Chinese laws may affect new overseas business

By Simon Pitman

- Last updated on GMT

Related tags: Personal care companies, Law

Anti-monopoly laws introduced by the Chinese government have been
heralded as a foundation for a 'fair and uniform law system' for
doing business in the country, but international business groups
believe it could spell further hurdles to establishing new business
in the country.

Chinese legislators said that the new law, introduced last week, was long overdue and would do much to regulate an often ambiguous area that has seen dramatic development in recent years. The official line from the American Chamber of Commerce of China is that the move has been welcomed as a 'defining moment in the development of China's legal system'. Likewise, the move is also expected to help to denationalize a number of state run businesses, as the country's government aims to increase the size of its private sector and up efficiencies. But international business groups believe that the laws could hinder attempts by foreign companies to muscle in on future growth. Indeed, some analysts have gone as far to say that the new laws may serve as a means to protect the market from outside business in order to promote domestic players from the threat of international companies. Many believe that pivotal to this is whether or not the new laws are implemented according to model economic principles and international law practices. Traditionally China has been a difficult market for foreign investors to crack, with Chinese lawmakers stipulating that new foreign businesses must be set up in conjunction with a China-based joint venture partner in the past. This situation led to a number of challenges for foreign businesses, but the regulations have been relaxed more recently, allowing foreign businesses to set up more easily in the country. This gave international cosmetic and personal care companies the opportunity to get a footing in a market that is continuing to outpace economic growth world-wide, as annual GDP continues to increase in excess of 10 percent. The growth has been translated into a huge boom in the consumer retail sector, growth that has greatly benefited cosmetics and personal care spend, which is fuelling the development of cosmetic and personal care companies across the board In turn, this has attracted big international players to increase their investment, marketing individual products and extended product lines that are commonly available on a global basis. This has resulted in big gains for some of the world's biggest cosmetics players, raising the question of whether or the new anti-monopoly laws will continue to encourage such growth opportunities. With a recent market report from Deloitte and Touche outlining that China is still the number one destination for international businesses looking to both expand into the Asian market as well as establishing low-cost international manufacturing bases, it appears that a lot continues to rest on the implementation of these new laws.

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