China Has No Anti-Monopoly Monopoly

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Recent posts have looked at restrictions on foreign investment (see here) and the introduction of an Anti-Monopoly Law in China (see here). While these issues may be annoying to some, it is useful to put the facts in some international context. Chinese companies have had their fair share of politically-protected M&A failures overseas as well. Remember Unocal? Now we have China International Marine Containers Co., the biggest producer of cargo-carrying boxes in the world, hitting a brick wall in Europe.

Bloomberg reports that the company has “dropped its proposed takeover of Burg Industries BV of the Netherlands after European regulators extended their review”.

    “The decision to terminate the 82.5 million euros ($104 million) purchase was made after ‘judging the process for European Union regulators to review the transaction’, China International said in a statement to the Shenzhen Stock Exchange today. The European Commission on June 26 extended its scrutiny of the deal, delaying a ruling from July 28 to Aug. 21.”

The European fear was that the combined companies would have a “quasi-monopolistic” market position. The case serves as a reminder that, while motivations may differ, it is not only China that is seeking to block monopoly positions and to protect local interests.

In fact, as James Kynge points out in his excellent book, “China Shakes the World” (which is on my list of favorite China business books), the world’s trading relationship with China went full-circle in the time from Lord McCartney’s ill-fated trade mission in 1793 to the imposition by the US and EU of textile trade quotas on China in 2005: “China was for the first time…more open to the world than the world was to China”.

As China continues to develop its competitive manufacturing base, and as Chinese companies “go global” (see here), the impact of this changed relationship will increasingly be felt, and will have direct consequences for business and policy everywhere. We may expect blocked acquisitions, imposition of import quotas or tariffs, restrictions on technology transfer, imposition of new rules on outsourcing, or other challenges which will, no doubt, be appearing on these pages before too long.

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