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How China's Probe of GlaxoSmithKline Could Play Out

Bribes and stealing secrets? Those words might not quite appear in the official employee handbooks of Chinese companies, but those who ignore these informal guidelines for a modern cutthroat world may find themselves out of work.

Still, the central leadership isn't happy about that, especially as they try to make health care more affordable to common Chinese, and may try to sacrifice GSK as a chicken to scare monkeys in other drug companies. Central leaders may also want to show an international audience that its laws are serious, policing effective and China not a steal for multinationals.

Scenario 3. Powerful players in China's growing, ever changing and hypercompetitive medical industry sell drugs similar to GSK's but lack the name recognition to scale up.

According to this scenario, police may have been ordered from higher-ups with friends in the medical field to make as many busts as possible.

KPMG rated the British drug producer the eighth-largest medical multinational in China in the first quarter of 2011, with $378 million in sales.

This sort of theory, common as it is, seldom bears evidence. But if this is really the case, Chinese authorities will build up their case to stick people in jail and hurt GSK's future business in China.

At the time of publication the author had no position in any of the stocks mentioned.

Ralph Jennings is on LinkedIn.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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