MNCs in the News-2014-06-20

Violent anti-China protests in Vietnam in May, which link to territorial and maritime tensions between China and Vietnam, have awoken Vietnamese firms as well as the Vietnamese government of the need to diversify suppliers, financing, investors, and markets away from China. While tensions have not yet hurt trade with or investment from China, Chinese tourism has plummeted. At present, China is Vietnam’s major trade partner and a major export destination or supplier for the Vietnamese agricultural, apparel and footwear, and tools and machinery sectors. Vietnam also is looking to the Trans-Pacific Partnership and as an alternative source of economic growth (Nguyen Dien Tu Uyen, “China Aggression Sounds Wake-Up Call for Vietnam Makers,” Bloomberg, June 16, 2014, http://www.bloomberg.com/news/print/2014-06-16/china-aggression-sounds-w...)

The Chinese Ministry of Commerce (MOFCOM) published a long list of patents held by Microsoft, which the US-based software giant had developed itself or purchased from others and contends give it rights to royalties over Android phones and other cellphones. The list, closely guarded by Mr. Softee, had to be provided to MOFCOM as part of MOFCOM’s anti-trust review of Microsoft’s purchase of Nokia. The lists open the door to those bargaining with Microsoft about royalties who previously lacked information about Microsoft’s actual patent warchest (Joe Mullin, “Chinese Gov’t Reveals Microsoft’s Secret List of Android-Killer Patents,” Ars Technica, June 16, 2014, http://arstechnica.com/tech-policy/2014/06/chinese-govt-reveals-microsof...)

In response to China’s consideration of a removal of its almost 10-year ban on foreign investment in China’s steel sector, ArcelorMittal CEO Lakshmi Mittal expressed positive sentiments with making any specific commitments. The desire of Chinese firms to enhance their technological level and to shift to higher-value products, the Chinese government’s desire to reform state-owned enterprises, and the desire of foreign firms to tap China’s huge steel market, generally, and large auto steel markets, specifically, may create a fertile environment for steel, assuming problems, such as the industry’s huge excess capacity, can be ironed out (Helen Yuan and Kevin Hamlin, “Mittal Backs China for Possible End of Curbs on Mergers,” Bloomberg, June 16, 2014, http://www.bloomberg.com/news/print/2014-06-15/china-steel-game-changer-...)

During a visit to London laden with all kinds of political issues ranging from complaints about the length of the red carpet to China’s treatment of political dissidents, Chinese Premier Li Keqiang oversaw the signing of a large number of trade, investment, and financial deals. For instance, China’s ZN Shine Solar concluded a joint venture that would see it purchase, develop, and manage £400 million of United Kingdom solar panel assets and participate in a three year construction program with various large UK engineering and construction companies. China also has been exploring investment opportunities in nuclear, high-speed rail, and telecommunications (“China Signs £14bn trade Deals with UK Amid Premier’s Visit,” BBC News, June 17, 2014, http://www.bbc.com/news/business-27882954)

The Chinese government recently reported that foreign direct investment (FDI) had fallen to its lowest level in 16 months. According to government statistics, May FDI inflows ran US $8.6 billion, a 6.7% percent decline from May 2013 and the weakest FDI figure since January 2013. Analysts attributed the fall to China’s slowing economic growth and uncertain prospects, among other factors (“Foreign Investment into China Falls in May,” BBC News, June 17, 2014, http://www.bbc.com/news/business-27881953)

Chinese FDI into the US continues to surge and increased in contrast to declines in China’s overall FDI. Chinese FDI involved several dozen transactions and was focused on the healthcare, information technology, and real estate areas. While, generally speaking, China is an insignificant investor in the US, it made a big splash in 2013 when it poured in $14 billion. In tandem with rising Chinese investment in the US, Beijing has been increasing its support services, upgrading its US embassy website pertaining to the US investment environment, courting local governments, and negotiating a Bilateral Investment Treaty with the US (Chen Weihua, “Chinese FDI in US Rides in Fast Track,” China Daily, June 18, 2014, http://usa.chinadaily.com.cn/2014-06/18/content_17595605.htm).

No longer wildly optimistic about the China market, a survey by the German Chamber of Commerce in China indicated that the sentiments of German firms remain largely stable and positive. This is hardly surprising given the importance of demand in China to the revenues and profits of German companies and the desire to German firms to serve key customers as well as to diversify. Furthermore, German companies seem to see new investment opportunities emerging in automation, digitalization, environmental protection, and renewable energy as a result of the Chinese government’s current priorities and economic reform initiatives (Li Jiabao and Mu Chen, “‘New Era’ for German Investment in China,” China Daily, June 20, 2014, http://www.chinadaily.com.cn/business/2014-06/20/content_17603320.htm)

For the first time, Japanese companies attend an international defense fair, the Eurosatory Defense Fair in Paris. Overall, 1500 firms from 58 countries participated in the fair with thirteen Japanese companies including Mitsubishi Heavy and Kawasaki Heavy Industries participating. Japanese Prime Minister Shinzo Abe loosened regulations restricting weapons exports in April as part of his strategy for reviving Japan’s stagnant economy and in the wake of this policy shift Japanese companies have begun to market defense products. Japanese companies exhibited pontoon layer vehicles, weather observation radar systems, night-vision lens, life-saving equipment, and portable mine detectors (“Japanese weapons at an international fair in Paris,” The Huffington Post, June17, 2014, http://www.huffingtonpost.jp/2014/06/16/-three-principles-of-arms-export... and “Japanese companies debut at international defense fair,” The Japan Times, June 16, 2014, http://www.japantimes.co.jp/news/2014/06/16/national/japanese-companies-...)

Japanese conglomerate Mitsubishi Heavy Industries and Siemens of Germany made a $19.3 billion offer to acquire the energy division of French engineering company Alstom S.A. To make their offer more appealing, they promised they would keep their stake under 50%, would preserve Alstom’s current range of activities, and would create 2000 jobs. The joint offer challenged a $17 billion bid by US firm General Electric. French President Francois Hollande is paying close attention to the offers because of the potential job impact and his government has called for better offers from both MHI-Siemens and GE ( “Mitsubishi Heavy expresses its superiority of the offer for the ratio of investment,” Nikkei, June 19, 2014, http://www.nikkei.com/article/DGXNASDZ170HF_X10C14A6TJ1000/; and “France spurns bids for Alstom, seeks sweeteners,” The Japan Times, June 18, 2014, http://www.japantimes.co.jp/news/2014/06/18/business/corporate-business/...)

Korean President Park Geun-hye and Kazakh President Nursultan Nazarbayev met recently to discuss expanding economic ties through three joint projects worth US$10 billion, focusing on energy and natural resources. Both sides also agreed on improved cooperation in plant construction and oil field expansion, joint exploration of zinc and lead mining, as well as assisting Korean SMEs in entering the Kazakh market. This builds upon Park’s “Eurasia Initiative,” which aims to connect transportation and energy infrastructure between Asia and Europe and offer investment and jobs opportunities by further integrating the continent (Kang Seung-woo, “Korea, Kazakhstan to enhance economic cooperation,” The Korea Times, June 19, 2014, http://www.koreatimes.co.kr/www/news/nation/2014/06/116_159437.html)

Due to growing instability across the country, many Korean companies, including Korea Gas Corporation (KOGAS), POSCO Engineering and Construction (E&C) and Hanwha E&C, have halted projects and relocated personnel in Iraq. With armed militants closing in on Baghdad, companies like KOGAS have given notice they may bring employees back to Seoul if the situation gets worse. This year, Korean building companies have secured US$ 8 billion in construction orders in Iraq and there are nearly 14,000 people employed in eighty Korean companies across the nation (Park Si-soo, “Iraqi instability hits Korean companies,” The Korea Times, June 13, 2014, http://www.koreatimes.co.kr/www/news/biz/2014/06/123_159084.html)

A joint Singaporean-South Korean center has been established in Singapore to develop medical technologies and help Korean biomedical companies conduct human trials and commercialize products in Korea. Singapore’s Agency for Science, Technology and Research (A*Star) and South Korea’s government-affiliated Korean Health Industry Development Institute (Khidi) signed a memorandum of understanding last year, which allows Korean SMEs like Gencurix and Handok to work with partners in Singapore to expand operations and further attract biomedical firms to Singapore. A*Star-Khidi has invested US $5 million to finance joint projects between the two countries (Feng Zengkun, “New S'pore-South Korea med-tech centre at Biopolis,” Business Asia One, Jun 19, 2014, http://business.asiaone.com/news/new-spore-south-korea-med-tech-centre-b...)

According to the International Data Corporation (IDC), Indonesia lacks the infrastructure and electricity supplies needed to make it an attractive location for data center firms looking to expand overseas. The IDC report low government spending, cost inefficiencies, and security deficiencies, as reasons why firms like Canada’s BlackBerry choose not to invest in data centers here despite government regulations that require companies with a large Indonesian consumer base, like BlackBerry, to build data centers in Indonesia (Khoirul Amin, “RI still out of favor as a data center location, says IDC,” The Jakarta Post, June 18 2014, http://www.thejakartapost.com/news/2014/06/18/ri-still-out-favor-a-data-...)

*The information used herein is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content in this section does not necessarily represent the official view of the Wong MNC Center, its Board of Directors, or its Advisory Board.