China, and the Story of the Malicious Foreign Takeovers

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Malicious foreign takeovers?! Are we talking about US perceptions of CNOOC’s bid for Unocal, Dubai’s bid for P&O’s US ports, China’s overseas oil investments, or maybe Nanjing Auto’s takeover of Rover in the UK? No…it is the role of foreign investment in China that is causing concern to some in the Chinese government – according to reports quoting Li Deshui, the head of the National Bureau of Statistics.

While no examples of companies were given, sectors at risk (of foreign domination) were said to include beer, soft drinks and skincare products. Li was quoted as saying:

    “If we allow the free development of malicious acquisitions by multinational companies, the autonomous brands and innovative ability of China’s national industry will gradually disappear,”

Happily this is not a generally accepted perception of foreign investment – which is still very popular in most officials’ eyes. Another commentator, Shi Jianhuai, a professor at Peking University, noted that:

    “These purchases [by foreign companies] are market practice…if they don’t acquire you, they will defeat you through competition.”

All cheer the Socialist Market Economy!

Yet another perspective comes from Zhu Min at the Bank of China – which has sold strategic stakes to (obviously non-malicious) foreign banks. He is quoted in the China Daily as saying:

    “When we joined the WTO, we always talked about the wolf has come, we’re scared to death…A year later, we talked about dancing with the wolf… Now we marry…the wolf”.

While the foreign “threat” may not be a serious as Li suggests, this sort of language is always intended to deliver a serious message. Policy-makers and businesses should therefore remember that there are two sides to the proverbial coin. As the US and EU are trending towards aggressive protectionism, it may also be a sign of the times that foreign and domestic tax rates in China are set to be harmonized, and that foreign firms have been accused of “immense” tax evasion by a member of the Chinese People’s Political Consultative Conference (CPPCC). The People’s Daily reports:

    ”It is estimated that foreign-funded firms elude 30 billion yuan (3.75 billion U.S. dollars) of tax each year in China, said Chen Wangang, a member of the National Committee of the Chinese People ‘s Political Consultative Conference (CPPCC).
    It might therefore also be wise to keep an eye on the development of China’s Anti-Monopoly Law, which is set to be published this year. And, for good measure, why not spare some time for public relations and corporate social responsibility programmes. After all, foreign businesses benefit themselves, and local interests, when they contribute to the communities and countries in which they operate.
    See news sources:

See news sources:

    China official warns on “malicious” foreign takeovers
    Financial Times – London,England,UK
    The head of China’s statistics bureau has called for action to limit malicious moves by multinational companies to acquire local companies as a way of …
    http://news.ft.com/cms/s/ea14a16a-ae92-11da-b04a-0000779e2340.html

    China faces challenges from foreign investors
    A year later, China and the wolf were dancing together. … Zhu Min, the state-owned bank’s executive assistant president, noted that 50 percent of …
    www.chinadaily.com.cn/english/ doc/2006-01/26/content_515821.htm – 26k –

    Foreign firms in China evade enormous amount of tax: expert
    People’s Daily Online – Beijing,China
    Foreign-funded firms in China have cashed in on taxation loopholes to evade an immense amount of tax, a member of the country’s top political advisory body …
    http://english.people.com.cn/200603/08/eng20060308_248983.html

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