MNCs in the News-2015-06-05

KFC, a major global fast food chain and “the biggest restaurant China operator in China,” will sue three Chinese firms (Shanxi Weilukuang Techology, Taiyuan Zero Point Technology, and Yingchenanzhi Success and Culture Communications) it claims used social media such as WeChat to spread false rumors about it including that it used chickens that were “genetically modified to have six wings and eight legs.” KFC’s suit, filed in Shanghai, seeks compensation of USD $242,000 and an apology. KFC China’s President Qu Cuirong asserted the posts had hurt the brand of the food giant which had more than 4,800 branches in China (“KFC Sues Chinese Firms over Eight-Legged Chicken Rumors,” BBC, June 1, 2015, http://www.bbc.com/news/world-asia-china-32964606; “Colonel Slanders: KFC Sues Chinese Companies for Defamation,” WantChinaTimes.com, June 3, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150603000079&cid=...)

China’s proposed law for controlling foreign nonprofits has potentially serious negative implications for foreign business associations such as the American Chamber of Commerce in China and European Union Chamber of Commerce in China. According to the law, police would have the authority to monitor all nonprofits, nonprofits would be required to submit regular work plans and reports, foreign nonprofits would be limited in the number of offices they could maintain in China, and foreign nonprofits would be limited in the number and proportion of their foreign staff. One American professor labeled the law a “‘a pretty nasty piece of work’” (Gillian Wong and Josh Chin, “Foreign Business Groups Wary of China’s Nonprofit Clampdown,” New York Times, June 1, 2015, http://www.wsj.com/articles/foreign-business-groups-wary-of-chinas-nonpr...)

The European Union Chamber of Commerce in China strongly criticized China’s draft National Security Law as “excessively broad” and representing a “‘massive national security overreach’” that creates tremendous “‘uncertainty for businesses’” and raised serious concerns about foreign business’s ability to sell technology goods and services in China and to protect their intellectual property. European Union Chamber of Commerce President Joerg Wuttke further criticized the law as contrary to China’s efforts to attract foreign investment and warned it could possible hinder China’s access to foreign technology (Michael Martina, “European Business Lobby Slams China’s Draft National Security Law,” Reuters, June 3, 2015, http://www.reuters.com/article/2015/06/03/us-china-security-idUSKBN0OJ1I...)

The State Council recently ordered the NDRC to draw up guidelines pertaining to the “monopolistic conduct and abuse of” IPR, which would apply to products and services in industries such as telecommunications, the medical sector, vehicles, machinery, and even agricultural seeds. In April, China’s State Administration of Industry and Commerce announced a series of rules (“the Prohibition of Abuse of IPR to Eliminate or Restrict Competition”) which will “serve as the basis” for the NDRC’s guidelines.” An NDRC official said “‘patent protection is important for promoting innovation, but the abusive use of IPR is rampant…it’s important to strike a balance’” (Lan Lan, “Regulators Target ‘Aubse’ of IPR,” China Daily, June 5, 2015, http://www.chinadaily.com.cn/business/2015-06/05/content_20913033.htm)

To facilitate Chinese outward investment and implementation of the “One Belt One Road” initiative, China’s State Administration of Taxation plans to “sign and update more tax treaties.” It also plans to increase “Mutual Agreement Procedures,” a bilateral consulting mechanism that aids Chinese companies facing international tax disputes. Tax treaties will help Chinese companies by limiting double taxation, reducing withholding taxes on interest, dividends, and royalties, and clarifying the tax treatment of various kinds of transactions. Tax problems have been a big issue for Chinese companies in Africa due to ignorance of the law and a dearth of bilateral tax treaties (Zheng Yangpeng, “Tax Pacts to Make Going Global Easier,” China Daily, June 4, 2015, http://www.chinadaily.com.cn/business/2015-06/04/content_20904999.htm)

Ning Gaoning, the chairman of COFCO, said his company will “commit resources and manpower to support the SREB and MSRI initiatives. The initiatives are important to COFCO because many countries along the routes are “key global grain producers” and investing abroad is essential to ensuring China’s food security as well as demands globally for “high-protein and nutritious food.” The President of COFCO Yu Xinbo added that “the company is keen to continue building grain and other agricultural product supply chains particularly with countries in the Black Sea Regions and South America and wanted to build “import channels in North America” (Zhong Nan, “COFCO Commits to Belt and Road Initiative,” China Daily, June 3, 2015, http://www.chinadaily.com.cn/business/2015-06/03/content_20895016.htm)

The Korea Fair Trade Commission recently charged Volkswagen Korea with texting messages of planned price increases for its cars to visitors to the firm’s showrooms in several areas, apparently in an effort to encourage individuals to purchase vehicles before prices rose. However, the price rise did not occur, leading some Korean consumer advocates to demand an investigation. A Volkswagen Korea spokeswoman said the sales promotion initiative was not a corporate-level policy, but rather a “‘minor blunder’ by sales agents” acting on their own on the basis of some inside information about a potential price increase plan that did not materialize (Park Si-soo, “Volkswagen Blames Salesclerks for Gaffe,” Korea Times, June 2, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/06/123_180057.html).

MERS is disrupting one of the Korean government’s/President Park Geun-Hye’s current initiatives, which involves creating closer links with the Middle East to boost investment, trade, and service provision in areas like food, nuclear power, and medical services. Due to the crisis “a number of Korean companies have stopped sending their employees to the Middle East and are also considering temporarily halting business projects there.” The Korean Federation of SMEs is delaying dispatching individuals to the region who could explore potential opportunities there while the Korean Ministry of Land, Infrastructure, and Transport has delayed a planned visit to discuss infrastructure projects (Park Si-Soo, “2^nd Middle East Push in Jeopardy,” Korea Times, June 5, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/06/123_180304.html)

Indonesia’s Investment Coordinating Board (BKPM) plans to give greater attention to luring/realizing foreign direct investment (FDI) from Japan to meet its annual FDI goals. BKPM already is anticipating Japanese FDI around US $3.4 billion this year with nine investors planning to invest around $2 billion and ten investors already having obtained permits for investments totaling $1.4 billion. Japanese investors seem particularly interested in sectors such as farming, shipping, property, hospitals, and steel and petrochemicals. Japan’s actual FDI in Indonesia between 2010 and 2015 ran around US $13.3 billion far less than the planned amount of $20.6 billion during the period (Grace D. Amianti, “BKPM Woos Japanese Investors to Boost FDI,” The Jakarta Post, June 5, 2015, http://www.thejakartapost.com/news/2015/06/05/bkpm-woos-japanese-investo...)

Vietnam’s Ministry of Planning and Investment (MPI) has recommended to the Prime Minister to direct the State Bank of Vietnam give a license to Singapore’s United Overseas Bank (UOB) to open a wholly foreign owned foreign bank. Many countries already have banks in Vietnam, but UOBs does not even though Singapore is Vietnam’s largest investor after South Korea and Japan. The license rewards UOB for its effort to promote investments in Vietnam, facilitates the consolidation of the banking sector, and lays the groundwork needed for Vietnam to meet its ASEAN Economic Community and World Trade Organization financial sector opening requirements (“Ministry Backs Wholly Foreign-owned Bank,” VietNam News, June 2, 2015, http://vietnamnews.vn/in-bai/271151/ministry-backs-wholly-foreign-owned-...)