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6 White Paper on the Business Environment in China
improving its bottling and distribution infrastructure.35 projected 150 million new urban consumers by 201538 reinforce
Following up on its 2011-2014 investment plan, in late 2013 China’s importance as a strategic location globally.
Coca-Cola announced its intent to an additional $4 billion to Notable Policy Activity
build more manufacturing plants in China between 2015 and
2017.30 2007 Revision of the Catalog for the Guidance of Foreign In-
vested Enterprises
A Coca-Cola spokeswoman noted that the company “is also
open to deals with local firms.”30 Note: This section has been left intact from the 2008 edition to
supplement the discussion of declining foreign investment in the
“The beverage market is quite competitive right now and hospitality industry above
Coke is going to have to do a lot more acquisitions rather
than growing through organic growth,” commented a Shang- As always, while it is clearly the prerogative of the Chinese
hai-based analyst. Nevertheless, market data indicates that “Co- state to adjust regulatory policy to best guide the domestic
ca-Cola is still the leading drinks maker in China [and] held 16 economy according to development goals, the issue at hand for
percent market share by total volume in 2012.”30 foreign investors is not the policy itself but the way in which it
is implemented. In this case, the revisions to the Catalog for the
Danish brewer Carlsberg, meanwhile made headlines by Guidance of Foreign Invested Enterprises were released to the
expanding its ownership of the domestic Chongqing Brewery public (in Chinese) on November 7, 2007, and effective De-
for a total stake of 60 percent. “As majority shareholder it will cember 1, 2007, placed foreign participation in “Construction
be easier for Carlsberg to implement efficiency programs to in- and operation of high-ranking hotels, villas, high-class office
crease profitability, and integrate the business with its existing buildings and international exhibition centers” under the “Re-
breweries in China,” Reuters observed.36 stricted” category. The 23 days between first notice and the new
rules becoming effective is an extremely short period of time for
“The Chinese beer market is estimated to be worth around companies to asses and react to the new environment. While
451 billion yuan ($74 billion) in 2013 with a volume of 53 bil- this particular change may not affect the many foreign com-
lion liters, analysis agency Euromonitor said.”36 panies managing locally-owned properties, this method may
continue to undermine investor confidence in other—encour-
Finally, international coffee behemoth Starbucks was at- aged—sectors.
tacked on apparently political grounds in a high-profile CCTV
broadcast accusing the company of unfair pricing. “Regulations on Travel Agencies”
In March of 2009 People’s Daily reported that according to
“The 18-minute Starbucks report, which appeared to use hid-
den cameras, showed CCTV reporters in Beijing, Chicago and new regulations that were to take effect on May 1, 2009, foreign
Mumbai asking people on the street what they thought about the investors would be permitted to own and operate travel agen-
price and value of Starbucks coffee,” writes Reuters. “It criticized cies within China. The paper reported that:
the Seattle-based company for charging higher prices than in oth-
ers markets, which it said helped Starbucks earn “fat” profit mar- According to promises China made for entry into the
gins given its costs in China were not very high.”37 WTO, the new regulation stipulates that in addition to
Chinese-foreign equity and contractual joint ventures,
The piece was reportedly instigated by a non-editorial ex- foreign investors can also set up foreign travel agencies.
ecutive and appeared to be part of a series of attacks on foreign An official from the National Tourism Administration
brands which also included attacks on Apple, Samsung Elec- said foreign travel agencies will be entitled to national
tronics, Yum! Brands’ KFC restaurants and GlaxoSmithKline treatment in the three major tourism markets—in-
in addition to carmakers Audi, Subaru and Jaguar Land Rover.37 bound, outbound and domestic tours.39
It was quickly criticized for its unprofessionalism. “Internet Of note, however, is that foreign enterprises will not, at first,
users chided the network for tackling a minor issue compared be permitted to operate outbound tours—a clear competitive
to China’s many challenges. Economists said CCTV had failed advantage in their favor due to their experience and expertise
to grasp the concept of supply and demand, noting it was nor- outside of China—until they have operated for two years “with-
mal for a company to charge different prices for its products in out receiving administrative punishment for infringing on tour-
different countries.”37 ists’ legal rights and interests.”39
“Chinese government bodies and state-owned firms are usu- In September 2010 these regulations were revised to allow
ally too sensitive to investigate, putting foreign companies in foreign-domestic joint-ventures to organize outbound tours
the firing line for hard-hitting corporate stories,” experts told
Reuters.37
While foreign investment by major multinational corporations
looks to remain strong, vagaries in franchising law may provide
a hurdle to small- and medium-sized enterprises looking to
enter China, even as growth in consumer spending ability and a
218
improving its bottling and distribution infrastructure.35 projected 150 million new urban consumers by 201538 reinforce
Following up on its 2011-2014 investment plan, in late 2013 China’s importance as a strategic location globally.
Coca-Cola announced its intent to an additional $4 billion to Notable Policy Activity
build more manufacturing plants in China between 2015 and
2017.30 2007 Revision of the Catalog for the Guidance of Foreign In-
vested Enterprises
A Coca-Cola spokeswoman noted that the company “is also
open to deals with local firms.”30 Note: This section has been left intact from the 2008 edition to
supplement the discussion of declining foreign investment in the
“The beverage market is quite competitive right now and hospitality industry above
Coke is going to have to do a lot more acquisitions rather
than growing through organic growth,” commented a Shang- As always, while it is clearly the prerogative of the Chinese
hai-based analyst. Nevertheless, market data indicates that “Co- state to adjust regulatory policy to best guide the domestic
ca-Cola is still the leading drinks maker in China [and] held 16 economy according to development goals, the issue at hand for
percent market share by total volume in 2012.”30 foreign investors is not the policy itself but the way in which it
is implemented. In this case, the revisions to the Catalog for the
Danish brewer Carlsberg, meanwhile made headlines by Guidance of Foreign Invested Enterprises were released to the
expanding its ownership of the domestic Chongqing Brewery public (in Chinese) on November 7, 2007, and effective De-
for a total stake of 60 percent. “As majority shareholder it will cember 1, 2007, placed foreign participation in “Construction
be easier for Carlsberg to implement efficiency programs to in- and operation of high-ranking hotels, villas, high-class office
crease profitability, and integrate the business with its existing buildings and international exhibition centers” under the “Re-
breweries in China,” Reuters observed.36 stricted” category. The 23 days between first notice and the new
rules becoming effective is an extremely short period of time for
“The Chinese beer market is estimated to be worth around companies to asses and react to the new environment. While
451 billion yuan ($74 billion) in 2013 with a volume of 53 bil- this particular change may not affect the many foreign com-
lion liters, analysis agency Euromonitor said.”36 panies managing locally-owned properties, this method may
continue to undermine investor confidence in other—encour-
Finally, international coffee behemoth Starbucks was at- aged—sectors.
tacked on apparently political grounds in a high-profile CCTV
broadcast accusing the company of unfair pricing. “Regulations on Travel Agencies”
In March of 2009 People’s Daily reported that according to
“The 18-minute Starbucks report, which appeared to use hid-
den cameras, showed CCTV reporters in Beijing, Chicago and new regulations that were to take effect on May 1, 2009, foreign
Mumbai asking people on the street what they thought about the investors would be permitted to own and operate travel agen-
price and value of Starbucks coffee,” writes Reuters. “It criticized cies within China. The paper reported that:
the Seattle-based company for charging higher prices than in oth-
ers markets, which it said helped Starbucks earn “fat” profit mar- According to promises China made for entry into the
gins given its costs in China were not very high.”37 WTO, the new regulation stipulates that in addition to
Chinese-foreign equity and contractual joint ventures,
The piece was reportedly instigated by a non-editorial ex- foreign investors can also set up foreign travel agencies.
ecutive and appeared to be part of a series of attacks on foreign An official from the National Tourism Administration
brands which also included attacks on Apple, Samsung Elec- said foreign travel agencies will be entitled to national
tronics, Yum! Brands’ KFC restaurants and GlaxoSmithKline treatment in the three major tourism markets—in-
in addition to carmakers Audi, Subaru and Jaguar Land Rover.37 bound, outbound and domestic tours.39
It was quickly criticized for its unprofessionalism. “Internet Of note, however, is that foreign enterprises will not, at first,
users chided the network for tackling a minor issue compared be permitted to operate outbound tours—a clear competitive
to China’s many challenges. Economists said CCTV had failed advantage in their favor due to their experience and expertise
to grasp the concept of supply and demand, noting it was nor- outside of China—until they have operated for two years “with-
mal for a company to charge different prices for its products in out receiving administrative punishment for infringing on tour-
different countries.”37 ists’ legal rights and interests.”39
“Chinese government bodies and state-owned firms are usu- In September 2010 these regulations were revised to allow
ally too sensitive to investigate, putting foreign companies in foreign-domestic joint-ventures to organize outbound tours
the firing line for hard-hitting corporate stories,” experts told
Reuters.37
While foreign investment by major multinational corporations
looks to remain strong, vagaries in franchising law may provide
a hurdle to small- and medium-sized enterprises looking to
enter China, even as growth in consumer spending ability and a
218
