In the news: The CFDA faces a brain drain, Tencent considers buying 'Clash of Clans' maker Supercell and the government pledges manufacturing support
May 25, 2016 | BY
Katherine JoThis week senior food & drug officials' moves to the private sector were discussed, Tencent engaged in talks to acquire a Finnish gaming company and China issued policies to encourage innovation, industries and projects
Officials at the China Food and Drug Administration (CFDA) are reportedly being lured to the private sector by higher salaries and greater work freedom: A former CFDA section chief spoke to Reuters of a “brain drain” where senior staff eventually move on to drug companies that provide more than Rmb600,000 ($92,000) a year, in contrast to being paid Rmb120,000 at the regulator. Areas including drug supervision and front-line enforcement in particular were reportedly hard hit. Those with regulatory experience are increasingly in demand at multinational pharmaceutical companies, local drugmakers, consultancies and investment firms. The CFDA has been dealing with a backlog in drug registrations—the slow approval process for which China is already notorious—for quite some time and has been making efforts to keep up with the industry, such as by hiring more staff and benchmarking standards of mature jurisdictions, according to Eli Lilly China's general counsel. The drain isn't unique to the drug industry. Many PRC court judges move into private practice, and a number of leading antitrust partners at law firms in China are ex-MOFCOM [Ministry of Commerce], for instance.
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China's Tencent is in talks to acquire a majority stake in Finnish game-maker Supercell from Japan's SoftBank, which owns 73%. Supercell is the maker of top-grossing battle game “Clash of Clans.” Tencent completed a buyout of Riot Games, which produces “League of Legends”—one of the most popular multiplayer online games in the world—just last year, as well as stakes in smaller mobile-game makers Pocket Gems and Glu Mobile. Tencent also owns a stake in Activision Blizzard, which produces the first-person shooter game “Call of Duty” and fantasy role-playing “World of Warcraft” series. Supercell is already well known in China—its “Clash Royale” was the only foreign-published title among the 10 top-grossing mobile games in China last month, according to research firm Newzoo. This would further allow Tencent, the world's largest gaming company, to further consolidate its dominant position on its home turf. The February regulations confirmed that all online publishers, including those of games, need a license and that foreign ownership of any kind in these services is restricted. It will be interesting to see how the lucrative online gaming market will be further regulated, and whether foreign game-makers will eventually be able to get a piece of the pie. The China Internet Network Information Center (CNNIC) reported that 620 million people log on to the web through mobile phones as of the end of 2015.
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The PRC government has pledged to support the country's manufacturing sector as policymakers try to stabilize and restructure the economy. Plans were released to encourage technological innovation and fund 10 major manufacturing projects. China also announced supportive policies for certain industries, including ship-building, advanced equipment and general aviation. Xinhua's Economic Information Daily reported that more plans that focus on software and IT, big data, new materials and energy-efficient and environmentally friendly industries will be released this year. Rising labor costs and shrinking export demands have put a strain on companies and factories in China—industrial hubs like Guangdong have faced a number of downsizings and shutdowns in the past two years. This has prompted the government to take a more pro-corporate approach, such as by lowering enterprises' insurance costs. But the broader economic reform will see many workers losing out amid the transition from low to high-end manufacturing. One employment practitioner told China Law & Practice: “I don't know if the provincial government has been able to create enough jobs…most of these workers have a high school education and switching them over to a service or high-end sector overnight would be unrealistic.”
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