Cultural Revolution 2: PRC Targets Apple, Mercedes-Benz

♠ Posted by Emmanuel in ,, at 8/07/2014 01:30:00 AM
Begone ye foul capitalist roaders; the second Cultural Revolution has begun.
I have written a lot--far too much for my tastes--about recent Communist Party efforts to wean the PRC off foreign products and services as if the country never opened up to the rest of the world [1, 2, 3]. However, this juggernaut keeps rolling on. After all, with all and sundry multinationals having set up shop in China as the ultimate emerging market, there is no shortage of them to bash for the next hundred years or so. On today's hit list are (surprise!) another American tech firm. For variety, though, also on the menu is German automaker Mercedes-Benz.

I. Despite nearly all their stuff being made in the PRC--nearly everything they sell says "Designed in California...Assembled in China"--Apple has reportedly been blacklisted from government procurement as well:
China’s government excluded Apple Inc. iPads and MacBook laptops from the list of products that can be bought with public money because of security concerns, according to government officials familiar with the matter...

Apple is the latest U.S. technology company to be excluded from Chinese government purchases amid escalating tensions between the countries over claims of hacking and cyberspying. China’s procurement agency told departments to stop buying antivirus software from Symantec Corp. and Kaspersky Lab, while Microsoft Corp. was shut out of a government purchase of energy-efficient computers...

Apple depended on Greater China for about 16 percent of its $37.4 billion in revenue last quarter, according to data compiled by Bloomberg. IPad sales in the world’s biggest market increased by 51 percent and Mac sales by 39 percent, Chief Executive Officer Tim Cook said July 23.
Unlike Norton and Kaspersky, I venture that Apple does not have much to worry about insofar as their sales to apparatchiks for official use are minimal. What's more, their reliance on government purchases which have to be legitimate is likely lower since pirated hardware is much less salable to Jian Q. Public than commonly pirated software. Still, it's ironic that they would so willingly bash China-made goods for being a security threat since it implies Apple is doing the American government's bidding by installing spying apparatus right in their own backyard. It makes China look dumb, doesn't it?

II. The more novel move here is hitting Mercedes-Benz with an antitrust suit. Why would M-B be considered a monopolist when virtually all of the world's car brands are now represented in the PRC? It goes back to a nice "captive market" luxury car marques have all to themselves and abuse with impunity as owners of these cars will attest: incredibly costly car parts, Apparently, Mercedes-Benz was hit by an unannounced raid:
Foreign auto makers came under new pressure in China on Tuesday, with Daimler AG DAI.XE -2.38% saying it is assisting Chinese authorities in an investigation into the car maker's Mercedes-Benz brand and Chrysler unveiling wide-ranging price cuts on some of its cars and spare parts. Chrysler said its move is a "proactive response" to an antitrust probe. The investigation into Daimler comes after efforts by the German auto maker to appease regulators with price cuts on spare parts two days earlier. A Daimler spokesman couldn't be reached for comment Tuesday on the company's pricing policy in China...

Foreign luxury-auto makers have been facing mounting pressure in what has been a lucrative market. China's state media have accused auto makers of earning exorbitant profits in China by dominating the market, overcharging consumers and controlling auto-parts sales. In recent weeks, Chinese regulators have increased scrutiny of the industry, people familiar with the matter have said. On Sunday, Daimler said it would reduce prices on average by 15% for aftermarket auto parts to address Beijing's concerns about anticompetitive behavior in the domestic auto industry. It followed a similar move by VW's Audi the week before, and that of Tata's Jaguar Land Rover brand for a few models.
This action I am more sympathetic to. Maybe some Communist Party bigwig's S-Class broke down overheating in Beijing traffic and he was outraged by Mercedes-Benz spare parts pricing that the rest of the world knows is a ripoff. He then called his ol' buddy Xi Jingping to strong-arm, I mean, mount an antitrust investigation into German automakers' monopolistic practices. Now, if they could only down the prices of spare parts worldwide I'd be so appreciative.

Anyway, to the Cultural Revolution analogy. We are witnessing the following actions which mirror those that occurred during the cultural revolution:

1. Purification of thought from malign foreign influences;
2. Leadership purges;
3. Adversarial relations with neighbors (India/Russia then, Japan/assorted SE Asia now)

It's all part of a cleansing process to restore the ideological purity of the Communist revolution. Sure it's backward-looking and "corruption" is in the eye of the beholder, but that it isn't over yet is clear.

Dumb capitalist roaders apparently don't know what hit them as China turns back the clock to 1966. Having gained Western know-how, the Chinese leadership probably believes their country is now rich and smart enough to turn the screws on the West. It's payback time for indignities the West foisted onto China.