MNCs in the News-2014-05-23

During a meeting with the Chairman of the International Chamber of Commerce (ICC) Harold McGraw III, Chinese Prime Minister Li Keqiang stressed China treated foreign firms “on a par with domestic ones.” Prime Minister Li also stressed China’s opposition to trade and investment protectionism and lobbied the ICC, which has helped shape China’s finance and trade regulations, to make more of an effort to take into account Chinese business voices. A Chinese commentator remarked that foreign firms should not mistakenly conclude that the investment environment has declined merely because foreign firms no longer enjoy special privileges relative to domestic ones (Zhao Shengnan, “Domestic, Foreign Companies Treated Equally, Li Says,” China Daily, May 16, 2014, http://www.chinadaily.com.cn/china/2014-05/16/content_17511145.htm)

Prior to Russian President Vladimir Putin’s visit to China, which eventually led to a host of trade, energy, and investment deals, Chinese automobile firm Great Wall provided a statement to the Hong Kong stock exchange that it planned to enter into an agreement with the Tula Oblast (south of Moscow) and Tula Oblast’ investment promotion agency, that would lead to an approximately $350 million investment in a factory with estimated capacity of 150,000 vehicles. Great Wall has been pursuing overseas expansion opportunities elsewhere such as Malaysia and Thailand, though political troubles in Thailand have disrupted Great Wall’s investment plans there (Colin Murphy, “China’s Great Wall Motor to Invest in Russia Plant,” Wall Street Journal, May 19, 2014, http://online.wsj.com/article/BT-CO-20140519-705948.html)

On May 19, the US Justice Department, in its first cyber-espionage case against state actors, formally charged five Chinese army officers with hacking into five private American companies (Westinghouse Electric, US Steel, Alcoa, Allegheny Technologies, and SolarWorld) and the US Steelworkers Union, alleging that they had stolen trade secrets and internal documents. Stolen materials allegedly include information on pricing strategy, plant component designs, legal, marketing, and trade policy strategies, and financial data. Of note, each company was publicly seeking to make use of World Trade Organization or US Commerce Department measures to deal with problems it was having with China (“US Justice Department Charges Chinese with Hacking,” BBC News, May 19, 2014, http://www.bbc.com/news/world-us-canada-27475324; Keith Bradsher, “Retaliatory Attacks, Online,” New York Times, May 20, 2014, http://www.nytimes.com/2014/05/21/business/international/firms-in-united...)

The US hacker case has resonated in Germany, China’s most important European trade partner, with Germany’s domestic security agency warning German firms that China is devoting an immense amount of effort to obtain commercial valuable data. Concerns have led some German firms to take severe security precautions such as having a special pool of cell phones and computers for use in China, wiping all data from such devices after they return to Germany, and limiting what information is stored on such devices. German firms also have been urged to be cautious about visiting delegations and the opening of sensitive sites (Jeevan Vasagar and Chris Bryant, “German Fears of China Cyber Spying Reinforced by US Charges,” Financial Times, May 21, 2014)

China’s bribery case against GlaxoSmithKline, which may result in jail terms for executives and billions in fines, plus a more than $100 million fine against Avon relating to corruption at its China unit, has scared foreign firms in China to become more vigorous in their compliance practices and compliance training activities. This is not only a function of increasing the frequency and intensity of compliance training, but making it more intimate and meaningful. To date, compliance training and monitoring has been a challenge even for aggressive firms because staff turnover in China is high and good compliance officers are scarce (Tom Mitchell, “Foreign Businesses Act after GSK Probe,” Financial Times, May 18, 2014).

The chaotic political situation in Thailand, evidenced by escalating violence by pro- and anti-government protesters, and the ousting of Prime Minister Yingluck Shinawatra, led the Thai army to declare martial law on May 22. Pursuant to its martial law declaration, the army suspended the constitution. The tumultuous situation has alarmed Japanese firms, which view Thailand as a strategic business location in Southeast Asia and have large-scale presence (1500 firms according to one estimate) in the country. The country’s recent political problems have forced Japanese firms such as Toyota, Honda, Mitsukoshi-Isetan holdings, and Lawson, a major convenience store, to limit hours (“Coup d’état in Thailand according to army commander,” NHK News, May 22, 2014, http://www3.nhk.or.jp/news/html/20140522/k10014652961000.html; and “Thai Coup affects Japanese firms,” NHK News, May 23, 2014, http://www3.nhk.or.jp/news/html/20140522/k10014658401000.html)

Major funding support from the Japan International Cooperation Agency will facilitate the construction of more than 10 medical facilities in the Philippines between 2015 and 2020. The project, which will be undertaken by Mitsubishi Corporation, will run an estimated 30 billion yen (292 million US dollars), and will facilitate Mitsubishi’s push to establish an Asia healthcare business. Mitsubishi will provide its know-how and outfit these hospitals with Japanese advanced medical equipment and devices. Toshiba and other Japanese companies also are actively marketing medical equipment or devices in Asia, eyeing demand from an increasing middle-class population (“Mistubishi to open hospitals in Philippins,” Nikkei Asian Review, May 21, 2014, http://asia.nikkei.com/Business/Consumers/Mitsubishi-to-open-hospitals-i...)

South Korea’s Ministry of Trade, Industry and Energy will lower entry barriers to its free economic zones (FEZs), permitting firms to enter into contracts with operators within the FEZs. This eliminates the need to seek Ministry approval, the current method. Beyond this, the government aims to eliminate 17 regulations and reform 11 others over the next four years, arguing they inhibit new business formation and place excessive burdens on existing firms. One regulation targeted for elimination is a requirement for firms to give 25% of their profits to local governments (“Gov’t to ease regulations on entering FEZs,” The Korea Times, May 19, 2014, http://www.koreatimes.co.kr/www/news/biz/2014/05/123_157437.html)

The US Department of Commerce recently concluded that imports of Taiwanese non-oriented electrical steel have caused damage to the US steel market and has set anti-dumping duties on such goods. One heavily affected firm is Leicong Industrial Co, which must pay 52.23 percent anti-dumping tariffs. The new penalties come after Leicong already was ordered to pay anti-subsidy duties of 12.82 percent last March pursuant to investigations launched in November 2013 (“Washington imposes duties on Taiwanese steelmakers,” Taipei Times, May 19, 2014, http://www.taipeitimes.com/News/biz/archives/2014/05/19/2003590674)