How a Starbucks Latte Shows China Doesn’t Understand Capitalism

Criticism of the prices charged Chinese consumers by international companies is an unseemly interference in the free market

It will come as no surprise that some Chinese believe Starbucks coffee is a bit too expensive. After all, we do pay a pretty penny for a cup of water and milk. But are Starbucks’ prices something bordering on criminal? Chinese state media seems to think so. In a series of attacks, the press has accused Starbucks of overcharging Chinese with “outrageous” prices compared to those paid by consumers in the U.S. and elsewhere.

(People line up to buy coffee during a Starbucks Coffee shop opening ceremony on Mar. 1, 2013 in Taiyuan, China)

The coffee-shop chain, however, is only the latest victim of an apparent campaign aimed at forcing down the prices of foreign goods in China. The government is investigating the price tags on foreign automobiles, while in August several foreign companies were fined for supposedly selling their milk powder at unfairly high prices. Nestle and Danone pledged to slash their prices amid the enquiry.

What gives? We can only speculate as to the government’s intentions. Perhaps officials are trying to uncover real infractions, or what they think are real infractions. Or perhaps the campaign is an attempt to beat back foreign brands and give China’s own companies a leg up in the local market.

Foreign brands are favored by Chinese consumers in many industries, since there is a perception they are of higher quality. In milk powder, for instance, foreign labels have had a huge advantage ever since local brands were tainted by a 2008 scandal in which they sickened children with milk contaminated by a chemical. Perhaps the government is irritated that foreign firms are making some juicy profits off Chinese consumers.

Read more: http://business.time.com/2013/10/24/how-a-starbucks-latte-shows-china-doesnt-understand-capitalism/#ixzz2ijE7Pzmy