The Chinese authorities are once again taking moves that can be described as measures within the framework of the concept of unfriendly attitude towards business, having launched an investigation into the activities of Taiwan-based Foxconn Technology Group, one of Apple’s main partners and one of the largest employers in this country.
Last weekend, Chinese state media reported that local regulators were conducting tax audits against the said manufacturer of electronics and computer components. Beijing is also studying Foxconn’s actions regarding land use practices. This brand manufactures most of the iPhone smartphones in factories located in China.
The company Hon Hai Precision Industry, unit Foxconn, announced its intention to cooperate with the authorities in the investigation. The stock price of this firm on Monday, October 23 showed the largest drop in more than three months amid news about Beijing’s actions against Foxconn.
Foxconn Industrial Internet, a large subsidiary registered in Shanghai, has plunged its daily limit by 10%, which is the biggest loss in the history of its existence. At the same time, the share price of Luxshare Precision Industry, a competitor of the Taiwanese manufacturer, increased by 4.9%.
Beijing adheres to the position that the authorities are not obliged to explain certain of their actions in the public space. This approach is actively applied by the Chinese leadership in cases where investigations of companies’ activities are conducted.
Alicia Garcia Herrero, chief economist of Natixis SA for the Asia-Pacific region, believes that the core of power based in Beijing is really concerned about external influence since there is currently a tendency among the elites to spread disagreement with the valid doctrine of the functioning of the state. According to the expert, the investigation of foreign business is a signal addressed to the elites and hinting to them that they should not follow the path that this group of persons perceives as a more correct alternative to the official political course of the authorities.
The media, citing insiders, report that inspections are currently being carried out against Foxconn subsidiaries in the provinces of Guangdong and Jiangsu. Also, according to insider information, natural resources officials are studying the company’s use of land in Henan and Hubei provinces.
This is not the first case of Beijing’s excessive attention to business. In March, searches were conducted at the local office of the American law firm Mintz Group in Beijing and five of its employees were detained. In April, employees of the Shanghai office of Bain & Co., based in the United States, were questioned.
As we have reported earlier, China’s Central Bank Calls On Financial Sector to Help Fund Technology Research.