Should Singapore Firms Invest in China or Steer Clear?—Fair Business Practices in China?

By Epoch Times Staff

In early March, Chinese Premier Li Keqiang announced his target of a 6.5% economic growth this year. The Chinese government also aims to create 11 million new urban jobs in 2017.

Plans are in place to keep cash within the country as Chinese companies spend close to 130 billion pounds in 2016 (S$226 billion, or an increase of 44 billion pounds from 2015’s 86 billion pounds) while foreign investment into China stagnated at 92 billion pounds (S$160 billion) between 2015 and 2016.

Many foreign companies with investments in China have cited concerns over the lack of a clear regulatory and legislation system. Rules relating to contractual rights, property rights and capital controls are not transparent. (https://www.tharawat-magazine.com)

China aims to bridge this gap by easing restrictions for overseas companies to transfer funds into China, allowing more foreign firms to list in China, removing its previous requirement stipulated for registered capital amount for foreign investment firms, and more.

It remains to be seen how effective these measures will be in light of inefficient government-affiliated systems. With 635 initial public offering applications pending approval in China as at January 12, 2017, there is a long queue.


Many foreign companies with investments in China have cited concerns over the lack of a clear regulatory and legislation system. Rules relating to contractual rights, property rights and capital controls are not transparent.


The Floundering China-Singapore Suzhou Industrial Park (SIP)

A frequently cited example of a Singaporean entity’s foray into China is the China-Singapore Suzhou Industrial Park (SIP) (Donaldytong/commons.wikimedia.org)

A frequently cited example of a Singaporean entity’s foray into China is the China-Singapore Suzhou Industrial Park (SIP), which was started by Singapore’s Ministry of National Development in 1994.


Initially, the SIP was 65% owned by Singapore and the deal was brokered between both the Singapore government and the central government in Beijing. While undergoing construction, the Suzhou government started its own replica of Singapore’s SIP by constructing Suzhou New District Industrial Park (SND), which was situated beside SIP.

Singapore had attempted to keep its park the only marketable development for Suzhou by asking the Suzhou government to suspend its promotional efforts on SND, but that failed.

Losses of USD90 million (S$126 million) were incurred across five years. Eventually, Singapore cut its losses by lowering its holding to 35%. Suzhou government officials were incentivised to earn a promotion and that drove them to build a replica of SIP.


As New York Times pointed out in an article entitled ‘Singapore Industrial Park Flounders: A Deal Sours in China’, the late Mr Lee Kuan Yew, Singapore’s first Prime Minister of Singapore and one of the masterminds behind SIP, admitted that the project was far from a success. This unanticipated experience had made him more prudent about investments in China.


The Singapore government is not the lone victim.

Uber had most recently left China by selling its US$8 billion (S$11 billion) business to competitor Didi Chuxing following the Chinese government’s new ruling to legalise ride sharing. Uber had spent three years in China trying to enlarge its market share from Didi.

However, following the exit of Uber, provincial governments in metropolises such as Beijing are contemplating policies that would only allow local residents to drive for ride-sharing applications. This could be a hindrance to Didi as many of their drivers have failed to obtain taxi licences with provincial governments due to the long queue, fees required by regulators, as well as failure to comply with quality requirements. Moreover, Didi relies on many out-of-town drivers, who have flocked to the metropolises to earn a living.

The Feasibility of Xi’s Anti-Corruption Campaign

With Xi Jinping and his administration’s anti-corruption campaign in full swing, together with his proposal to lay off inefficient government agencies, it seems plausible that the clean-up will impact many levels of the country.

However, Xi’s anti-corruption campaign can only solve problems on the surface if he does not eradicate the root causes of the disease. China’s lack of a clear regulatory and legislation system and its serious economic inequalities have ensued from its one-party policy.

However, Xi’s anti-corruption campaign can only solve problems on the surface if he does not eradicate the root causes of the disease. China’s lack of a clear regulatory and legislation system and its serious economic inequalities have ensued from its one-party policy. (http://www.asiaobserver.org/)

The trappings of a modern consumerist society do not change the essence of the Chinese Communist Party (CCP) – to maintain absolute control of society and the economy, in line with textbook Marxist teachings, the Party is the only true landowner in China; the Party leases land to the Chinese people.


Zhang Kaichen, a defector from the CCP and a former chief propagandist in the northeastern city of Shenyang, told Epoch Times that the CCP is nothing more than a sinister mafia that seeks to expand its own power.

To keep a firm grip on Chinese society, CCP officials or family members will continue to hold power in key business institutions and own several key industries. In fact, though state-owned enterprises merely make up only three percent of all companies in China, they produce an estimated 25 to 30 percent of the total industrial output.

As a result, CCP officials and their ‘princelings’, as well as those affiliated with CCP, reap the most of the profits and become extremely rich.

For instance, China’s ‘Telecommunications King’, Jiang Mianheng, exerts dominance over the telecommunications industry, simply because he is the son of former Party leader Jiang Zemin. And as revealed in the case of JPMorgan, the bank’s hiring of princelings to win business in China was dubbed ‘Sons and Daughters’, the name of a well-devised programme; it has been called “bribery by another name” by assistant attorney-general Leslie Caldwell, according to a Financial Times article.

To top it off, private businessmen are often gotten rid of by the CCP once their wealth reaches a certain level. Many Chinese businessmen join the Communist Party to protect themselves and gain business advantages, and many top Chinese businessmen are Communist Party members.

In order to thrive in this system, CCP and its members will strive to accumulate more wealth and tighten control, hence intensifying the crisis.

After two decades, it is evident that trading with communist China does not lead to an improvement in human rights nor democratic reform. As ‘Nine Commentaries of the Communist Party’ states: “The fairness and transparency of Western societies are replaced by nepotism, bribery and embezzlement in China.” 


As such, an implementation of fair business practices in China is possibly infeasible without ousting communism and transiting to a society free from the Communist Party.


 

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