China could target oil firms, telecoms, banks in price probes: report

BEIJING Thu Aug 15, 2013 6:29am EDT

The national flag of China flutters behind a fence of the headquarters of the National Development and Reform Commission (NDRC) in Beijing, in this picture taken July 12, 2013. REUTERS/Kim Kyung-Hoon

The national flag of China flutters behind a fence of the headquarters of the National Development and Reform Commission (NDRC) in Beijing, in this picture taken July 12, 2013.

Credit: Reuters/Kim Kyung-Hoon

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BEIJING (Reuters) - China's powerful price regulator could target the petroleum, telecommunications, banking and auto sectors next in its investigations into violations of the country's anti-trust laws, state media quoted a senior official as saying.

The National Development and Reform Commission (NDRC) would look at industries that have an impact on the lives of ordinary Chinese, China Central Television (CCTV) quoted Xu Kunlin, head of the anti-monopoly bureau at the NDRC, as saying on one of its programs.

The NDRC has launched nearly 20 pricing-related probes into domestic and foreign firms in the last three years, according to official media reports and research published by law firms.

But the scope of its investigations in the world's second-biggest economy have gathered pace in recent months and coincide with criticism in official media about the price of goods such as milk powder, medicine, luxury cars and jewellery.

"When you look at activities around the world, regulators tend to investigate sectors where their investigations can have a direct impact on consumers and that will look good," said Sebastien Evrard, Beijing-based partner at law firm Jones Day, which specializes in anti-trust law.

Last week the NDRC fined six milk powder firms for anti-competitive behavior. It is also investigating 60 foreign and local pharmaceutical companies over pricing and costs.

Companies in the petroleum, telecommunications, banking and auto sectors were on the NDRC's radar for future investigations, CCTV's official blog quoted Xu as saying.

Xu gave a hypothetical example, saying that if banks fixed deposit or lending rates if and when China liberalized its interest rate regime, such behavior could prompt an investigation.

CCTV gave no other details and NDRC officials could not be reached for comment.

China has been taking incremental steps towards liberalizing interest rates. Last month the central bank removed controls on bank lending rates, giving commercial banks the freedom to compete for borrowers.

Evrard said that while telecoms companies and fuel prices were often the target of regulators around the world, they would not be obvious choices in China because of the involvement of state-owned companies.

State-owned majors PetroChina, Sinopec Corp and CNOOC Ltd dominate China's oil and gas industry, both upstream and downstream.

Domestic fuel prices are also set by the NDRC.

The country's three biggest telecom firms - China Unicom Ltd, China Mobile Ltd and China Telecom Corp Ltd - are state-owned.

Similarly, the top four banks are controlled by the state.

The China Automobile Dealers Association told Reuters earlier this week that its officials were collecting data on the price of all foreign cars sold in the country for the NDRC.[ID:nL4N0GE3QQ]

The State Administration for Industry and Commerce (SAIC), a regulator in charge of market supervision, kicked off a separate three-month investigation into bribery in the pharmaceutical and medical services sector on Thursday.

Foreign executives and bankers in China say the various investigations are a hot topic of discussion but many are still puzzled by the motivation behind the probes and whether they will impact their business.

(Additional reporting by Adam Jourdan and Samuel Shen. Editing by Dean Yates and Matt Driskill)

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Comments (2)
Universalist wrote:
The Chinese leadership is taking on domestic issues and actions taken on behalf of the spending Chinese citizens will help offset the effects of a slowing economy. It is a political ace in hole that gets thrown on the table when it is needed. Everyone loves it when the government goes after those mean ol’ greedy capitalists who fix prices and gouge away. Just think of every time Obama takes up high gas prices, we fall for it only to be distracted by something else while gas prices just go up. The Chinese will smack ‘em pretty good and rightfully so.

Aug 15, 2013 3:51am EDT  --  Report as abuse
MikeBarnett wrote:
With China’s economy on track to become the biggest in the world, Beijing is putting into effect the next phase of China’s development. China has most of the economic laws of the US, but it has selectively enforced them during its drive for economic growth. Dr. Edward Tse wrote “The China Strategy” in which he pointed out the legal bases for China’s economy and Beijing’s selective enforcement.

Despite its change to make the economy more fair and reduce pollution from 2011 to 2020, China’s GDP growth rate is at 7.6% for the 1st half of 2013 compared to a 1.4% GDP growth rate for the US. The main reasons for China’s decline from double digit GDP growth appear to be recession in the EU, China’s biggest trade partner, and sluggish recovery from recession in the US, China’s 2nd biggest trade partner. With the EU coming out of recession and double digit trade growth with ASEAN and Africa, China’s 3rd and 4th biggest trade partners, Beijing may see GDP growth move closer to 8% or higher. Therefore, China’s leaders can target the telecommunications, petroleum, and automobile sectors to make them conform to China’s official laws without causing damage to its economic growth.

However, banking remains a special case owing to its great importance. Kevin Phillips, in his book American Theocracy, pointed out the dangers of financialization of an economy that dominates the world. In world history, only two countries have dominated the global economy through finance. Britain failed, and the US is failing, so China takes the growth of its domestic and international financial system slowly to make China the global economic and financial leader that succeeds.

Aug 15, 2013 6:30pm EDT  --  Report as abuse
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