June 26, 2006

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China is busy considering an anti-monopoly law as another mark in its evolution towards a market economy. One can overlook the irony of a nominally Communist country introducing such a law. One can marvel at the differences between China's opening economy and its closed political monopoly. The article says:

"The aim of the law is to protect fair competition, prevent and check monopolistic behavior and maintain an orderly market place," Xinhua News Agency said of the draft law Saturday.

The draft law bans monopolistic agreements such as price-fixing and other forms of collusion, while providing guidelines on investigating and prosecuting monopolistic practices.

Meanwhile, supposed laissez-faire and free-wheeling Hong Kong has no such law despite cartels in everything from petrol retailing to supermarkets to property.

posted by Simon on 06.26.06 at 08:55 AM in the China economy category.


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Unfortunately there are many who think Hong Kong has no place for any anti-monopoly legislation precisely because HK is supposed to be laissez-faire.

The editorial in the lastest issue of Next Mag cites a research claiming that the profit margins of local supermarket chains are 'only' 6%; it goes on to say that if the chains really are a monopoly or an oligopoly, the margins wouldn't be so low. Therefore, it says, monopolies don't really exist in HK and so the anti-monopoly legislation's proposal is only for gaining political points, blah blah blah.

posted by: spacehunt on 06.26.06 at 12:29 PM [permalink]

I would recommend the editor of Next Magazine to read "Land and the Ruling Class in Hong Kong", which may let him look at the issue from a different perspective.

posted by: Alice Poon on 06.28.06 at 07:43 AM [permalink]

Technically anti-monopoly laws are not laissez faire. Many people confuse Laissez Faire with government mandated competitive markets. Laissez Faire means the government should leave the market alone and let it find its own structure. If cartels, oligopolies or monopolies develop it is because that is the best way for the market to deliver the goods that people want most efficiently. Also, they claim that monopoly profits etc could not persist for long because in a level playing field without barriers to entry someone would come in and compete if the profit margins were high enough.

I am not debating whether government anti-monopoly laws are or are not justified. Just saying they are not consistent with the principal of Laissez Faire. So PRC's use of them does not make the PRC more Laissez Faire than Hong Kong.

I am also not saying that Hong Kong is necessarily as Laissez Faire as is commonly thought. It can be debated that the HK Government creates the barriers to entry that allows to cartels to persist.

Finally, just because the PRC has a law against it doesn't mean much in a country that does not recognize the "rule of law". One owner, the Chinese Communist Party is still the largest owner of business in the PRC. Those they don't own are still not really "free market" in that the government can, and often does, use its regulatory powers to direct private businesses activities. Theoretically, it is "private property" as long as you stay within the bands of use the government wishes. For example, if a private owner of a factory wanted to shut it down and lay off 1000 workers and start a parking garage with 10 workers may find someone from the PRC government "there to help" them change their mind.

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