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August 14, 2014

CHINA: Companies fear unfair targeting in regulatory clampdown

Foreign companies are protesting that Chinese authorities involved in an antitrust crackdown are abusing their power through intimidation tactics.

Foreign companies are protesting that Chinese authorities involved in an antitrust crackdown are abusing their power through intimidation tactics.

The Bloomberg news service reported that Chinese investigators are picking on foreign companies, pressuring them into accepting punishments and depriving them of full hearings.

The European Union Chamber of Commerce, which has some 1,800 members in the country, told Bloomberg that business sentiment is deteriorating in China as dozens of foreign companies, including carmakers, are being targeted in the country’s broadest antitrust investigation since anti-monopoly laws came into effect six years ago.

Analysts say that where foreign companies in China once enjoyed incentives, the rules of the game have changed with the National Development and Reform Commission, China’s main economic planner, investigating possible antitrust violations in the auto industry to “maintain market order and protect consumers”.

However, the European chamber told Bloomberg it received anecdotal accounts about intimidation tactics with some being told not to challenge investigations, bring attorneys to hearings, involve their respective governments or chambers of commerce.

There are also concerns that foreign companies are being disproportionally targeted while their Chinese partners are not.

The China Daily newspaper reported that more than 1,000 companies, including domestic businesses, are under investigation. Concern is growing that the probes signal increased regulatory scrutiny which could erode profitability in the country.

There is also a feeling that the move by the authorities is in response the US indicting five Chinese military officials for allegedly hacking into the computer networks of American companies to learn trade secrets.

See also: CHINA: China’s anti-trust regulator investigates over 1,000 auto companies

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