MNCs in the News-2015-06-12

According to a recent study, foreign investors remain confident in China’s prospects and see many opportunities, which seems validated by Ministry of Commerce data showing an increase of 10.5 percent year-over-year, largely in services, for the first five months of 2015. Per the study, foreign investors have great interest in China’s domestic market, find its “stable policy environment and sound industrial infrastructure” attractive, and see potential in high-end manufacturing. They also look positively towards government efforts to streamline various processes. Still, they want more efforts to increase the domestic talent base, more incentives and targeted policies, and more sophisticated services (“Xinhua Insight: Chinese Market Still Attractive to Foreign Investment,” China.Org.Cn, June 9, 2015, http://www.china.org.cn/business/2015-06/09/content_35782004.htm; “China’s FDI Up to 10.5% in Jan.-May,” Shanghai Daily, June 11, 2015, http://www.shanghaidaily.com/business/Chinas-FDI-up-105-in-JanMay/shdail...)

In early June, Chinese Premier Li Keqiang met with high-level foreign corporate executives participating in the 3^rd round table summit of the Global CEO Council. He told these executives who were representing promiment companies like Nokia, Pfizer, Volkswagen, Goldman Sachs, and Standard Chartered Bank. Premier Li told the assembled CEOs and presidents that “China welcomes foreign companies to join in its modernization and will create a market environment for fair competition” and added that China would “expand the opening-up of high-end manufacturing and the service industries.” He further expressed interest in foreign companies helping to support mass entrepreneurship and innovation (“Foreign Firms Welcomed to Join in China’s Development,” China.Org.Cn, June 10, 2015, http://www.china.org.cn/business/2015-06/10/content_35783226.htm)

China is working to develop its own radio-frequency identification chips (RFID chips). At present, it procures such RFID chips from foreign companies. At a cybersecurity conference, a researcher with China’s Ministry of Public Security stated, “‘the localization of chips is to protect the safety of our citizens and to break up a situation where foreign companies control the technology.’” The new stance should hurt foreign RFID producers and help local firms like Shanghai Fudan Microelectronics. On a related note, China’s Ministry of Public Security gave more than 4,000 Chinese law-enforcement officers ZTE Corp. smartphones using an indigenous Alibaba-developed operating system (“China to Test Homegrown Chips in Challenge to Foreign Makers,” Bloomberg Business, June 10, 2015, http://www.bloomberg.com/news/articles/2015-06-09/china-to-test-homegrow...)

The European Chamber of Commerce in China recently released a survey offering a less upbeat perspective. Optimism among EU companies is at “a record low.” While a majority of surveyed EU companies are optimistic, the percentage is substantially lower than 2014, and almost 25 percent are pessimistic, with those in the industrial sector being the “least optimistic.” On top of this, 1/3^rd of EU firms intend to put China investment/expansion plans on hold while China’s rank as a top investment destination has been falling. Nevertheless, China remains a key investment destination given that “there is ‘no second China’ in sight” (“EU Firms Take Dimmer View,” China.Org.Cn, June 11, 2015, http://www.china.org.cn/business/2015-06/11/content_35793543.htm)

Zoje Resources Investment, a (China) Zhejiang Province-based company historically focused on machinery manufacturing, has concluded a deal with Russia’s Transbaikal Regional Government pursuant to which it will lease 115,000 hectares of uncultivated land. In a media release, Zoje Resources stated, “the move is in response to the Chinese government’s call for development in countries along the Belt and Road Initiative.” Zoje plans to use 50,00 hectares of land for grazing and 65,000 hectares of land to grow vegetables, wheat, and other products. After the original land is developed, Transbaikal may give Zoje an opportunity to bid on another 85,000 hectares (Zhong Nan, “Zhejiang Firm to Help Agriculture in Eastern Russia,” China Daily, June 10, 2015, http://www.chinadaily.com.cn/business/2015-06/10/content_20954884.htm)

Indonesia did not fare well in the 2014 World Bank “East of Doing Business Survey.” Although its ranking jumped from 129^th to 114^th (out of 189 nations), its ranking remains much lower than neighboring countries such as Malaysia and the Philippines. Indonesia’s Investment Coordinating Board (BKPM) seeks to boost the country’s ranking by, among other things, simplifying construction permit issuance and business establishment processes and making it easier to get electricity and pay taxes. Indonesia President Joko “Jokowi” Widodo has stated he wants Indonesia to be “one of the best countries in Asia in terms of ease of doing business” (Grace D. Amianti, “BKPM Aims for ‘Better Score’ on Investment,” The Jakarta Post, June 10, 2015, http://www.thejakartapost.com/news/2015/06/10/bkpm-aims-better-score-inv...)

Indonesia will limit foreign ownership stakes in banks, which currently can be as high as 99 percent, by restricting ownership levels to 40 percent. Indonesia allowed such high foreign ownership levels as part of its efforts to respond to the 1998 Asian Financial Crisis. However, the sense is that current rules are both “‘too liberal’” and “‘too risky’” and these sentiments overrode concerns about the billions of dollars Indonesia would need to spend to take over foreign bank stakes. Under Indonesia’s new policies, foreign investors will have 10 years to divest stakes the maximum limit (“Banks’ Foreign Ownership Regulations Too Liberal: Economist,” The Jakarta Post, June 10, 2015, http://www.thejakartapost.com/news/2015/06/10/banks-foreign-ownership-re...)

At the Vietnam Business Forum meeting in Hanoi in mid-June, the Capital Market Working Group argued to the State Securities Commission that the country should make changes to its state-owned enterprise restructuring policies in order to increase the involvement of foreign investors. Specifically, because Vietnam’s small domestic stock market had only a limited ability to absorb the marketization of SOEs, the Vietnamese government should explore not only different ways of selling stakes such as the direct sales of shares through international brokers. Furthermore, the government should contemplate allowing greater foreign ownership stakes than 49 percent public companies in non-sensitive sectors (“Gov’t Advised on Attracting Foreign Interest in SOEs,” VietNam News, June 10, 2015, http://vietnamnews.vn/in-bai/271521/govt-advised-on-attracting-foreign-i...)