Tongfei Kou's Blog

From “Financial Times”
Original Title: Unilever bows to Beijing pressure by putting off planned price increases
By Patti Waldmeir in Shanghai, Robin Kwong in Taipei, Alexandra Stevenson in London

Unilever, the Anglo-Dutch consumer goods group, has bowed to pressure from Beijing to delay planned price increases, highlighting a new regulatory risk in an inflationary climate.

While Chinese authorities routinely force state-owned enterprises to place the public interest ahead of commercial concerns, Unilever’s confirmation of the government’s request signals that large foreign multinationals are not immune to such pressure.

A Unilever spokeswoman in London said, “I can confirm that Unilever China received a request from the National Development and Reform Commission and has chosen to comply with it, and postpone price adjustments previously scheduled for April 1.”

Chinese consumers, increasingly alarmed at the rising cost of living, cleared supermarket shelves earlier this week of shampoos, soaps and detergents after state media said four consumer goods companies – including Unilever and Guangzhou Liby Enterprise Group – would raise prices by 5 to 15 per cent.

Alarmed by the reaction, Beijing is understood to have contacted companies to urge price restraint. China’s consumer price index rose 4.9 per cent year-on-year in February.

“When you wake up and see photos of old people rushing into supermarkets in a panic, that is a signal to government that this is a serious problem,” said Shaun Rein of China Market Research in Shanghai.

Alongside Unilever, Liby – another leading detergent producer – and Tingyi, which produces half of China’s instant noodles, agreed to delay planned price rises.

Tingyi said it acted “in alignment with the policy of the state for maintaining the stability of commodity prices”. Wei Ing-chou, chairman and chief executive, had spoken of the need to “watch which way the [political] wind blows”, when announcing the rise but, explaining the delay on Friday, the company pointed to signs that raw material prices were stabilising.

Luo Zhiping, analyst with Business Information Research, a Shanghai-based consulting firm with close ties to government, said the goal was to “prevent consumer chaos” after widespread panic-buying of salt, which was viewed as an antidote to potential radiation from Japan’s earthquake-crippled nuclear power station. By firing this shot across the bows of companies whose planned price increases were widely publicised, Beijing should be able to convince a wide range of companies to contain most prices, at least temporarily, he said.

Unilever would not say how long it would postpone the price rise.

Liby said that after being contacted, it had decided “to take the whole situation [of the market and consumer reaction] into account” and delay or even rescind price increases that had already been put in place.

From “Financial Times”
Original Title: Unilever bows to Beijing pressure by putting off planned price increases
By Patti Waldmeir in Shanghai, Robin Kwong in Taipei, Alexandra Stevenson in London