The end of irresponsible business practices by multinationals in China
Simon Zadek says Beijing's crackdown on misconduct by foreign multinationals signals an end to the days of irresponsible business practices in China. And that can only be good for Chinese consumers and firms
Multinational corporations are under siege in China. In recent months, the government has levelled a series of allegations of corporate misconduct - ranging from food-product contamination to price rigging, bribery and environmental shortfalls - against foreign-owned companies, with important implications for the development of China's business environment.
Does the government's behaviour reflect a commitment to strengthening business ethics, marking the start of a long-overdue regulatory catch-up process? Is it intended merely to create a convenient populist distraction from China's current economic woes? Or are these revelations of often long-known corporate misdemeanours part of a complex power play involving competing Chinese interests?
The answer is probably a combination of these factors. But whatever the motivation, the message is clear: the age of irresponsible business in China is over.
The authorities' new regulatory activism is late in coming, but it will ultimately benefit Chinese consumers and firms. The targeting of multinationals - which have long received preferential treatment, including subsidies and regulatory incentives, while profiteering from Chinese consumers' distrust of locally made products' quality and safety - portends the creation of a more level playing field.
China’s ‘corporate responsibility’ agenda is shaped more by national interests than by public good
Given that booming sales of imported baby-food products have exemplified the problem of profiteering, the 668.7 million yuan (HK$841 million) in fines recently incurred by half a dozen international baby-formula producers over anti-competitive behaviour and price fixing sent a particularly strong message.
Hardly a day goes by without China's government thrusting another global brand into the limelight. Last month, China's environment ministry rejected an application from BMW Brilliance, the German carmaker's Chinese joint venture, to expand one of its plants, citing inadequate waste-water analysis and failure to meet official pollution-reduction targets. Less than a week later, an electrical fault forced the company to recall more than 140,000 vehicles, further undermining BMW's reputation for high production standards and sterling environmental credentials.