MNCs in News-2016-12-30

China’s National Development and Reform Commission (NDRC) released a document which states China “will focus on freeing up foreign investment in banking, insurance, securities, and future markets trading firms as part of a wider opening up of the services sector.” However, the NDRC did not provide any specifics or time frames. Moreover, it said vaguely China would “maintain ‘some controls.’” It also said China would liberalize areas like unconventional oil and gas production and open up areas like education, the internet, and telecoms in an orderly manner. The document differs somewhat from foreign investment guidelines China released earlier this month (Kevin Yao, “China to Relax Curbs on Foreign Investment in Banking, Securities-State Planner,” Reuters, December 29, 2016, http://www.reuters.com/article/us-china-economy-foreigninvestment-refor-...)

Chinese companies made USD $220.4 billion in acquisitions in 2016. Going forward, the trend may slow or reverse somewhat given increased scrutiny in China and abroad. In Australia, Germany, and Norway, for instance, deals involving China have been stopped for various reasons. China itself has been a barrier with the China Insurance Regulatory Commission ending sales of certain insurance products that funded deals and the State Administration for Foreign Exchange (SAFE) moving to limit “speculative” deals. Per some sources, SAFE approvals now take 4-6 months versus 2-3 months. However, deals that are “‘strategic for China Inc.’” likely will go ahead (“Chinese M&A: Interrupted Travel,” Financial Times, December 28, 2016; Don Weinland, “Chinese M&A Boom Faces Regulatory Checks,” Financial Times, December 29, 2016)

Japan may become, relatively speaking, a big source of OFDI in 2017 because its companies are flush with almost USD $3.2 trillion in cash, have limited growth prospects at home, and China is working to restrict outward capital flows. Already this year, Japanese firms have invested USD $93 billion overseas, which may not exceed the record in 2015. “The Japan-China rivalry may play out in the natural resources sector…the sector is traditionally favored by China but is of growing interest to Japan. Japanese firms may be more inclined to invest in the US given some of President-elect Donald Trump’s plans (“Japan Inc May Have Edge in Dals as China Restricts Capital Outflows,” The Straits Times, December 29, 2016, http://www.straitstimes.com/business/companies-markets/japan-inc-may-hav...)

Japan’s Takata Corp. which made defective air bags linked to 16 deaths worldwide, may settle criminal charges with the U.S. Department of Justice before Obama leaves office. As part of the settlement, Takata would have to plead guilty to criminal misconduct. Pursuant to the settlement, it also would have to pay close to a USD $1 billion fine and accept monitors. More than 40 million cars with Takata air bag inflators have been subject to a recall while the company already has paid USD $70 million in fines. The settlement might pave the way for an eventual sale of Takata (“Takata Could Settle U.S. Criminal Probe Next Month: Source,” Reuters, December 29, 2016, http://www.reuters.com/article/us-takata-autos-idUSKBN14H1F8; “Takata Gains on Report of Near US Settlement,” The Star Online, December 20, 2016, http://www.thestar.com.my/business/business-news/2016/12/30/takata-gains...)

Charging Qualcomm with “abusing its market dominance,” Korea’s Fair Trade Commission (FTC) leveled a USD $854 million fine on the firm. The Korean FTC said “‘Qualcomm has forced unilateral, unfair terms on licensing contracts without going through a fair calculation process’” and had not fairly paid for the use of patents held by others. Korean firms have been vocal the royalties they pay are excessive. Aside from lower royalties, Qualcomm may have to let others access more of its key patents. Qualcomm said it planned to challenge the findings and implied regulators were biased and did not treat it fairly (Song Jung-a and Richard Waters, “Qualcomm Fined $854m in South Korea Antitrust Case,” Financial Times, December 27, 2016; “S. Korea Fines Qualcomm Record $1.2b in Antitrust Case,” The Straits Times, December 29, 2016, http://www.straitstimes.com/business/companies-markets/s-korea-fines-qua...)

Malaysia’s Federal Land Development Authority (FELDA), a government company, will take a 37 percent stake in Eagle High, a palm oil project in Indonesia. The Malaysian opposition has criticized the deal because Eagle High is controlled by Rajawali Group, which, in turn, is run by Peter Sondakh, a businessman with close ties to Malaysian Prime Minister Najib Razak. FELDA defends the deal as giving it access to land at a time when less land is available in Malaysia. There also are some environmental and labor issues potentially linked to the deal because it may involve deforestation and mistreatment of workers (Jeevan Vasagar, “Palm Oil Deal Embroiled in Malaysian Politics,” Financial Times, December 29, 2016)