The intense scrutiny from China’s regulators is a signal that the era of fast rising profits in the region might come to an end, as products from Starbucks’ coffee to Audi limousines brought bigger earnings than in their home countries.
Triggered by numerous media reports claiming that Chinese buyers were discriminated, the anti-monopoly regulators jumped in and started probing numerous foreign brands – from Danone or Microsoft to Audi or Toyota. Taking as an example just the automotive industry, in the past 30 days no less than seven automakers were forced – or diligently advised – to cut prices for services, products and spare parts.
“We may be seeing a paradigm shift where the rules of the game are changing,” said David Loevinger, former US Treasury Department senior coordinator for China affairs. “Until people figure out the new rules it will create a much more uncertain business climate.”
“There’s a concerted effort on the part of multiple regulators in China to aggressively enforce the regulations,” said Kent Kedl, managing director for Greater China and North Asia at Control Risks Group Holdings Ltd. “They are being much more aggressive now than we have ever seen.”
After a media scrutinized investigation by the National Development and Reform Commission, China’s main economic planner, Audi, BMW, Jaguar Land Rover, Chrysler, Toyota and Honda, have all announced various price cuts.