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Vol. 1, No. 5 - April 25, 2014
Inside This Issue RCCPB News
Maoming PX Plant Protests Not Post-Material Giles to Speak on Migration and Rural Families
Glaxo Marketing Changes Motivated by Market Access Fears RCCPB Recruiting Communications Manager
Providing Sea Water to Beijing a Waste of Resources Cunningham to Deliver Talk on CO2 Emissions
Wal-Mart Most Responsible for Ensuring Product Quality
Go Figure!: China's Antidumping Penalties Relatively Low  
 
 
Maoming PX Plant Protests Not Post-Material

Summary
     
Our Opinion
     

On March 30 in Maoming, Guangdong, crowds of protesters turned up in front of government offices with banners calling for a halt in the construction of a planned paraxylene (PX) plant to be built near local homes. In recent years, many in China have begun to express concern about the impact of the production of PX, a chemical used in plastic fibers and bottles, on local health and environment. The Maoming government's eagerness to prioritize the development of the factory led to large-scale protests that appear to have spread to neighboring cities.

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Topics:
Environment
Protests

 

Recent large-scale protests originating in and around Guangdong Province’s Maoming City against plans to build a chemical factory raise at least as many questions about social unrest and repressive state responses in China as they answer. Are such episodes on the rise? Eruptions of violence such as this (including similarly well-publicized protests in Taishi and Wukan) are often used to support unsubstantiated, flippant media and scholarly claims about “growing unrest” in China. We actually have no reliable, systematic information about the frequency and character of protests in China. Do anti-pollution protests reflect strengthening environmental consciousness? Even if protests are framed in seemingly universal, post-material (environmental) terms, research suggests that Chinese protesters are often motivated by material concerns, most notably their home property values. Because protesters can be placated (temporarily, at least) by economic compensation, government leaders have learned to respond to protest with material concessions, leading to what one scholar has termed the pollution “compensation trap.” Finally, are environmental protests really the spontaneous manifestations of popular discontent that they appear to be? Research on the subject suggests that behind the appearance of unorganized mass mobilization are savvy, well-connected protest leaders with allies in the government and media—what another scholar has dubbed “embedded activism.” For these reasons, even if objective conditions comparable to those in Maoming are widespread across China, we should expect them only rarely to escalate to full-blown protest and violent repression.

em


Ethan Michelson
Senior Associate & Associate Professor
Departments of Sociology, EALC &
The Maurer School of Law
Indiana University Bloomington
emichels@indiana.edu

 
Glaxo Marketing Changes Motivated by Market Access Fears

Summary
     
Our Opinion
     

GlaxoSmithKline Plc. fired workers and withheld bonuses in China after an ongoing corruption investigation spurred a deep review of employee expense claims. The firings came amid a highly publicized global push by Glaxo to improve its reputation by changing the way that it markets drugs. In July of 2013, Chinese authorities alleged that Glaxo sales staff bribed doctors, hospitals, and officials. The company said in December 2013 that it is changing the way that it compensates salespeople and pledged to stop paying doctors for giving speeches and attending medical meetings.

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Topics:
Corruption
• Multinationals

 

Glaxo’s changes in marketing practices will indeed hurt their short-term Chinese sales revenues. But the concern over imminent lost sales misses the bigger issue of retaining access to this enormous market. Glaxo had no choice but to take this action to ensure sales opportunities over the long haul. The Chinese health care market is expanding rapidly. China’s aging population, diseases of affluence and polluted natural environment all drive greater demand for health care. Government officials publicly support greater access to health care. Glaxo simply can’t afford exclusion from this market. During his visit to Indiana University, the Governor of Zhejiang province spoke extensively about opportunities for US-China cooperation to increase health care services to the Chinese people. China’s government is conspicuously cracking down on corruption in government agencies, state-owned-enterprises and industrial sectors including health care. Glaxo’s action sends a strong signal to its employees, the Chinese government, and most importantly to its customers - Chinese physicians and other product adoption gatekeepers - that Glaxo is serious about following ethical sales practices. The challenge of educating physicians and other potential adopters of pharmaceuticals, devices, and diagnostics is unique to neither Glaxo nor China. It is a worldwide issue. Many countries now mandate greater transparency. The quid-pro-quos, real or perceived, that were customary for decades between sellers and their customers are now verboten. Sellers and buyers need to find new ways to educate and learn.

mt


Mohan Tatikonda
Senior Associate &
Professor of Operations Management
Kelley School of Business
Indiana University
tatikond@indiana.edu

 
Providing Sea Water to Beijing a Waste of Resources

Summary
     
Our Opinion
     

A planned coastal desalination plant to be located in Tangshan, east of Beijing, could provide as much as one-third of the capital's drinking water by 2019, according to officials quoted in state news media. The government and SOEs are said to have invested heavily in desalination projects to help address northern China's ongoing water shortages.

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Topics:
Environment
Water

 

The fact that the government is expanding desalination plants to supply Beijing shows how severe the water crisis in northern China has become. Making seawater drinkable is phenomenally expensive, so desalination is mostly used by rich, dry countries that have no other choice like Saudi Arabia and Israel. What makes desalination attractive to China is not geography or wealth but politics. Three policy changes could increase Beijing's water security at much less cost than new desalination plants. First, the government could charge more for water. Prices are kept artificially low to keep urban dwellers, farmers, and factories that use water happy. Increasing the amount that users pay for water (at least beyond what is reasonably needed for personal usage) would encourage homes and businesses to increase efficiency. Second, the government could redouble its efforts to clean the country's rivers and lakes, nearly all of which are polluted. Third, the government could accelerate the phase-down of coal mining, which accounts for nearly 20 percent of the country's total water consumption. Indeed, because desalination is so energy intensive, it could actually exacerbate the problem by maintaining demand for water-intensive coal-fired power. In sum, powerful stakeholders and interest groups block the policies that could really fix northern China's water problem. Desalination is an expensive, short-term solution, a drop in the ocean.

TH


Thomas Hale
Global Governance Initiative Scholar &
Postdoctoral Research Fellow
Blavatnik School of Government
Oxford University
Thomas.hale@bsg.ox.ac.uk

 
Wal-Mart Most Responsible for Ensuring Product Quality

Summary
     
Our Opinion
     

In  the past three years, the Chinese government has fined Wal-Mart $9.8 million for misleading pricing and poor quality products. Now, Wal-Mart is retaliating by publicly rebutting the Chinese authorities accusations, saying that manufacturers should be just as responsible for quality control and complaining of uneven enforcement.

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Topics:
Multinationals
Foreign Investments

 

Other companies like Mattel and Nike have also faced criticism and initiated discussions about what level of responsibility multinational firms should take for product quality. This situation has shocked Wal-Mart because their operations have historically centered on the US, a mature market with government responsibility for handling quality control of products. Moving overseas, the company has entered into new business environments where governments may not occupy as strong a in role guaranteeing product quality. Wal-Mart must take steps - like Nike and Mattel - to shoulder more responsibility for product quality.

Wal-Mart’s international operations have not been as successful as its domestic business. It has had problems in Europe, India, and China. The business model that Wal-Mart uses abroad basically attempts to replicate their US model. Wal-Mart has hit a wall in other countries and I think that one of the main reasons is that it does not study the local environment enough. The company needs to adopt a more proactive approach towards international business environments.

It is true that the Chinese government should take responsibility for monitoring product quality, like the US government does domestically. But the reality is that China's weak legal system makes it challenging for the government to go after each producer of sub-par products. It is understandable that Wal-Mart would complain about this issue after all of the fines that they have received. However, I believe that responsibility for quality control should be shared and that this is actually a good opportunity for Wal-Mart to involve itself in shaping the business and quality-control environments in China.

dl

Li Dan
Senior Associate &
Associate Professor of International Business
Kelley School of Business
Indiana University
lid@indiana.edu

 
 
GF
China's Antidumping Penalties Relatively Low
IPChart
         
China uses a variety of tariff and non-tariff barriers to protect domestic industry. China has become one of the most active users of antidumping measures, launching around 200 cases since 1999. The data shows that the Ministry of Commerce has instituted penalties in 80% of the cases, a high "success rate" for the domestic applicants in comparative perspective, second only to India. However, the average tariff penalties from Chinese cases is low compared to every other major user of antidumping, including being on average only one-third the level of US penalties. And it is the actual tariff penalty, not the success rate, that is more important in determining how substantial such tools are to keeping out "unfair" foreign competition.    
wq

Yesola Kweon
RCCPB Research Assistant &
Ph.D. Student
Political Science
yeskweon@indiana.edu


This is the final issue for Spring 2014. Two special Summer issues are planned for June and July of this year.
 
Previous Issues
Vol. 1, No. 5 - 04/25/14
Vol. 1, No. 4 - 04/11/14
Vol. 1, No. 3 - 03/14/14
Vol. 1, No. 2 - 02/28/14
Vol. 1, No. 1 - 02/12/14

   
     
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