MNCs in the News-2015-05-29

Hewlett-Packard (HP) has decided to sell a 51 percent stake in its Chinese enterprise technology division (H3C), which operates networking, server, data storage, and technology-services businesses, to Tsinghua University’s Unigroup, which has been a strategic distribution partner of HP in China for more than 10 years, for US $2.3 billion. The deal is seen as a way for HP to address Chinese limits on foreign technology sales that hinder H3C’s sales to state-controlled businesses and government agencies. HP will maintain its China enterprise software and printing businesses. H3C reportedly will receive technology assets from Tsinghua as part of the deal (Michael J. de la Merced, “Hewlett-Packard Sells 51% Stake in China Unit to Tsinghua University,” New York Times, May 21, 2015, http://www.nytimes.com/2015/05/22/business/dealbook/hewlett-packard-sell... Hannah Kuchler, “Hewlett-Packard Spins off Chinese Server Business,” Financial Times, May 21, 2015; Yimou Lee, “HP Sells $2.3 billion China Unit Stake to Forge Partnership with Tsinghua Unigroup,” Reuters, May 21, 2015, http://www.reuters.com/article/2015/05/22/us-hp-m-a-tsinghuaunigroup-idU... “Tsinghua University and Hewlett-Packard Announce Joint Venture,” WantChinaTimes.com, May 24, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150524000005&cid=...)

China’s State Council has approved a three-year pilot program that will make it easier for foreign investors to put money into Beijing’s service sector. The areas that will be opened include “science and technology, internet and information services, culture and education, business and travel, financial services, health and medical services.” Government media indicate that the sectors were selected because they are “comparatively mature and hold potential” and that the government hopes the opening will spur greater vigor in the sector (“Beijing Opens Service Sector Wider to Spur Vitality,” China Daily, May 22, 2015, http://www.chinadaily.com.cn/business/2015-05/22/content_20789565.htm)

China blocks Twitter, which has 300 million users globally, but this has not prevented the company from attempting to sell services such as advertising to Chinese firms. Twitter representatives observe “‘this seems to be a moment in time where Chinese corporations really feel the urge to be global and in fact, there’s even a mandate from the government saying ‘go global,’ which is exciting.’” Twitter already works with Xiaomi, Alibaba Group, Haier, and Air China in order to help these companies expand their global reach. Ironically, China’s state news agency Xinhua uses Twitter outside China (Sue-Lin Wong, “Blocked in China, Twitter Still Courts Chinese Firms for Ads,” May 27, 2015, http://www.reuters.com/article/2015/05/27/us-twitter-china-idUSKBN0OC0DY...)

Chen Wei, the Director of the Software Bureau at China’s Ministry of Industry and Information Technology, stated the government is contemplating a “five-year software security guideline to safeguard the State secrets and data in key industries.” Chen added that the government will be working vigorously this year to strengthen the security of software in the financial sector and that government agencies and state-owned enterprises use. The guidelines likely will raise new challenges for foreign technology companies since they will encourage greater use of local product (Gao Yuan, “Govt Plans Software Guideline to Protect Data,” China Daily, May 27, 2015, http://www.chinadaily.com.cn/business/2015-05/27/content_20832858.htm)

Chinese gold mining companies in Sudan have been faced with the termination of their business activities after the government suddenly ordered them to stop extraction operations. “Most Chinese gold extracting enterprises have stopped production, while others have hired local contractors to keep their factories running.” The move shocked Chinese investors given Sudan had turned to natural resource exploitation activities to make up for the economic disruption caused by the separation of South Sudan in 2011, which cost Sudan 75 percent of its crude oil. The move affects 17 Chinese gold mining operations in Sudan which employ about 1200 local workers (“Sudan Orders Chinese Gold Miners to Stop Digging Immediately” WantChinaTimes.com, May 27, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150527000190&cid=...)

Over the past five years, Japan has provided about US $85 billion in infrastructure financing. Recently, Japanese Prime Minister Abe Shinzo announced Japan planned to provide US $110 billion in “‘high quality aid’” for the five-year period ending in 2020, with funding going to the Asian Development Bank, the Japan International Cooperation Agency, and the Japan Bank for International Cooperation. The funding would be provided in collaboration with private investors, partly to spur them. Abe’s initiative is motivated by a desire to counter China’s Asian Infrastructure Investment Bank, to spur Japanese exports, and to facilitate Japanese firm service provision abroad (“Leika Kihara and Linda Sieg, “Japan Unveils $110 Billion Plan to Fund Asia Infrastructure,” Reuters, May 21, 2015, http://www.reuters.com/article/2015/05/21/us-japan-asia-investment-idUSK... “Abe Unveils $110 bil. In Aid for Asia,” The Japan News, May 22, 2015, http://the-japan-news.com/news/article/0002169479)

Indonesia’s Investment Coordinating Board (BKPM) and the Indonesian Consulate General in Osaka, Japan signed an agreement providing for greater cooperation in attracting investment by Japanese businesses in Osaka in Indonesia’s maritime sector, particularly areas like shipyards, fisheries, and fish-product processing plants. In this vein, the two parties agreed to “routinely hold investor forums and to visit investors in Osaka.” The Indonesian consulate in Japan believes that Japan’s total potential investment in Indonesia could reach almost US $11 billion as Japanese firms have interests in Indonesia’s agriculture, electricity, and maritime sectors (“BKPM, KJRI Osaka Cooperate to Attract Maritime Investments,” The Jakarta Post, May 25, 2015, http://www.thejakartapost.com/news/2015/05/25/bkpm-kjri-osaka-cooperate-... “Osaka Cooperation Chance to Develop Maritime Potentials: Envoy,” The Jakarta Post, May 25, 2015, http://www.thejakartapost.com/news/2015/05/25/osaka-cooperation-chance-d... “Economy in Brief: BKPM, KJRI Osaka Eye Maritime Investments,” The Jakarta Post, May 26, 2015, http://www.thejakartapost.com/news/2015/05/26/economy-brief-bkpm-kjri-os...)

Indonesian State Secretary Pratikno stated “‘President Joko Widodo has reasserted that the government has decided it will take over Mahakam Block,” a gas site managed by French energy giant Total E&P Indonesie and Inpex Corp. and a gold mining site that PT Freeport Indonesia controls. The government’s takeover of Mahakam will occur in 2017 while the takeover of Freeport’s site will occur in 2012. The government intends to leverage Indonesia’s 2014 Mineral and Coal Law to change the nature of PT Freeport’s project from a work contract to a mining business permit in order to obtain a stronger bargaining position (“Govt to Take Full Control of Mahakam Gas Block, Freeport: Pratikno,” The Jakarta Post, May 26, 2015, http://www.thejakartapost.com/news/2015/05/26/govt-take-full-control-mah... “Economy in Brief: Govt to Control Mahakam, Freeport: Pratikno,” The Jakarta Post, May 27, 2015, http://www.thejakartapost.com/news/2015/05/27/economy-brief-govt-control...)

In 1987, Vietnam passed its Foreign Investment Law. Since that time, foreign investors have poured US $11.5 billion into more than 1,000 FDI projects, making it the 3^rd largest FDI recipient sector among all FDI recipient sectors. South Korea has been the largest investor, constituting almost 50 percent of total construction projects and 21 percent of total construction project value. Singapore, Taiwan, Japan, and Malaysia also have been major investors with Singapore and Taiwan ranking second and third respectively. Vietnam expects its revision of FDI laws pertaining to construction and investment will spur new FDI flows into the construction sector (“Foreigners Pour Total of $11.5b Into Construction,” Vietnam News, May 25, 2015, http://vietnamnews.vn/in-bai/270772/foreigners-pour-total-of-115b-into-c...)

At a conference on Russia-Vietnam investment in Hanoi, the Chief Representative of the Russian Trade Office in Vietnam Maxim Golikov suggested that Russia and Vietnam increase their trade and investment cooperation. He also emphasized that the two countries should focus on projects that “boost socio-economic development via investment in new technologies” since this would create jobs. Russian investment in Vietnam, which totals approximately US $1.9 billion, apparently was a big issue when Russian Prime Minister Dmitry Medvedev hosted meetings with Vietnamese leaders in Moscow in April. To boost investment, Golikov suggested that the two countries establish an inter-government working group (“Russia to Increase Investment as Co-Operation with VN Grows,” Vietnam News, May 22, 2015, http://vietnamnews.vn/in-bai/270664/russia-to-increase-investment-as-co-...)