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The Cost of Doing Business in China: The Coca-Cola Company (KO), Caterpillar Inc. (CAT), Alcoa Inc (AA)

Once, it’s a fluke. Twice, it’s a coincidence. Three times, it’s a trend.

Three stocks that make up the Dow Jones Industrial Average 2 Minute (Dow Jones Indices:.DJI) have all publicly been at odds with the Chinese government in the past few months. The most recent was The Coca-Cola Company (NYSE:KO) with an odd GPS law, while Caterpillar Inc. (NYSE:CAT) purchased and then wrote off what now seems to have been a fictional company, and Alcoa Inc (NYSE:AA), which competes with government-owned aluminum producers, is now sort of a partner with the Chinese government.

Let’s take a closer look.

The backstories
This past week, Chinese authorities announced they they were investigating The Coca-Cola Company (NYSE:KO) employees for the improper use of GPS devices. The Chinese government keeps tight control on the use of this technology for reasons of “national security.” The Coca-Cola Company (NYSE:KO) uses GPS devices in their delivery trucks in an effort to increase efficiencies, and company officials are cooperating with Chinese authorities.

Last year, The Coca-Cola Company (NYSE:KO) controlled 16.6% of the soft-drink market in China, down from 17% the year before. Increasing efficiencies is likely a way for Coke to continue to pad the bottom line, even though market share is declining.

In late January, Caterpillar Inc. (NYSE:CAT) announced that it would be taking an $850 million write off because it found that a Chinese company it had purchased for just more than $650 million had fraudulently reported higher revenues in their books. Caterpillar Inc. (NYSE:CAT) said this fraud was a multiyear scheme that the Chinese company deliberately manufactured. The company produced and sold mining equipment, which is what caused Caterpillar Inc. (NYSE:CAT) to become interested in the organization in the first place, but apparently it wasn’t making quite the amount it reported.

And finally, we have Alcoa Inc (NYSE:AA). It started with the steel industry, and now it seems that have moved to aluminum: U.S. steel manufacturers have been bounded over the past 10 to 20 years, as Chinese companies dump cheap product on the markets. The price of steel fell to a price in which the U.S. producers could no longer compete, dramatically hurting the steel industry here at home.

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