MNCs in the News-2014-06-27

Chinese investment continues to draw the attention of local governments across the US given its potential for job creation and tax revenue generation in areas starved for investment and jobs. Narrowing wage gaps, falling US energy prices, and currency fluctuations are pushing Chinese firms to consider US investments while local officials, especially from the American south, are pulling Chinese investors by touting their low cost environment and, occasionally, offering tax breaks and infrastructure enhancements. Local governments also are trying to create one-stop shops for Chinese investors. Chinese investments relate, too, to Chinese firms trying to get closer to their customers (Paul Wiseman, “Ni Hao, y’All; US Hinterlands Woo Chinese Firms,” AP, June 23, 2014, http://news.yahoo.com/ni-hao-yall-us-hinterlands-woo-chinese-firms-04320...)

Detroit’s woes have made it very active in courting Chinese investment with almost 200 Chinese firms, most in the automotive sector, now operating in the metropolitan area. Many of the companies are small, but are helping to stabilize a sector that has been buffeted by many harsh winds over the past 5 years or so. Chinese firms are drawn by the area’s talent pool and R & D opportunities. To garner more investment, the Michigan Economic Development Corporation and other state and local bodies have been enhancing the local talent pool, undertaking trade missions, and pressing for more EB-5 visas (Adelina Zhang, “Chinese Investors Discovering Lure of Motor City,” China Daily, June 25, 2014, http://usa.chinadaily.com.cn/world/2014-06/25/content_17614390.htm)

China’s Ministry of Industry and Information Technology published guidelines showing its intent to bolster China’s indigenous chip making capability through a mix of financial supports, the creation of a coordinating group, and encouraging local banks to invest. The policy is a reflection of China’s desire to move up the value-added chain and also its desire to become less dependent on foreign firms as well as national security concerns. Indeed, MIIT specifically stated that building China’s domestic integrated circuit (IC) capability would raise “the nation’s level of security.” China’s weak IC sector means it imports a huge amount of foreign chips (Michael Kan, “China Sets Out to Become Global Leader in Chip Manufacturing,” PC World, June 24, 2014, http://www.pcworld.com/article/2367300/china-sets-out-to-become-global-l...)

In a ruling with significant implications for the protection of intellectual property rights, China’s Supreme People’s Court (SPC) ordered Chinese video-sharing site Tudou to compensate China Central Television (CCTV) for infringing the copyright of a CCTV food documentary program by hosting various program videos on its website that users could download. Tudou argued that it should not be held responsible since a user posted the videos, but the SPC rejected the defense saying Tudou did not prove its claim and was responsible for what people posted on its website. As compensation, the SPC required Tudou to pay CCTV US $40,292 (“Tudou Found Guilty of Violating CCTV Copyright,” China Daily, June 24, 2014, http://www.chinadaily.com.cn/business/tech/2014-06/24/content_17611127.htm)

Walmart’s struggles with Chinese labor groups over severance compensation, notice timeframes, and other issues in regards to the closure of Walmart’s store in Changde, Hunan, reported in previous MNCs in the News digests, have finally come to an end with an arbitration panel dismissing the worker suit. The dispute drew attention because of its length, apparent support from China’s traditionally moribund official labor union, the All China Federation of Trade Unions, and the fact that it went to arbitration. Some workers claimed they were pressured to accept an upgraded settlement offer from Walmart, leaving few workers participating in the suit (Tom Mitchell, “Walmart Wins China Labour Dispute,” Financial Times, June 26, 2014).

Japan is negotiating exporting low-pollution high-tech coal power plant equipment—integrated gasification combined cycle (IGCC) technology—to Chile in exchange for carbon credits that offset its greenhouse gas emissions (Japan needs more offsets given its decreasing reliance on nuclear energy and increasing reliance on dirtier fossil fuels). Japan has similar emission credit deals with Indonesia and Vietnam, though most are small. The deal fits with Prime Minister Shinzo Abe plan of promoting the infrastructure export to stimulate economic growth. Tokyo Electric Power, Mitsubishi Heavy Industries, and Mitsubishi Corp. would participate in various aspects of the IGCC export including its installation (“Japan provides high-tech coal plant to Chile; Japanese government accelerates infrastructure export,” Nikkei, June 20, 2014, http://www.nikkei.com/article/DGXNASGG1901Y_Z10C14A6MM8000/; “Japan eyes carbon credits from Chile for high-tech coal plant,” Nikkei Asian Review, June 20, 2014, http://asia.nikkei.com/Politics-Economy/Policy-Politics/Japan-eyes-carbo...)

Despite political frictions between Tokyo and Beijing, China still remains an attractive investment destination for numerous Japanese multinationals. Recently, Kawasaki Heavy Industries, a Japanese shipbuilder, announced it plans to construct liquid-natural gas carriers in China give the relative cheapness of Chinese ship yards. Kawasaki and other Japanese shipbuilders have found themselves at a relative cost disadvantage against Korean competitors and also seen opportunity in Japan’s shift to a greater emphasis on non-nuclear energy. Kawasaki has been building ships in China since 1995 through a joint venture with China Ocean Shipping Group Co. that has focused on large bulk carriers and large crude oil carriers (Masumi Suga, “Kawasaki to Build LNG Tankers in China to Take on Koreans,” Bloomberg, June 24, 2014, http://www.bloomberg.com/news/print/2014-06-24/kawasaki-to-build-lng-tan...)

Not long ago Mitsubishi Heavy Industries Ltd. and Siemens of Germany submitted a joint bid to acquire the energy-system assets of France’s Alstom SA, but US-conglomerate GE eventually won the battle after accommodating the demands of French President Francois Hollande and other French government officials by, among other things, establishing a renewables joint venture with Alstom. The French government had opined, too, that the Siemens-Mitsubishi offer violated European Commission’s competition regulations. The failed bid has put Mitsubishi at the risk of seriously falling behind GE because GE will now dominate the global gas turbines market (Shinsuke Takahashi and Shinya Ajima, “Failed Alstom bid rocks MHI’s global strategy,” The Japan Times, June 23, 2014, http://www.japantimes.co.jp/news/2014/06/23/business/corporate-business/... and “France supporting GE offer; Mitsubishi Heavy lost over Alstom bid despite additional offer,” Nikkei, June 21, 2014, http://www.nikkei.com/markets/kigyo/ma.aspx?g=DGXNASDZ21009_21062014MM0000)

Indian Prime Minister Narendra Modi, seeking foreign investment to revitalize a stagnating economy, recently met with a delegation of Taiwanese business leaders and agreed to establish a task force to fast-track a Taiwan-India economic cooperation agreement (ECA). The removal of India’s bilateral tariffs and other trade barriers pursuant to the ECA will give Taiwanese firms looking to expand abroad an opportunity to rely less on China and to tap into India, which also enjoys low labor costs and a huge market. In addition, the ECA will promote a quicker review process for commercial projects and offer incentives for labor-intensive manufacturing (Kevin Chen, “Taiwan-India links set to surge: report,” The Taipei Times, June 23, 2014, http://www.taipeitimes.com/News/biz/archives/2014/06/23/2003593426)

A delegation led by Singapore’s Senior Minister of State for Trade and Industry and National Development Lee Yi-Shyan was recently in Russia to boost economic ties between the two nations. The delegation met with St. Petersburg Governor Georgy Poltavchenko and signed an agreement to foster cooperation in industries such as transport, e-government, and training programs, and held a forum for Russian and Singapore firms to network. Lee also met with Moscow’s Minister and Head of External Economic and International Relations to witness the signing of a memorandum of understanding that seeks to enhance relations through urban development and infrastructure investment (Chia Yan Min, “S'pore team helps boost business ties with Russia,” Asia One Business, Jun 27, 2014, http://business.asiaone.com/news/spore-team-helps-boost-business-ties-ru...)

In an unusual joint statement published in three Chinese-language newspapers, four of Hong Kong's biggest global accounting companies have warned that their multinational clients may leave the city if pro-democracy groups like “Occupy Central” continue to disrupt business with street protests and other acts. Occupy Central seeks to reform HK’s electoral system through these protests as well as a secret referendum that has received much attention among the locals. The firms claim these threats to HK’s good business environment and ability to attract foreign investment could have a negative and long-lasting impact on the economy (Josh Noble, Robin Kwong, and John Aglionby, “Big four accounting firms warn Hong Kong over democracy push,” The Financial Times, June 27, 2014)

Philip Morris International (PMI) is blaming low growth in 2014 on plain product packaging laws, growing illicit tobacco use, and currency swings. It is trying to leverage Australia’s trade treaty with Hong Kong to tackle these problems. For example, it plans to hold discussions with overseas regulators on protecting its intellectual property and curbing non-duty paid cigarettes entering the market in Australia as well as the Philippines, a trend that it sees affording domestic competitors an unfair advantage, claiming smokers are turning toward cheaper alternatives than buying PMI’s premium brands (Duncan Robinson, “Plain packaging and currency swings weigh on Philip Morris,” The Financial Times, June 26, 2014)