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For quite some time, the Chinese state dominated the economy, determining what to produce at what quantity and what to sell at what price. Even with the reform, the state still “monopolizes” such sectors as telecommunications, utilities and petroleum with state-owned enterprises in the name of protecting the nation’s strategic interests. The protectionist policy has been criticized for behaviors such as charging excessively high prices, providing low-quality services, and receiving excessive profits, as well as eroding the competitiveness of these companies.
It remains to be seen whether the new law will curb the monopolistic behaviors of state-owned enterprises holding lawful monopoly positions or rather protect those SOEs. But Li Rongrong, head of the State-owned Assets Supervision and Administration Commission, unequivocally indicated that reorganization of the SOEs, especially those administered by SASAC, is deemed to be beneficial to the national economy and will be exempt from anti-trust examination. Apparently, the ongoing reorganization in China’s telecommunications sector falls into this category.
However, the Anti-Trust Law will keep a close eye on multinational corporations with operations in China. Many of them have occupied dominant positions in the Chinese market and are thereby perceived to have a negative effect on the development of China’s national economy and public interest.
Dong Zhengwei of Zhongyin Lawyer, a Chinese law firm, filed a charge against Microsoft with China’s Ministry of Commerce, State Administration of Industry and Commerce, and National Development and Reform Commission for its monopolistic practices and requested a fine of US$1 billion levied on the software giant.
According to the petition, Microsoft dominates China’s operating system and office software market as 70 percent of the personal computers used in China have its software installed. It is estimated that Microsoft sold some 41.4 billion yuan (US$5.4 billion) worth of these two products in China in 2007.
Given that China has the largest Internet user base in the world – 253 million as of the end of June 2008 with 20 percent annual growth of PC sales – Microsoft’s position in China could only be more significant in the years to come. In the meantime, by way of market and technology monopoly, Microsoft has hurt other software vendors that develop products such as the Linux operating system and office software packages.
Separately, on the occasion that the Anti-Trust Law took effect, Chinalabs.com, an Internet and IT consultancy, issued a report surveying the monopolistic situation in China’s high-tech industry such as Internet, media, software, PCs, semiconductors, telecommunications, IT services and digital media. In addition to Microsoft’s monopoly in operating systems and office software, China Mobile and China Telecomm are identified as monopolies in telecommunications, Tencent in instant messaging, Baidu in search engines, Tao Bao in C2C e-commerce, CCTV and Focus Media in media, Intel in semiconductors, IBM in IT services, and Sony in digital cameras.
If this report represents some sort of indication, both Chinese companies and multinational companies will be scrutinized for the “likelihood of elimination or restriction of competition in the relevant market,” according to the new law.
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(Cong Cao is a senior research associate with the Neil D. Levin Graduate Institute of International Relations and Commerce at the State University of New York. He received his PhD in sociology from Columbia University in 1997 and has worked at the University of Oregon and the National University of Singapore. Dr. Cao is interested in the social studies of science and technology with a focus on China. ©Copyright Cong Cao.)
