Six years after introducing anti-trust legislation, China´s authorities have started to use those tools. Foreign firms fear they are targets, but business analyst Ben Cavender sees at CNBC another reason: the growing anxiety at the central government for the huge inequality in China´s incomes.
“Many foreign companies, by virtue of having strong brand positions, can add additional margins,” Ben Cavender, an analyst at China Market Research Group, said. “They’re sending a signal to firms that they can’t get too greedy,” he added.
“They’re worried about wealth inequality,” he said, noting that in the wake of the mainland’s economic slowdown, many wealthy individuals are continuing to benefit even as average consumers struggle.
China’s gini coefficient, an indicator of the concentration of wealth in a society, is around 0.55, indicating a “severe” gap between rich and poor, compared with 0.45 in the U.S. and 0.30 in China in 1980, according to researchers at the University of Michigan. The scale ranges from zero to one, with zero indicating complete equality. The U.N. calls levels above 0.4 a predictor of social unrest…
Cavender also noted that authorities’ latest campaign may be at cross-purposes with efforts to boost local industry.
“There’s this duality between helping local businesses and making things more fair for consumers. These are two competing issues,” Cavender said.
But that can make it difficult for foreign companies to direct their operations on the mainland.
“Right now, it’s challenging to be a foreign company here because you don’t necessarily know where the pressure is going to come from next, even if you’re doing the same thing the local companies are,” Cavender said. “It’s becoming more difficult to assess where the risks are.”
Are you interested in more risk management experts at the China Speakers Bureau? Do have a look at this recent list.