world growth

world growth

Saturday, August 2, 2008

Chinese Antitrust Law: The New Face of Protectionism?

China has finally implemented its own antitrust law. Companies from USA, EU and Japan will no longer have a free ride in the Chinese market. Watch out ! Microsoft.

Chinese Antitrust Law: The New Face of Protectionism?

http://www.huffingtonpost.com/anu-bradford/chinese-antitrust-law-the_b_116422.html

China's new Antimonopoly Law goes into effect today. This comprehensive antitrust makeover is celebrated in some quarters as a significant step in China's transition to a market economy. But the new law is also worrisome, for it could be used to protect national corporate champions while keeping foreign corporations out of the Chinese market. And if China follows this course, the options for the rest of the world are grim.

On its face, the new Chinese law is neutral. It subjects both foreign and domestic corporations to antitrust scrutiny. The law purports to promote economic efficiency and advance consumer welfare, which are appropriate goals of antitrust law. But the law also contains several ominous provisions, including a clause subjecting foreign acquisitions of Chinese corporations to a "national security review." The law further defines "national security" to include economic security, opening the door for the Chinese officials to block any foreign transaction that significantly impacts the structure of the Chinese economy or, as some fear, that Chinese authorities simply do not like. An antitrust law that on its face is designed to open markets can be a powerful tool to close them.

As its legislative history suggests, the law reflects the resurgence of protectionist sentiments in China following the increase in foreign acquisitions of Chinese corporations. Some domestic groups favored the law as a tool to control the conduct of state-owned enterprises and to abolish trade barriers among different regions within China. Others saw the new law as an opportunity to challenge foreign multinationals that are increasingly controlling the Chinese economy. Only a track record of enforcement will show which motivations will ultimately prevail.

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