The State Administration for Industry and Commerce (SAIC) in China has raided Microsoft Corporation (NASDAQ:MSFT) offices in Beijing, Liaoning, Fujian and Hubei. The authorities have also raided Accenture Plc (NYSE:ACN)’s office in Dalian., where Microsoft outsourced its financial work.
Microsoft Corporation (NASDAQ:MSFT) was suspected of violating Anti-Monopoly laws of China since June 2013. SAIC stated that the violation was related to the compatibility and document authenticity for Windows OS and Office software. Chris Darbyshire, CIO at 7 Investment Management, talked on CNBC about these raids by Chinese authorities.
Darbyshire said that the most important thing to understand is whether Microsoft Corporation (NASDAQ:MSFT) has broken any Chinese laws to provoke the checks at its offices. He thinks that China is conducting anti-corruption campaigns at very high levels. Darbyshire also doubts that there is a bias towards foreign companies or a kind of a tax charged on them for doing business in China. He pointed out that foreign banks in US were paying similar kind of tax for doing business.
In addition to Microsoft Corporation (NASDAQ:MSFT), similar problems were faced by companies like Audi and Mercedes-Benz in China.
“My guess is that, probably a bit of both. No smoke without fire. It is probably some pricing, which is higher than would be expected. On the other hand, I do think perhaps there is an element of teaching the foreigners a lesson. I think that is the cost of doing business in China. I don’t think these companies pulling out of China as a result of these problems,” Darbyshire added.
He thinks that China is trying to develop its society along the capitalist lines, but he feels that it is state driven/directed capitalism, which cannot be considered as true capitalism. Darbyshire added that people are very excited about markets and opportunities in China, but he feels that the future actions of Chinese government might be the most important thing to observe. He thinks that the Chinese government needs to come up with policies and install a more fair market economy.
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