China could target oil firms, telecoms, banks in price probes: report

China could target oil firms, telecoms, banks in price probes: report

6:29am EDT

By Kazunori Takada

BEIJING (Reuters) – China’s powerful price regulator could target the petroleum, telecommunications, banking and auto sectors next in its investigations into violations of the country’s anti-trust laws, state media quoted a senior official as saying. The National Development and Reform Commission (NDRC) would look at industries that have an impact on the lives of ordinary Chinese, China Central Television (CCTV) quoted Xu Kunlin, head of the anti-monopoly bureau at the NDRC, as saying on one of its programs. The NDRC has launched nearly 20 pricing-related probes into domestic and foreign firms in the last three years, according to official media reports and research published by law firms. But the scope of its investigations in the world’s second-biggest economy have gathered pace in recent months and coincide with criticism in official media about the price of goods such as milk powder, medicine, luxury cars and jewellery.“When you look at activities around the world, regulators tend to investigate sectors where their investigations can have a direct impact on consumers and that will look good,” said Sebastien Evrard, Beijing-based partner at law firm Jones Day, which specializes in anti-trust law.

Last week the NDRC fined six milk powder firms for anti-competitive behavior. It is also investigating 60 foreign and local pharmaceutical companies over pricing and costs.

Companies in the petroleum, telecommunications, banking and auto sectors were on the NDRC’s radar for future investigations, CCTV’s official blog quoted Xu as saying.

Xu gave a hypothetical example, saying that if banks fixed deposit or lending rates if and when China liberalized its interest rate regime, such behavior could prompt an investigation.

CCTV gave no other details and NDRC officials could not be reached for comment.

China has been taking incremental steps towards liberalizing interest rates. Last month the central bank removed controls on bank lending rates, giving commercial banks the freedom to compete for borrowers.

Evrard said that while telecoms companies and fuel prices were often the target of regulators around the world, they would not be obvious choices in China because of the involvement of state-owned companies.

State-owned majors PetroChina, Sinopec Corp and CNOOC Ltd dominate China’s oil and gas industry, both upstream and downstream.

Domestic fuel prices are also set by the NDRC.

The country’s three biggest telecom firms – China Unicom Ltd, China Mobile Ltd and China Telecom Corp Ltd – are state-owned.

Similarly, the top four banks are controlled by the state.

The China Automobile Dealers Association told Reuters earlier this week that its officials were collecting data on the price of all foreign cars sold in the country for the NDRC.[ID:nL4N0GE3QQ]

The State Administration for Industry and Commerce (SAIC), a regulator in charge of market supervision, kicked off a separate three-month investigation into bribery in the pharmaceutical and medical services sector on Thursday.

Foreign executives and bankers in China say the various investigations are a hot topic of discussion but many are still puzzled by the motivation behind the probes and whether they will impact their business.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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