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Dealing with Multinationals
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Zhao Jinping


The role of multinationals in China's development has become an increasingly pressing issue in recent years.


The economic and social behavior of transnational companies is judged on three main issues.


Firstly, whether these companies obey the laws and regulations of the host country. This is a basic rule, necessitating a bottom line the companies must adhere to.


So far, most of the more than 200,000 foreign-invested enterprises in China have honored the laws and regulations. But there are also some enterprises that elude taxation, cause pollution, disregard the rights of laborers and residents, manipulate the real estate and capital markets and use dishonest and unfair competitive practices.


Secondly, how far the companies pursue the localization of their business operations. This is an important criterion for measuring their contribution to the local economy. Generally foreign companies have made great progress in localization, which has promoted the upgrading of China's economic structure, advanced the use of technology and helped spur the accumulation of capital.


It helps improve Chinese products' competitiveness and plays an important role in aiding the country's economic reforms. But different enterprises have different levels of localization.


Thirdly, whether these companies actively shoulder social responsibilities. Enterprises' social responsibility mainly means foreign enterprises should approach their relationships with domestic companies and other groups in a responsible way. It is not simply a negation of traditional enterprise values driven by the desire to maximize profits.


It requires enterprises to be responsible for all related parties, help protect their rights and interests and drive sustainable development in economic, social and environmental fields.


Transnational corporations that perform well on these three issues play an active role in promoting the construction of a harmonious society. Their conduct provides a good example for their foreign peers and they can offer domestic companies a model for how to improve management and upgrade social responsibility awareness.


At the same time, the government also needs to enhance its responsibilities on the following aspects to guarantee a healthy environment for all enterprises.


China should further improve its legal environment. Legal means are essential to regulating enterprises' behavior, ensuring market order and protecting investors' interests. Enforcement should be enhanced to guarantee the authority of the law. Strict legal measures, in particular, should be taken to protect the environment and anti-monopoly legislation should also be improved.


The need for scientific development should be given greater emphasis.


A rational evaluation and encouragement mechanism should be built to regulate the behavior of regional governments. Some local governments' blind pursuit of economic growth has resulted in damage to the environment and land wasted this has to be stopped.


A good policy environment should be provided for enterprises, multinationals included.


Last but not least, the government needs to complete the redefinition of its functions. It needs to enhance information services and provide a better investment environment.


The author is deputy-director of Foreign Economic Studies at the State Council's Development Research Center


(China Daily March 12, 2007)


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