U.S. Companies Say China Subjectively Enforcing Laws

Murck, President of the American Chamber of Commerce in China-U.S. Companies Say China Subjectively Enforcing Laws

China is targeting foreign companies with opaque laws and rules, according to a group representing U.S. businesses there, contributing to a deteriorating environment for investment in the nation.

Sixty percent of respondents to a survey last month by the American Chamber of Commerce in China said they feel foreign business is less welcome in the country than before, the group said today in Beijing, up from 41 percent in a late-2013 survey. Forty-nine percent said foreign companies are being singled out in recent pricing or anti-corruption campaigns.

The results follow a statement by the group’s European counterpart last month that local authorities involved in an antitrust crackdown are abusing their power through intimidation tactics. Dozens of foreign companies are being targeted in probes, with regulators opening an anti-monopoly investigation into Microsoft Corp. in July and state media accusing Apple Inc. of using its iPhone to steal state secrets.

American Chamber members say they have “growing perceptions that multinational companies are under selective and subjective enforcement by Chinese government agencies,” Greg Gilligan, the group’s chairman, said in a report today. Laws and rules “lack transparency and are at times only vaguely related to the particular case.”

The survey released today was conducted from Aug. 22 to Aug. 28 with 164 respondents, while the previous one had 365 responses in November and December, according to the chamber.
‘Groundless’ Accusations

“China used to be more friendly to foreign companies, but the honeymoon is over,” said Jin Jianmin, a senior researcher at Fujitsu Research Institute in Tokyo who previously worked for China’s government. The government has started to take complaints from domestic companies about preferences for foreign firms more seriously, Jin said.

Accusations that most of China’s antitrust probes are directed against foreign companies are “groundless and baseless,” Xu Kunlin, head of the National Development and Reform Commission’s anti-monopoly bureau, said in an interview published today in the state-run China Daily. “We treat local and overseas companies equally to ensure justice for all,” Xu was quoted as saying.

American Chamber members have “concerns that rules are shifting again for foreign companies in China in ways that are highly opaque and difficult for local managers to anticipate or adapt to,” Gilligan wrote in a note accompanying a report on China’s investment environment. “Our member companies strive hard for full compliance and need support and greater clarity to achieve that goal.”
Targeting Industries

China is targeting industries where it wants domestic companies to catch up, including in pharmaceuticals, medical devices, technology and autos, Lester Ross, a chamber vice chairman, said at a briefing today in Beijing.

Volkswagen AG’s Audi, Bayerische Motoren Werke AG, Daimler AG’s Mercedes-Benz, Tata Motors Ltd.’s Jaguar Land Rover, Fiat SpA’s Chrysler, Toyota Motor Corp. and Honda Motor Co. have announced price cuts of vehicles or spare parts since July in the wake of the probes. General Motors Co. said last month that its joint venture with SAIC Motor Corp. has been responding to regulator requests since 2012.

China last month found a dozen Japanese auto-parts makers guilty of price fixing and doled out the biggest antitrust fines in the country since relevant rules came into effect six years ago, with Sumitomo Electric Industries Ltd. and Yazaki Corp. drawing the biggest penalties.
Microsoft, Oshkosh

The American Chamber’s membership includes more than 3,800 people from more than 1,000 companies, according to a media statement today. Members include Microsoft, Johnson & Johnson, Dell Inc., Oshkosh Corp. and Mead Johnson Nutrition Co., according to its website. Gilligan is vice president and managing director for PGA Tour China and previously worked for McDonald’s Corp. in China.

Authorities raided the offices of software maker Microsoft in July, while Qualcomm Inc. and Mead Johnson have also fallen under anti-monopoly scrutiny in China.

Gilligan cited evidence presented in a previously published survey and later by individual members for the concerns that show a “deteriorating landscape of the business environment for foreign investment in China.”

Members also see “rising political risk, including both domestic political campaigns and foreign policy tension, which are directly reflected in declining foreign direct investment from North America, Europe, and Japan,” Gilligan wrote. They also cited concerns about China’s long-term economic health and its reliance on investment and exports amid rising debt and lower consumption growth, he wrote.

Non-financial foreign direct investment in China fell 0.4 percent to $71.1 billion in the first seven months of 2014 compared with the same period a year earlier, according to government data.