MNCs in the News-2016-04-01

Meeting with a US delegation organized by the Aspen Institute, a US think tank, which included almost twenty members of the US Congress and legislative representatives from California, Delaware, Illinois, and Nebraska, Chinese Premier Li Keqiang said “China will ramp up efforts to nurture a fairer environment for market competition and will bolster intellectual property rights protection to attract more foreign investment, including from the United States.” Li also noted “China is willing to work hard with the US to advance negotiations on a China-US bilateral investment treaty, which is expected to better benefit economic and trade activities between them (“China to Ramp up Efforts to Attract Foreign Investors: Premier,” China.org.cn, April 1, 2016, http://www.china.org.cn/business/2016-04/01/content_38156649.htm)

Following its publication of a draft regulation last week, China’s Ministry of Industry and Information Technology said planned rules on Internet domain names “will not affect foreign companies' normal business.” It specifically stated, “‘The draft rule asks websites that engage in network access within the borders of China to register their domain names in the country. Companies accessing network outside of the country will not be affected.” According to one analyst, “the statement failed to address the key issue of whether the new rule will apply to foreign websites both accessible in China and having their servers physically located there (“Govt Reassures Foreign Companies on New Internet Rules,” China.org.cn, March 31, 2016, http://www.china.org.cn/business/2016-03/31/content_38148318.htm)

Pursuant to a 10-year agreement, China will put a “‘few thousand troops and administrative personnel at its first overseas permanent military base in Djibouti that will allow for surveillance, monitoring, and resupply of vital shipping routes. The naval facility will not be far from a US base that focuses on regional counter-terrorism operations. It also will not be far from a local Japanese overseas military base. Djibouti is strategically located not far from the Red Sea and thus the Indian Ocean. The base is a sign of China’s greater outward tendencies, though China characterizes its base as a logistics facility (Katrina Manson, “China Military to Set Up First Overseas Base in Horn of Africa,” Financial Times, March 31, 2016)

China Railway Rolling Stock Corp. (CRRC), state-owned enterprise (SOE), plans to build bullet trains and provide services in developed markets. It seeks to grab more global market share from its foreign competitors and is talking with more than 30 countries, including the US, Russia, Brazil, and Iran, about high speed projects. CRRC has built manufacturing facilities and maintenance centers in the Brazil, Malaysia, and the US and wants to create a new high speed rail culture in the US. Wang Yongzhi, CRRC’s chief information officer, said the Belt and Road Initiative will help China export more high speed rail technologies (Zhong Nan, “Railway Companies on Track to Haul the World,” China Daily, March 28, 2016, http://www.chinadaily.com.cn/business/2016-03/28/content_24126957.htm)

Regarding China National Chemical Corp.’s planned acquisition of Syngenta AG, a Syngenta AG spokesperson said, “‘we welcome a full review of the transaction by the US government’” and “‘do not believe the proposed transaction raises any food safety or significant national security issues.” Iowa Senator Charles Grassley said, “Lawmakers want food security and safety implications analyzed,” especially since the deal “give China even more control over the global market for genetically modified corn, soybean and other seeds than it already has...Grassley said he was concerned [the deal] would give Beijing ownership of a vital part of the US agricultural infrastructure (Paul Welitzkin, “ChemChina’s Takeover ‘Poses No Security Issues,’” China Daily, March 26, 2016, http://www.chinadaily.com.cn/business/2016-03/26/content_24109058.htm)

Japan has expressed an interest in a multi-billion dollar new deep-sea port project in Patimban, Indonesia replying “to an offer from the Indonesian government to take on the largest share, $2.49 billion, of a private loan to finance the development of the port.” Japan has agreed to the plan provided Indonesia issues a presidential regulation to ensure the ease of the port development. Indonesia wants a loan with a 0.1 percent interest rate for the project while Japan has offered 0.25 percent. It will be the largest project funded by Japan in Indonesia if the two sides agree on terms (Farida Susanty, “Japan expressed interest in Patimban project,” The Jakarta Post, March 29 2016, http://www.thejakartapost.com/news/2016/03/29/japan-expresses-interest-p...)

JR Tokai and its American partner Texas Central Partners (TCP) are going to ask the US Federal Railroad Administration, with whom they already have been having conversations, to “set new rules allowing an ultrahigh-speed line [a 400km line connecting Dallas and Houston]…to be built to Japanese bullet train specifications.” This means that the line would use the same standards as “used by the Tokaido Shinkansen running between Tokyo and Osaka.” In essence, JR Tokai is seeking to use lighter cars, that facilitate high speed rail, whereas American regulations call for strong, heavy cars that minimize casualties resulting from a collision (Tomohiro Ichihara, “Texas Bullet Train Project Pushing for Japan Friendly Rules,” Nikkei Asian Review, March 30, 2016, http://asia.nikkei.com/Business/Companies/Texas-bullet-train-project-pus...)

Based on an investigation last July, the Korean National Tax Service imposed a 50 billion won surcharge on Mercedes-Benz Korea. The amount was unusual compared with other surcharges the National Tax Service has imposed. In March this year, the company was accused of selling 98 units that changed transmissions speeds without properly informing the government. The Korean Ministry of Land, Infrastructure, and Transport, working with other ministries, subsequently accused Mercedes of violating the Automobile Management Act, the Clean Air Conservation Act, and the Noise and Vibration Control Act. Consequently, it imposed a surcharge of 168.8 million won on the company (Jung Min-hee, “National Tax Service Imposed Surcharge on Mercedes-Benz Korea,” Business Korea, March 30, 2016, http://www.businesskorea.co.kr/english/news/industry/14249-surcharge-50-...)

After the recent closure of the Kaesong Industrial Complex in North Korea, the Korea Trade-Investment Promotion Agency (KOTRA) will send an investment delegation, consisting of five government employees and 26 representatives from 20 corporations, to Vietnam to search for industrial complexes in Ho Chi Minh. KOTRA’s goal is to help South Korean firms move their facilities out of the complex in North Korea. An ideal new destination will have a wage level similar to that of the Kaesong Industrial Complex as well as good infrastructure. Besides Vietnam, Cambodia and India also may be preferable alternatives (Jung Min-hee, “KOTRA to Seek for Alternative to Kaesong Industrial Complex,” Business Korea, March 31, 2016, http://www.businesskorea.co.kr/english/news/industry/14258-good-bye-kaes...)

15 South Korean construction companies, the International Contractors Association of Korea, and the Korea Plant Industries Association announced the establishment of a public-private consultative council to reinvigorate Korean overseas construction business. The Council’s four subcommittees will address topics such as petroleum & gas, power generation, infrastructure, and research & development. The council will try to find ways to get Middle-East oil-producing countries to replace business undercut by lower oil prices. Council task forces will focus on the Iranian construction market and the Asia Infrastructure Investment Bank, among others. The Korea Export-Import Bank and insurance organizations will participate in the council (Jung Min-hee, “New Council Set Up for Overseas Construction Business,” Business Korea, April 1, 2016, http://www.businesskorea.co.kr/english/news/industry/14273-public-privat...)

Failing in its effort to get Beijing to increase its investment participation and provide a lower interest rate for the Bangkok to Nakhon Ratchasima high-speed train line project, the Thai government has decided to pay 100 percent of the cost of line, which will be built by China at a cost of 170 billion baht. However, Democrats challenge this plan, arguing that the funds would be better spent on double-track freight rail and motorways. In addition, they say that it is better to have a co-investor, as carrying the whole financial burden will create long-term budgetary constraints for the government (Patsara Jikkham, “Democrats Oppose Thai-Sino Railway Decision,” Bangkok Post, March 28, 2016, http://www.bangkokpost.com/business/news/913004/democrats-oppose-thai-si...)

In the first quarter of this year, Vietnam received approximately US $4 billion in foreign direct investment (FDI), an increase of 119 percent over the same period last year. South Korea is the leading foreign investor in Vietnam, with a total investment of US $888.6 million, followed by Singapore and Taiwan. Manufacturing and processing industry attracted US $2.9 billion, making up 72.2 percent of total inward FDI flows into the country. Deputy Minister of Industry and Trade said Vietnam should develop policies to make FDI contribute to the country’s development (“Foreign investors pour $4 billion into VN Q1,” Vietnam News, March 28 2016, http://vietnamnews.vn/economy/294403/foreign-investors-pour-4-billion-in...)