China cracks down on Unilever...for daring to raise prices.

On May 6, the Chinese Government declared it will fine Unilever RMB 2 million (US$ 308,000) for announcing in the media its intention to raise prices on a range of its consumer products. Apparently this had led to hoarding.

The National Development and Reform Commission, China’s top economic planning agency, said in a statement sales on some products surged 100 times above "normal" levels. The government has stamped its authority to control inflation as a top priority and the central bank stated on May 3 “stabilizing prices and managing inflation expectations are critical.”

The NDRC reminded China’s Price Law disallows operators from fabricating and distributing information about price increases, raising prices collectively and pushing up prices excessively. Consumer prices in China jumped 5.4% in March, the biggest increase in 32 months, exceeding the government’s 4% full-year target every month this year.

It's interesting how Unilever could respond to this in the long term as it also confronts the rising trend of commodity price. Shackled by pricing constraints, it may have to put the China business model under the microscope. To stay competitive and serve this growing market, does it need to evaluate and source from another low-cost manufacturing location within SE Asia or India? Capped and/or diminishing profit margins are not the basis of sound sustainable businesses.