Experts from home and abroad called for the swift passage of China's first ever Anti-Monopoly law at Tuesday's International Forum on Market Access and Fair Competition in Shanghai.
The problem is that under current conditions multinationals are squeezing out domestic enterprises, and national giants are doing the same to small and private companies.
How do we make the playing field even, while still opening up China's market economy?
Fair competition in China's emerging market has increasingly become China's focus, to make both international and domestic trade competitive, especially since China entered the WTO.
Many feel that as China opens its economic doors to foreign investment and transnational corporations, safe-guard Anti-Monopoly legislation should be made the country's number one priority.
Xie Fuzhan is the deputy director of Development Research Center of China's State Council. He said at Tuesday's forum that foreign investment over the last couple of years has developed along the following lines.
"The volume of capital in wholly foreign-owned enterprises is outweighing that in joint ventures, accounting for 67 percent, or 2 thirds of total foreign investment in 2004. In 1990, the figure was merely 20%. Single investment tends to get bigger and bigger, from an average 3.5 million US dollars for a single contract in 2004 to 4.1 million US dollars on average in the first half of this year," Xie said.
Compared with Chinese enterprises, multinationals have an advantage in terms of capital and technology. They can dominate the market more quickly.
Xie Fuzhan says that another reason for multinational dominance is that foreign investors tend to choose industries that already favor them, like the electronic and mechanical industries. The foreign investment in these industries therefore soars disproportionately day-by-day.
For instance, some international giants like Intel and Hitachi are investing billions in new manufacture bases in China, potentially monopolizing these sectors.
The spate of sweeping mergers and acquisitions to absorb major competition in these hard-hitting industries also poses a threat to corporate diversity.
The Chinese corporation watchdog last year listed a number of industries where free competition may be threatened by multinationals. The list includes industries that produce software, photosensitive materials, mobile phones, cameras, vehicle tires, and soft packaging.
But Xie Fuzhan stressed that foreign investors should not panic, and that it was a natural part of developing China's market economy to enforce anti monopoly laws, in line with WTO requirements.
Of course, anti-monopoly laws don't only apply to international companies, but also to domestic companies. Fan Gang, a renowned Shanghai-based economist says that the state-owned giants should be a target of any new anti-monopoly laws.
Fan said, "When we talk about fair competition in China, we can't avoid the problem of how to break state monopoly and treat private enterprises as well as foreign and state-owned ones. For example, why don't state-owned enterprises need to pay for their exclusive rights in mining of natural resources? A good law or policy should treat all the participants equally."
Currently China does not have a unified anti-monopoly policy, but has specific references scattered among a number of laws, including a code outlawing unfair competition implemented in 1993 and a price law in 1997.
The creation of the anti-monopoly law has been put on the legislative agenda of the 10th National People's Congress in its five-year tenure, which ends in 2007. And Fan Gang suggests that an independent organization be established to unify and enforce the anti-monopoly law.
(CRI November 24, 2005)
