sold at a much higher price in China than in the United States.
China's Anti-Monopoly Law is being widely enforced solely in an effort to restore order to disproportionately dominated markets and to push forward fair competition. Foreign companies operating in the country must understand that the days of preferential treatment are gone for good. Moving forward, they must adapt to keep pace with the country's macroeconomic conditions and become fair market players. In the same vein, foreign media coverage would do well to adopt a more balanced position on China's affairs and present them in a more objective manner.