While continuing to welcome the investment of transnational companies, China has learned the negative effects of these corporate giants: curbing competition and creating monopolies.
The fair trade bureau under China's State Administration for Industry and Commerce has recently completed an investigation of anti-competition acts of transnational companies in China, which finds some transnational companies are abusing their advantageous positions to curb competition.
A report about the investigation, the first of its kind ever undertaken by the bureau, says transnational companies command obvious advantageous positions in their investment areas in China.
For instance, Microsoft's operating system software and Tetra Pac packaging materials each account for 95 percent shares of the Chinese market. Eastman Kodak, which formerly held a more than 50 percent share of China's roll film market, is expected to further consolidate its market dominance after having taken over 20 percent shares of its sole major Chinese rival Lucky Film Corp.
According to the report, some transnational companies have been using their dominant roles in technology, brand recognition, capital and management to suppress competitors and maximize their profits.
On the eve of the release of WPS97, a set of computer program developed by a Chinese company, a transnational company hurriedly put forward its version of the same kind of product at much lower prices.
In addition, certain transnational companies tend to purchase the exclusive promotion rights of supermarkets in busy seasons, barring these supermarkets from displaying other brands.
Some transnational companies set different prices for the same kind of products for China and their home countries, with the price in China twice as high as that in their home country.
To ensure their dominant roles, some transnational companies often carry out sweeping mergers and acquisitions to put major competitors under their own flags.
"Such actions would undermine the competitive environment of their host countries if transnational companies become domineering forces in this way. If such things happen, an anti-monopoly law has to be invoked to rectify the situation," said an official with the State Administration for Industry and Commerce.
The official said that to curb the anti-competition acts of transnational companies in China, it's imperative to quicken the revision of the existing law against unfair competition and make an anti-monopoly law.
Existing laws lack provisions against certain acts that suppress competition, such as selling tie-in goods, setting unfair prices to subdue competitors and pricing discrimination, said the official with the administration.
Informed sources say the draft of the anti-monopoly law is being considered by the Legislative Affairs Office of the State Council and other relevant departments.