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An Economic Defense Of China's Antitrust Crackdown

Criticized as targeted crackdowns against foreign companies, recent investigations into alleged monopolistic practices should actually be seen as progress in China's business policy.

The Shanghai Free-Trade Zone, actively promoting Sino-U.S. and Sino-EU investment agreements.
The Shanghai Free-Trade Zone, actively promoting Sino-U.S. and Sino-EU investment agreements.
Ren Qing

-Analysis-

BEIJING — Chinese authorities have raised concern in the business world after recent antitrust investigations into several multinational companies such as Microsoft, Audi and Mercedes-Benz.

Such investigations are unusual. But that doesn't mean that alleged monopolistic behavior hasn't existed in China before now, or that law enforcement officials are suddenly abusing their power.

A better explanation is that enforcement agencies were willing to allow a phase-in period for new anti-monopoly legislation — time for market players to self-correct. Some also needed a little while to gain enforcement expertise and experience.

Now, after six years, China's relevant agencies possess both the willingness and the ability to carry out comprehensive anti-monopoly measures. In a certain sense, they are cleaning up "historical debts," and this implementation is becoming the norm.

With its Shanghai Free-Trade Zone, China is actively promoting Sino-U.S. and Sino-EU investment agreements. In the next few years, China may completely reform its foreign investment regulation system, the core of which is a review and approval system.

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The port of Shanghai — Photo: Marqueed

As it begins to abandon old ways of managing foreign investment, Chinese authorities are bound to rely more on anti-monopoly, anti-commercial bribery and security investigations, which are common legal tools in developed economies.

Enforcing antitrust laws complies with the international trend of foreign investment management. China is opening up its foreign capital policy, so it wouldn't be fair to conclude that China is somehow unwelcome to foreign investment because of its recent antitrust crackdown.

It's just that foreign businesses must now pay as much attention to China's anti-monopoly regulations as they do in jurisdictions such as the United States and the European Union. To avoid any risk, they must improve their antitrust compliance and codes, and follow these codes strictly.

Meanwhile, China-based companies shouldn't consider themselves mere onlookers in terms of enforcement. They too should remain vigilant by referring to the laws and regulations — and to cases in which companies have been penalized or those that remain under investigation.

As for the enforcement agencies, the legitimacy of anti-monopoly laws doesn't always justify enforcement actions in individual cases. They should consider how to improve enforcement and eliminate unnecessary misunderstanding via outside supervision.

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