Foreign and local companies in China are increasingly the targets of tax audits and other regulatory reviews, as local governments try to stabilize their finances by collecting more revenue.
The latest company to come under scrutiny is Taiwan’s Foxconn. Chinese state media outlets reported on Sunday that the company was facing investigations in four provinces.
Foxconn, one of the world’s largest manufacturers of electronics, is Apple’s main contractor for the production of everything from iPhones to MacBook laptop computers.
The Global Times, a nationalist tabloid and website owned by China’s Communist Party, said Foxconn faced tax inspections in Guangdong and Jiangsu provinces and was being investigated in Henan and Hubei provinces to determine whether He had complied with land use regulations.
Foxconn, whose full name is Hon Hai Technology Group, released a statement a few hours later saying the company would comply with its legal obligations: “Legal compliance wherever we operate around the world is strictly followed by Hon Hai Technology Group ( Foxconn) has a basic principle. “We will actively cooperate with relevant units on related work and operations.”
Last Thursday, Apple Chief Executive Tim Cook met with Jin Zhuanglong, China’s Minister of Industry and Information Technology, in Beijing. “The two sides exchanged views on Apple’s development in China, industrial chain supply chain cooperation and other issues,” the ministry later said in a statement.
In recent months, central government officials have warned local and provincial governments facing budget shortfalls not to use arbitrary fines to raise funds. Beijing is working hard to lure foreign investment to boost economic growth and maintain China’s leading role in global supply chains.
An article last Wednesday in Study Times, the official publication of the Central Party School, the Communist Party’s most elite training institution, warned that inappropriate use of fees and interference by local governments “could ultimately disrupt the business system, impairing the business environment.” may be harmed.” , and affecting business confidence.
Many local governments are facing financial difficulties due to deep uncertainty in the real estate market. Their biggest source of revenue, the sale of land leases to property developers, has dried up in all but the big cities. China Evergrande and Country Garden, two developers that have competed for national leadership over the past several years, are in trouble due to being unable to make loan payments on time.
Local governments are facing rising health care and pension costs for a growing population. The national government makes some financial transfers to these local governments, but has done little to take direct responsibility for the cost of social benefits.
Also, in an effort to reduce unemployment, Beijing has pressured local governments to increase their spending on building rail lines, highways, bridges and other infrastructure. Unemployment among Chinese in their late teens and early 20s reached record levels in the early summer, prompting the National Bureau of Statistics to stop releasing youth unemployment data.
Siyi Zhao Contributed to research.