MNCs in the News-2015-11-06

During a visit by German Chancellor Angela Merkel to China in late October, Chinese Premier Li Keqiang stressed to her and the accompanying business delegation at a meeting of the Chinese-Germany Economic Advisory Committee in Hefei that his government intended to “further expand its market openness so foreign business owners and joint ventures registered in China will enjoy the same treatment as their Chinese counterparts.” Li also encouraged German firms to invest in central and western China and called on German companies to cooperate with China in third-party markets. China expects more help from Germany in upgrading its manufacturing sector (“Li: Markets to open Wider for Foreign Firms,” China.Org.cn, October 31, 2015, http://www.china.org.cn/business/2015-10/31/content_36942388.htm)

Xu Shanchang, the Director of Economic System Reform at the National Development and Reform Commission (NDRC), announced the negative list system would be expanded from China’s coastal areas to the interior. However, the expansion was not automatic. China would select central, west, and northwest provinces having “‘good fundamentals allowing a deepening of economic reform.’” It was not clear how the negative list system extended to interior areas would apply to domestic firms, whether it would overlap with the Shanghai Free Trade Zone (FTZ), Guangdong, Tianjin, or Fujian FTZs, and what implications it might have for China-US bilateral investment treaty negotiations (Lan Lan, “Negative list for Foreign Investment Expanded to Inland Regions,” China Daily.com, October 31, 2015, http://www.chinadaily.com.cn/business/2015-10/31/content_22332771.htm)

China’s Ministry of Commerce (MOFCOM) touts that the country’s four pilot Free Trade Zones (FTZs), aided\] by the introduction of a negative list system, “financial innovations” relating to capital account convertibility and financial services diversification, and so on have “helped motivate foreign investors.” MOFCOM reported that for the first nine months of 2015, the number of registered entities in the Shanghai FTZ increased more than 50 percent year-over-year (YOY) while the number of new entities in the Guangdong, Tianjin, and Fujian FTZs tripled YOY. MOFCOM added the total number of new entities in the FTZs YOY doubled to reach 45,000 (“China FTZ Attract Growing Foreign Investment: MOC,” China.Org.cn, November 5, 2015, http://www.china.org.cn/business/2015-11/05/content_36989477.htm)

The State Council Anti-Monopoly Committee has tasked the NDRC “to draft six antitrust guidelines to further clarify existing laws and rules, so as to give the market clearer expectations and improve transparency.” The NDRC’s guidelines will address antitrust matters concerning the automobile industry, the abuse of intellectual property rights, leniency policies, undertakings’ commitments, the calculation of illegal gains and fines, and exemption procedures.” The guidelines will have implications for many IPR products and service providers and will deal with issues like “IPR-related monopoly agreements, abuse of dominant market position, and business concentration” and automobile online sales and parallel car imports (Lan Lan, “NDRC Tasked to Draft Antitrust Guidelines and Shape Market Expectations,” China Daily.com, November 6, 2015, http://www.chinadaily.com.cn/business/2015-11/06/content_22385981.htm)

China’s State Administration for Industry and Commerce (SAIC) said “China will give special trademark protection to Walt Disney Co.,” which soon will open its first theme park in mainland China. Specifically, it planned to “carry out a year-long campaign to crack down on Disney counterfeits.” The SAIC said its operations would “‘promote the development of a fair and competitive market and protect China’s international image for safeguarding intellectual property rights.’” Regarding Disney, the SAIC said it would create emergency teams “to help protect Disney trademarks, increase training for forces to spot illegal behavior, and boost monitoring of Disney counterfeits online” (“China Says Disney to Get Special Trademark Protection,” New York Times, November 5, 2015, http://www.nytimes.com/reuters/2015/11/05/world/asia/05reuters-walt-disn...)

Google, Twitter, Facebook, and others continue to court China. Eric Schmidt, chairman of Alphabet/Google, said at a conference in Beijing “‘we do hope to provide service in China, and we continue to communicate with the Chinese government. This is why I’m here…” He added we have “‘always been in touch with the Chinese government.’” Google, which has about 500 employees on the mainland, recently revealed its first direct investment into a Chinese start-up and maintains a partnership with Huawei. Schmidt stated “‘Google never left China’” though the company took its search, e-mail, and mapping services off the mainland in 2010 (“With Google and Twitter Still Blocked in China, Executives Woo Beijing,” LA Times, November 2, 2015, http://www.latimes.com/world/asia/la-fg-china-google-twitter-20151102-st... “No Clear Indication whether Google’s Plan to be Back in China,” China.Org.cn, November 3, 2015, http://www.china.org.cn/business/2015-11/03/content_36962774.htm; “Google Services Set for ‘Return’ to China,” China.Org.cn, November 4, 2015, http://www.china.org.cn/business/2015-11/04/content_36974467.htm)

United States Trade Representative Mike Froman said the Trans-Pacific Partnership digital rules were not just about China. He noted issues like “‘the area of localization [laws for data], forced technology transfer [and] forced [intellectual property] transfer…[were] central concerns in the [US]…relationship with China…but were not limited to China.’” He noted the TPP is not about any one country, but about “‘defining high-standard rules for the road in the region.’” Among other things, the TPP requires “making stealing trade secrets a crime, requires the unhindered flow of data, and bans practices such as mandating the use of special local encryption algorithms” (Shawn Donna, “Pacific Trade Deal Takes Aim at Chinese Hacking,” Financial Times, November 4, 2015).

According to China National Nuclear Corp., a state-owned enterprise (SOE), it is moving towards landing a $6 billion contract to build Argentina’s fourth nuclear power plant. CNNC said talks had been concluded and that it had signed a framework agreement for a fifth plant that would use “‘China’s home-grown nuclear technology.’” The fourth plan would be built in conjunction with Nucleoelectrica, Argentina’s state-owned nuclear operator, and would use the Canadian-developed Candu reactor, a heavy-water model. The deal provides for Nucleoelectrica providing 62 percent of equipment while CNNC will provide the balance and Chinese institutions will provide 38 percent of funding (Lyu Chang, “CNNC Inches toward $6b Nuclear Plant Deal in Argentina,” China Daily.com, November 6, 2015, http://www.chinadaily.com.cn/business/2015-11/06/content_22383758.htm)

China’s HKND said it had received needed environmental permits and thus would start its $50 billion inter-ocean Nicaragua canal project next year. Bill Wild, a HKND advisor, told Chinese media “‘This is a milestone for the development of the project, and we are pleased that the project can now move forward.” HKND, based in Hong Kong, said it would start preliminary work for the Brito Port at the end of the year. An executive vice president of HKND group said the project likely would cost far less than $50 billion due to the decline in the price of crude oil (Lyu Chang, “Chinese Firm to Start Nicaragua Canal by Late 2016,” China Daily.com, November 6, 2015, http://www.chinadaily.com.cn/business/2015-11/06/content_22388919.htm)

The U.S. National Highway Traffic Safety Administration (NHTSA)’s action against Japan’s Takata Corp. for its faulty airbags and distorted test data led Honda Motor Co., Takata’s biggest customer, to severe its relationship with Takata. Takata also had a $70 million fine imposed against it by the NHTSA for its “‘selective, incomplete, or inaccurate data’” and has been forced to change the chemical, ammonium nitrate, used to power its air bags. The NHTSA announced it would impose an additional fine of $130 million “if Takata did not comply [with its orders] or if the agency uncovers additional violations of safety regulations” (David Morgan and Bernie Woodall, “Honda Drops Takata Air Bags after U.S. Fine, Ban on Volatile Chemical,” Reuters, November 3, 2015, http://www.reuters.com/article/2015/11/04/us-usa-takata-idUSKCN0SS2DE201... Doina Chiacu, “U.S. and Japan’s Takata Settle over Air Bags: Nikkei,” Reuters, November 3, 2015, http://www.reuters.com/article/2015/11/03/us-autos-takata-idUSKCN0SS1UI2...)

In early November, Japan’s Land, Infrastructure, Transport, and Tourism Minister Keiichi Ishii met with Malaysia’s Land Public Transport Commission to promote Japan’s high speed shinkansen bullet train as an option for Malaysia’s high-speed project with Singapore that would run from Kuala Lumpur to Singapore. Ishii spoke about the advantageous of Japan’s technology as well as funding that could be provided by the Japan Bank of International Cooperation or Japan International Cooperation Agency. Japan’s Ministry of Land, Infrastructure, Transport, and Tourism said Ishii’s visit was a “‘a clear message to Malaysia about the enthusiasm of the Japanese government’” for the project (“Japan Promotes High-Speed Rail in Malaysia,” Bangkok Post, November 6, 2015, http://www.bangkokpost.com/business/world/756940/japan-promotes-high-spe...)

Korean Trade, Industry, and Energy Minister Yoon Sang-jick encouraged multinational companies looking to enter China and other Asian countries to set up bases in Korea as the country had established a free-trade network with many big economies around the world. He touted Korea’s appeal as a strategic base, saying it was proximate to key markets, had excellent residential and business infrastructure, and offered extensive incentives to investors. Korea also had “talented manpower” on top of these other things. Yoon noted Korea would work to remove regulatory obstacles and join the TPP to maintain its competitiveness (“Korea: Strategic Base for Multinational Firms,” Korea Times, November 1, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/11/123_189792.html)

At a meeting with James Kim, the Chairman of the American Chamber of Commerce in Korea (AMCHAM), Korea Trade Minister Yoon Sang-jick said the government would “remove barriers that discourage non-Korean companies from building and hiring workers.” He stated, we “‘will listen more to foreign companies and reflect their opinions in policies…policymakers…will make every effort to make regulations more foreign-business friendly.’” Kim stated while AMCHAM views President Park Geun-Hye’s efforts to create a better business environment for foreign firms positively the foreign business community still wants “the Korean government to work harder” and to implement the Korea-US Free Trade Agreement (Lee Hyo-sik, “‘Korea to Remove Barriers for Foreign Investors,’” Korea Times, November 5, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/11/123_190298.html)

Revelations Volkswagen cheated on its diesel vehicle emissions data have not affected German car sales in Korea. Indeed, “imports of mid-size and large diesel vehicles from Germany actually increased in the third quarter.” In contrast, “Volkswagen’s sale volume in Korea decreased by approximately 75% in October month over month, despite the firm having issued formal written apologies and recall notices to owners. Volkswagen also is at risk of losing some dealers and dealerships and faces a number of class-action lawsuits. Others recent negative news about fuel economy data manipulation could make Volkswagen situation even worse (Park Si-Soo, “VW Sales in Korea Plunge 67%,” Korea Times, November 5, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/11/123_190330.html; Jung Min-hee, “German Cars Still Very Popular in Korea Despite Volkswagen Emissions Scandal,” Business Korea, November 2, 2015, http://www.businesskorea.co.kr/english/news/industry/12709-small-ripples... Jung Min-hee, “Volkswagen Korea Takes Direct Hit from the Volkswagen Scandal,” Business Korea, November 3, 2015, http://www.businesskorea.co.kr/english/news/industry/12727-targeted-dist...)

Korea’s Free Trade Commission (FTC) has begun an investigation of Siemen’s Korea, specifically its healthcare division, for alleged unfair business practices in the “field of medical equipment business.” Siemens is being investigated for allegedly refusing to provide software ownership and only providing usage rights in connection with its medical equipment such as MRI scanners and CT scanners. The FTC launched its investigation of Siemens in response to complaints from hospitals who pay very large amounts annual for maintenance service contracts (Jung Min-Hee, “Fair Trade Commission Investigating Siemens Korea,” Business Korea, November 5, 2015, http://www.businesskorea.co.kr/english/news/industry/12759-investigation...)

Lotte E&C and Halla Corporation, both from South Korea, and Capital Diamond Star Group, a Myanmar conglomerate, have submitted a proposal to build a 20.5 kilometer expressway from Yangon that would eventually end at a new airport in Bago. The expressway would fit in with a two ring-road master plan for Yangon proposed by the Japan International Cooperation Agency. The project, which would cost at least $600 million, would be funded by tolls, preferential loans, and government contributions. The Korean International Cooperation Agency is working with Myanmar’s Ministry of Construction to conduct needed feasibility studies (“Korea-Myanmar Group Proposes Yangon Expressway,” Bangkok Post, November 6, 2015, http://www.bangkokpost.com/business/world/756812/korea-myanmar-group-pro...

Indonesia’s Chief Economy Minister Darmin Nasution told journalists Indonesia planned to offer “tax holidays of up to 25 years and relax restrictions on foreign investment in its special economic zones” (SEZs). He said that investors “would be eligible for income-tax discounts” of between 20-100 percent for 10 to 25 years, with those investing in priority sectors getting the biggest discounts. There also would be flexibilities for foreigners/foreign businesses in terms of owning property and “importing raw materials without paying value-added taxes.” Frank Sibarani, the head of Indonesia’s Investment Coordinating Board, added firms in SEZs would benefit from negative list treatment (“Indonesia Offers New Incentives to Investors,” Bangkok Post, November 5, 2015, http://www.bangkokpost.com/business/world/755712/indonesia-offers-new-in...)

In early November, India and Indonesia signed a memorandum of understanding (MOU) relating to cooperation in renewable energy. Among other topics, the MOU covers “the exchange of information and technology for the development of joint projects and research, technology transfer, promotion and investment, policy dialogs, and capacity building.” The two sides said they saw the MOU not only as advancing their carbon emissions reductions goals, but also help strengthen the two countries relations in investment and trade. Each side hoped it could learn from the other in terms of land investment, pricing, and so on (Raras Cahyafitri, “Indonesia, India Forge Deal on New, Renewable Energy,” The Jakarta Post, November 3, 2015, http://www.thejakartapost.com/news/2015/11/03/indonesia-india-forge-deal...)

Malaysia’s International Trade and Industry Minister Datuk Seri Mustapa Mohamed argued the “TPP would inject competitiveness into the system, pushing Malaysians to be more aggressive both locally and in the markets of other TPP countries.” He noted that with the TPP Malaysia can “keep pace” with international standards on matters like labor and the environment. He noted that Malaysia/Malaysian companies have various mechanisms to cope with TPP requirements such as “transition periods, thresholds, special government procurement pricing policies (to protect Bumiputera affirmative action), and exclusions for state governments and touted that Malaysian firms in other countries will enjoy many protections (Rupa Damodaran, “Moving up in competitiveness,” New Straits Times Online, November 06, 2015, http://www.nst.com.my/news/2015/11/moving-competitiveness)

Prime Minister Datuk Seri Najib Tun Razak said as a leader in Islamic finance Malaysia “can offer its experience and continue contributing to the global economy.” Najib emphasized “‘Malaysia is the leader not only in terms of the issuance of sukuk, but [that] we also have the ecosystem that enables Islamic finance to thrive.” Najib also emphasized that Malaysia housed the leading institution for training about Shariah-finance, the International Centre for Education in Islamic Finance (INCEIF), which was set up by the Bank Negara Malaysia.’” He noted that more than 50 countries participate in INCEIF and the number is growing” (“Malaysia can continue sharing Islamic finance experience with the world”, Daily Express, http://www.dailyexpress.com.my/news.cfm?NewsID=104330)

Menteri Besar Datuk Seri Mukriz Mahatir, an official from the state government of Kedah, Malaysia, said the government wants to see more companies from Qingdao, China, follow in the footsteps of Lu Hai Feng Ltd. and make major investments in Kedah. Lu Hai Feng will invest about RMB 3 billion in the Kedah Integrated Fishery Terminal, one of the biggest Chinese investments in Malaysia. The state government also hopes companies from Qingdao, which are advanced in trade, technology, and tourism, will assist Kedah to upgrade the facilities at the Ferry Terminal of Langkawi to cope with an increase in tourism (“Kedah seeks to attract more investments from Qingdao,” Daily Express, November 3, 2015, http://www.dailyexpress.com.my/news.cfm?NewsID=104291)