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6 White Paper on the Business Environment in China
It would appear that “Decree 8” was a response to the and the company was fined 2.69 million yuan.”62
then-undisclosed 3 billion yuan fraud (approximately $455 mil- At roughly the same time, “more than 100 Tesco employees
lion) committed by the two largest insurers in China (China
Life Insurance (Group) Company and People’s Insurance Com- went on strike in eastern China. The employees blockaded and
pany (Group) of China, both state-owned) in 2009, which was prevented shoppers from entering a Tesco store due to a labor
revealed to the public in early 2011.57 dispute.”62
American International Group—a company which was One question that remains unaddressed in many Mainland
actually founded in Shanghai in 1919, several decades before reports of foreign supermarkets’ troubles is that of culpability;
the People’s Republic was proclaimed—made news in 2012 determining if wrongdoing has had the tacit support of more
as a signatory to a non-binding agreement to purchase $500 senior executives or has rather been the work of greedy ‘rogue
million-worth of shares in a Hong Kong IPO planned by the actors’ at the individual store level seems to be left as an exercise
People’s Insurance Company of China. The agreement also in- for the reader.
cluded a planned joint venture between the two companies to
sell life insurance within the Mainland.58 The situation has not lately improved for the embattled re-
tailers.
Historically, foreign insurance companies have been per-
mitted to sell optional auto insurance in China but have been By 2013 Tesco had begun to “shut Chinese outlets and open
barred from offering Mandatory Third-party Liability (MTPL) new ones more slowly two years after announcing plans to dou-
coverage. White Paper contributors Dezan Shira & Associates ble stores and build more 400,000-square-foot malls,” writes
note that “Since most drivers tend to choose the same insurer BloombergBusinessweek. “Hindered by the country’s slowest
for both optional and compulsory coverage, China’s restriction economic growth since the 2009 financial crisis and competi-
‘has effectively blocked foreign firms.’”59 tion from local markets and regional chains, the Cheshunt, En-
gland-based retailer’s China same-store sales declined 1 percent
In 2011 then-Vice Premier Wang Qishan, at a session of in the second quarter.”63
the U.S.-China Strategic & Economic Dialogue, indicated that
foreign insurers may in the future be allowed to offer MTPL “Tesco’s China pullback reflects the hurdles global big box
coverage, “[in the hope that] experienced Western players will retail chains face in Asia,” the article continues, “where the real-
bring better pricing and underwriting practices to the country’s ities of complex local markets and slowing economies are damp-
young, fast-growing market.”59 ing dreams of easy expansion. The world’s largest retailer, Wal-
Mart, is also adding outlets more gradually than it had planned
Foreign retailers’ Mainland experiences have been mixed in in China’s 3.5 trillion yuan ($560 billion) grocery industry.”63
recent years.
Whether more or less gradually, Wal-Mart recently an-
Home Depot, purveyors of home improvement supplies, nounced plans to open “up to 110 facilities in China between
closed seven stores in China over the course of 2012, incurring 2014 and 2016, in addition to the 30 it has already opened
“an 11-cent charge” to its earnings per share.60 [2013].” The company also plans to “profit from China’s chang-
ing retail landscape by embracing e-commerce.” A major com-
Meanwhile, “Wal-Mart said store traffic in China declined ponent of that strategy is likely to be its subsidiary Yihaodian,
again [in Q3 2012].”61 “which claims 24 million registered users and provides same-
day delivery services to customers.”64
Wal-Mart, “the world’s largest retailer by sales revenue, en-
tered China in 1996”, “Nine years later […] had more than 70 China’s information technology sector continues to devel-
stores” and as of mid-2012 “[had] more than 376 outlets and op. The total value of exported software and services was esti-
more than 95,000 employees in China.”57 mated at $1.8 billion in 2006. In 2008, this figure was project-
ed to grow by more than 30 percent through 2011.64 January
Carrefour and Tesco, the world’s second- and third-largest to July of 2011 saw a year-on-year growth rate of 15.7 percent
retailers by revenue, had 206 and 111 stores in Mainland China, in exports, accounting for in excess of $15 billion. Revenues in
respectively.57 the sector were reported to have grown by 29.6 percent to reach
958.8 billion yuan (approximately $152 billion) in the same
Foreign supermarkets, especially, have seen difficulties aris- period.65
ing from pricing, misrepresentation and employee disputes.
According to the U.S. Foreign Commercial Service, the soft-
In January 2011, the NDRC “fined 11 Carrefour stores in ware industry is a major focus of the central government but
six cities 500,000 yuan ($78,440) each for overcharging cus- remains diverse and “highly fragmented,”66 with the PRC, with
tomers” at the same time that “some Wal-Mart stores were also the National Copyright Administration reporting an estimated
caught using illegal pricing methods.”57 80,000 registered software products as of 2010.67
Issues persisted, however. In October 2012, “Wal-Mart Finally, China’s telecommunications sector is of continuing
closed more than a dozen stores in Chongqing following alle- interest for both foreign and domestic firms, although foreign
gations that it had labeled regular pork as organic pork in some
stores. Two employees were arrested, another 35 were detained,
234
It would appear that “Decree 8” was a response to the and the company was fined 2.69 million yuan.”62
then-undisclosed 3 billion yuan fraud (approximately $455 mil- At roughly the same time, “more than 100 Tesco employees
lion) committed by the two largest insurers in China (China
Life Insurance (Group) Company and People’s Insurance Com- went on strike in eastern China. The employees blockaded and
pany (Group) of China, both state-owned) in 2009, which was prevented shoppers from entering a Tesco store due to a labor
revealed to the public in early 2011.57 dispute.”62
American International Group—a company which was One question that remains unaddressed in many Mainland
actually founded in Shanghai in 1919, several decades before reports of foreign supermarkets’ troubles is that of culpability;
the People’s Republic was proclaimed—made news in 2012 determining if wrongdoing has had the tacit support of more
as a signatory to a non-binding agreement to purchase $500 senior executives or has rather been the work of greedy ‘rogue
million-worth of shares in a Hong Kong IPO planned by the actors’ at the individual store level seems to be left as an exercise
People’s Insurance Company of China. The agreement also in- for the reader.
cluded a planned joint venture between the two companies to
sell life insurance within the Mainland.58 The situation has not lately improved for the embattled re-
tailers.
Historically, foreign insurance companies have been per-
mitted to sell optional auto insurance in China but have been By 2013 Tesco had begun to “shut Chinese outlets and open
barred from offering Mandatory Third-party Liability (MTPL) new ones more slowly two years after announcing plans to dou-
coverage. White Paper contributors Dezan Shira & Associates ble stores and build more 400,000-square-foot malls,” writes
note that “Since most drivers tend to choose the same insurer BloombergBusinessweek. “Hindered by the country’s slowest
for both optional and compulsory coverage, China’s restriction economic growth since the 2009 financial crisis and competi-
‘has effectively blocked foreign firms.’”59 tion from local markets and regional chains, the Cheshunt, En-
gland-based retailer’s China same-store sales declined 1 percent
In 2011 then-Vice Premier Wang Qishan, at a session of in the second quarter.”63
the U.S.-China Strategic & Economic Dialogue, indicated that
foreign insurers may in the future be allowed to offer MTPL “Tesco’s China pullback reflects the hurdles global big box
coverage, “[in the hope that] experienced Western players will retail chains face in Asia,” the article continues, “where the real-
bring better pricing and underwriting practices to the country’s ities of complex local markets and slowing economies are damp-
young, fast-growing market.”59 ing dreams of easy expansion. The world’s largest retailer, Wal-
Mart, is also adding outlets more gradually than it had planned
Foreign retailers’ Mainland experiences have been mixed in in China’s 3.5 trillion yuan ($560 billion) grocery industry.”63
recent years.
Whether more or less gradually, Wal-Mart recently an-
Home Depot, purveyors of home improvement supplies, nounced plans to open “up to 110 facilities in China between
closed seven stores in China over the course of 2012, incurring 2014 and 2016, in addition to the 30 it has already opened
“an 11-cent charge” to its earnings per share.60 [2013].” The company also plans to “profit from China’s chang-
ing retail landscape by embracing e-commerce.” A major com-
Meanwhile, “Wal-Mart said store traffic in China declined ponent of that strategy is likely to be its subsidiary Yihaodian,
again [in Q3 2012].”61 “which claims 24 million registered users and provides same-
day delivery services to customers.”64
Wal-Mart, “the world’s largest retailer by sales revenue, en-
tered China in 1996”, “Nine years later […] had more than 70 China’s information technology sector continues to devel-
stores” and as of mid-2012 “[had] more than 376 outlets and op. The total value of exported software and services was esti-
more than 95,000 employees in China.”57 mated at $1.8 billion in 2006. In 2008, this figure was project-
ed to grow by more than 30 percent through 2011.64 January
Carrefour and Tesco, the world’s second- and third-largest to July of 2011 saw a year-on-year growth rate of 15.7 percent
retailers by revenue, had 206 and 111 stores in Mainland China, in exports, accounting for in excess of $15 billion. Revenues in
respectively.57 the sector were reported to have grown by 29.6 percent to reach
958.8 billion yuan (approximately $152 billion) in the same
Foreign supermarkets, especially, have seen difficulties aris- period.65
ing from pricing, misrepresentation and employee disputes.
According to the U.S. Foreign Commercial Service, the soft-
In January 2011, the NDRC “fined 11 Carrefour stores in ware industry is a major focus of the central government but
six cities 500,000 yuan ($78,440) each for overcharging cus- remains diverse and “highly fragmented,”66 with the PRC, with
tomers” at the same time that “some Wal-Mart stores were also the National Copyright Administration reporting an estimated
caught using illegal pricing methods.”57 80,000 registered software products as of 2010.67
Issues persisted, however. In October 2012, “Wal-Mart Finally, China’s telecommunications sector is of continuing
closed more than a dozen stores in Chongqing following alle- interest for both foreign and domestic firms, although foreign
gations that it had labeled regular pork as organic pork in some
stores. Two employees were arrested, another 35 were detained,
234
