MNCs in the News-2015-07-31

China’s General Administration of Quality Supervision, Inspection, and Quarantine reported that Germany’s Mercedes-Benz will recall about 150 imported vehicles that suffer from fuses that “have been incorrectly installed in the passenger-side interior fuse boxes.” In certain cases, the improperly installed fuses may represent a safety hazard if they malfunction. Mercedes-Benz will inspect vehicles and, as needed, replace incorrectly installed fuses at no charge to consumers (“Mercedes-Benz Recalls Cars over Faulty Fuses,” China Daily, July 25, 2015, http://www.chinadaily.com.cn/business/motoring/2015-07/25/content_214070...)

China’s State-owned Assets Supervision and Administration (SASAC) oversees 113 non-financial central SOEs and 98,554 local SOEs, which hold assets of more than USD $14.5 trillion. To spur greater growth and boost efficiency, SASAC has been allowing mixed ownership where domestic private investors, foreign investors, and/or SOE employees take stakes in SOEs. Zhou Fangsheng, Deputy Director of the China Enterprise Reform and Development Society, which is under SASAC stated, “‘it’s possible that foreign capital could become the largest shareholder of an SOE through the mixed-ownership reform,’” though it would not become a majority shareholder and some sectors would be off limits (Lan Lan, “SOE Reform to Open Door to Foreign Capital,” China Daily, July 29, 2015, http://www.chinadaily.com.cn/business/2015-07/29/content_21440703.htm)

The Chinese government has been striving to push the country up the value added chain and to develop more Chinese intellectual property (IP). Rather than just developing Internet, biotechnology, and other IP, China has been seeking to buy it. In this vein, GSR Ventures, a Chinese venture-capital firm that was an early investor in Didi Kuaidi Joint Co. and has made investments in semiconductors, electric vehicle battery technology, and solar cells, is raising a USD $5 billion fund for overseas tech investments. GSR Ventures activism comes at a time when foreign firms are eager for helpful Chinese partners and investors (Rich Carew “China’s GSR Ventures Plans $5 Billion Fund for Overseas Tech Acquisitions,” The Wall Street Journal, July 26, 2015, http://www.wsj.com/articles/chinas-gsr-ventures-plans-5-billion-fund-for...)

At a gathering on the sidelines of the Pyeongchang Forum, Kwon Tae-Shin, President of the Korea Economic Research Institute (KERI), said “‘we have no time to hesitate…the government should be quick to introduce defensive policies to protect the best interests of Korean companies under attack by influential hedge funds.’” Kwon was reacting to a dispute between Samsung affiliates and U.S. Hedge Fund Elliott Associates. He specifically called for the government to allow poison pills and dual-class stock systems, which he said would encourage new kinds of investment and diversification by countering the short-term mentality of hedge fund investors like Blackstone (Kim Yoo-Chul, “KERI Warns against ‘Another Elliott,’” Korea Times, July 28, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/07/123_183516.html)

Indonesia requires certain kinds of mining companies to process, in Indonesia, the ores they extract in Indonesia. Ores that are partially processed or that are unprocessed require export licenses to be sold abroad. Furthermore, export duties must be paid. However, companies that have made progress on local processing earn export duty reductions and obtain required export permits. Due to progress on its smelting plant, Indonesia’s Energy and Mineral Resources Ministry has granted PT Freeport Indonesia an export license. To fulfill its obligations, PT Freeport Indonesia is working to build a new smelter in East Java that will run $2.3 billion (Raras Cahyafitri, “Freeport Gets Nod to Renew Export Permit, Pays Lower Duty,” The Jakarta Post, July 28, 2015, http://www.thejakartapost.com/news/2015/07/28/freeport-gets-nod-renew-ex...)

Meeting with Chairman of the National Committee of the Chinese People’s Consultative Conference Yu Zhengsheng who was visiting Indonesia, Indonesian President Joko Widodo noted his desire to have China help Indonesia become an “Asian production base.” Indonesia Foreign Minister Refno Marsudi observed at the post-meeting press conference that “China’s increasing overseas investments make it possible to have more factories built in Indonesia.” Yu said China looked at Indonesia as an important regional partner and would look to strengthen cooperation in areas like maritime infrastructure, power supply, and state owned enterprises (“Widodo Wants China to Build Indonesia into Asian Production Base,” WantChinaTimes.com, July 28, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150728000107&cid=...)

At a recent meeting, a Chinese consul general Zhu Honghai “committed to facilitating hundreds of Chinese state-owned companies” to invest in West Sumatra particularly in areas like infrastructure, banking, agriculture, tourism, and basic industry. Consul general Zhu lauded West Sumatra’s renewable energy resources, but noted that its resources had not been “optimalized yet due to a lack of infrastructure.’” He added lack of infrastructure was a problem for Indonesia as a whole. The head of Indonesia’s Investment Coordinating Board for West Sumatra commented that Chinese companies have been active investors in agriculture, energy, and tourism (“China’s State-owned Companies to Invest in West Sumatra,” The Jakarta Post, July 30, 2015, http://www.thejakartapost.com/news/2015/07/30/chinas-state-owned-compani...)

The Taiwan Investment Commission reported that Taiwan’s approved outward investment in July hit USD $2.78 billion. A very large percentage of this was represented by a Taiwan Semiconductor Manufacturing investment of $2 billion, which the world’s largest contract chip maker was sending to its British Virgin Islands subsidiary most likely as a way to play the US Federal Reserve’s likely raising of interest rates later this year. The government also approved Fubon Life Insurance’s request to invest USD $538 million to set up a special purpose vehicle that could be used to make overseas investments (“Taiwan’s Approved Outbound Investment Nears US $3 billion in July,” WantChinaTimes.com, July 29, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150729000104&cid=...)

Do Kim Lang, the deputy head of the Viet Nam Trade Promotion Agency, urged Vietnam firms to pay more attention to developing their brand names as this could help them grow and defend their market shares and fend off “unhealthy competition.” This was critical at a time of increasing competition and greater global integration by Vietnamese firms. He noted that small- and medium-sized enterprises were having a much more difficult time building brand names than larger firms. It remains to be seen if Vietnamese firms can meet world standards in terms of quality and needs (“Firms Urged to Develop Global Brand Recognition,” Viet Nam News, July 30, 2015, http://vietnamnews.vn/in-bai/273756/firms-urged-to-develop-global-brand-...)