Probe into Foxconn, arrests rattle foreign companies in China

Regulators conducting tax audits on major iPhone maker and reviewing its land use

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SHANGHAI The Chinese authorities are again shaking the confidence of foreign companies in the country with a series of arrests and an investigation into Foxconn Technology Group, Apple's most important partner and one of the largest employers in China.

At the weekend, the state media said regulators were conducting tax audits and reviewing land use by Foxconn, the Taiwanese company that makes the vast majority of iPhones at factories in China. Hon Hai Precision Industry, Foxconn's main listed arm, said it would collaborate with the authorities.

Meanwhile, an executive and two former employees of WPP, one of the world's biggest advertising companies, have been arrested in China, people familiar with the matter said. Also, the government detained a local employee of a Japanese metals trading company in March, the Nikkei newspaper reported on Sunday. And earlier in October, a court formally charged an employee of Astellas Pharma on suspicion of espionage.

Shares of Hon Hai fell the most in more than three months on Monday. Foxconn Industrial Internet Company, a major Shanghai-listed subsidiary, breached its 10 per cent daily limit on the way down - its biggest loss on record.

China often does not explain publicly the actions taken by its regulators, leaving companies with operations in the country guessing at the ultimate goals of the government. Given the Communist Party of China's immense power, this opaque approach to oversight of the economy has unsettled foreign executives.