Lin Min

    linmin67@126.com

    JAPANESE carmakers Toyota and Honda’s Sino-Japanese joint ventures in Guangzhou have joined their German rivals Audi, Mercedes-Benz and BMW in cutting prices on auto parts in China after the Chinese Government launched investigations targeting the automaker’s anti-competitive behaviors.

    Guangzhou Honda announced Friday an average price cut of about 20 percent for almost 30,000 auto parts, about 70 percent of all parts it produces. Guangzhou Toyota followed suit shortly, unveiling a similar price reduction package. The cuts came after major foreign automakers face punitive fines as the National Development and Reform Commission (NDRC), China’s top planning agency and price regulator, began ramping up efforts to bring companies in line with the country’s anti-monopoly law, which came into effect six years ago.

    This is not the first time China has targeted foreign firms for misusing their market dominance to overcharge consumers. Mead Johnson Nutrition Co., Danone SA, Nestle and three other milk formula makers were ordered to pay a combined fine of 670 million yuan (US$108 million) last year for setting unfairly high prices using their market dominance. Authorities are currently probing Microsoft Corp. and a string of carmakers.

    This time, foreign automakers have been quick to announce price cuts on new cars and components, apparently hoping to avoid huge penalties. Last year, baby formula makers Wyeth, Beingmate and Meiji were spared fines because they cooperated with investigators and took early action by lowering prices.

    For many years, Chinese car buyers and owners have had to pay significantly higher prices than their overseas counterparts when purchasing foreign-brand cars, components and maintenance service. Sales networks and prices of auto parts are strictly controlled by automakers, creating a noncompetitive market that forces car owners to pay exorbitant prices. For example, if you were to buy all the components necessary to assemble a Mercedes-Benz C-class model, all the parts needed would cost the same as 12 new cars. For a Toyota Camry, the price for all needed components equals the cost of five new Camrys. One study found that for more than 60 percent of carmakers, the cost of a car’s components is more than triple the price of a new car.

    Given the fact that carmakers dictate the prices of auto parts and services in a non-competitive manner, the price cuts announced by Honda, Audi and others should not be the end of NDRC’s investigation. Rather, the watchdog should come up with a reform package that will bring efficient competition to the auto service market.

    China is decades behind the U.S. Government’s antitrust campaigns, and there is still much to be done to rein in corporate overlords.

    Consumers nationwide have no choice but to use iodine-added salt, despite the fact that residents in coastal regions should guard against excessive iodine intake. Expressway operators charge tolls that are much higher than many other countries. Most gas stations are owned by only three major oil companies and licenses for opening a new one are off-limits to private companies unless they are willing to pay tens of millions of yuan through an under-the-table deal to acquire a license. Chinese netizens have to pay higher prices for Internet connections than in many other countries, but for lower speeds. The list goes on and on if you carefully think about the goods and services that give you no or few choices at unreasonable prices.

    The NDRC’s crackdown on monopolistic foreign firms should be applauded, but it should widen its net if the campaign is to take hold and bring sweeping changes. State-owned behemoths should be brought under the same level of scrutiny as foreign players.

    In 2011, the NDRC announced an anti-monopoly investigation into China Telecom and China Unicom’s broadband connection operations. Media reports at that time suggested the two telecom carriers faced hefty fines of billions of yuan if they were found to have broken the country’s anti-monopoly law in setting unfairly high prices for broadband access. However, three years have passed, and the NDRC has not released its findings.

    China’s ongoing reforms, if they are to revitalize a slowing economy by deregulation and breaking up monopolies and oligopolies, are bound to threaten the interest of corporate giants who have amassed huge wealth under the umbrella of the State at the expense of consumers and the private sector. Premier Li Keqiang has promised to remove unjustified privilege from established interests as China implements further reforms.

    Hopefully, the ongoing crackdown on misbehaviors by foreign firms is just part of a wider campaign to liberalize the economy and boost competition.

    (The author is head of the Shenzhen Daily News Desk.)