MNCs in the News-2014-05-02

At the end of April, Microsoft announced that it would start selling the Xbox One game console in China. Previously, the console could not be sold because of government concerns about potentially negative social effects. The launch of the Shanghai Free Trade Zone, however, witnessed a shift in government policy with game console makers being allowed, as part of the liberalization measures implemented for the SFTZ, to produce consoles and sell them in China. Game consoles have been available illegally in China since the ban was instituted 14 years ago and indeed have long been produced in China for export (“China Suspends Ban on Foreign Video Game Console Sales,” China Daily, January 7, 2014, http://www.chinadaily.com.cn/business/tech/2014-01/07/content_17221551.htm; and Eric Jou, “High Score: Xbox One to Hit China,” China Daily, http://europe.chinadaily.com.cn/business/2014-04/30/content_17477277_2.htm

A nearly month-long strike at Yue Yuen Industrial Ltd., a Taiwanese athletic shoe and footwear producer for foreign companies such as Adidas, Nike, and Timberland, that eventually grew to include more than 40,000 workers, essentially concluded after the company came to terms with workers about social, particular pension, benefits, by agreeing to pay all amounts due and increase worker living allowances. The CEO of Nike said that his company had considered moving production elsewhere because of concerns about the factory violating Nike workplace standards which require that contractors pay at least the minimum wage and provide all legally mandated benefits (“S China Footwear Factory Resumes Production,” China Daily, April 29, 2014, http://www.chinadaily.com.cn/business/2014-04/29/content_17473069.htm; and “Nike CEO Says Could Shift China Production Overseas over Labor Strife,” China Daily, May 2, 2014, http://www.chinadaily.com.cn/business/2014-05/02/content_17479427.htm)

The end of April witnessed a major deal between China National Petroleum Company (CNPC), a Chinese state-owned enterprise, and the Abu Dhabi National Oil Company, involving the formation of a joint company majority owned by Abu Dhabi. In return for its 40 percent investment, CNPC will gain a share of the oil produced in oilfields associated with the joint venture. Abu Dhabi has been seeking partners to extend the life of its oil fields, which have been dominated by western energy giants. The deal is logical given most of Abu Dhabi’s oil goes to Asia and China’s voracious energy needs (Simeon Kerr, “China’s CNPC Signs UAE Oil Deal,” Financial Times, April 29, 2014)

As previously reported, China seized a Mitsui Lines ship in late April. Mitsui quickly resolved the dispute by paying compensation. In the view of Tokyo, compensation based on wartime claims was unjustified because China and Japan had resolved the issue of reparations pursuant to their 1972 joint communiqué. The lack of Sino-Japanese agreement on the implications of the 1972 joint communiqué became a moot point because the issue was handled as a problem between two private firms. According to some sources, China was concerned with the negative economic fallout if the case was not handled properly. As for Japan, the government treated this case as a unique incident and pushed for a quick end to the dispute (“Mitsui O.S.K. Lines’ ships seized, gray zone between Japan-China statements,” Nikkei, April 30, 2014, http://www.nikkei.com/article/DGXNASFS2802Q_Z20C14A4PE8000/)

Mitsubishi Heavy Industries will sell a package of PM 2.5 removal equipment to a coal-fired power station in China. The equipment is much welcomed because it will remove over 99.9% of the tiny particles contained in power station exhaust fumes, which can cause serious respiratory problems. The Chinese government’s plan to reduce PM2.5 by 15 to 20 percent by 2017 is powering the transaction. In fact, some estimate that China may invest about 30 trillion yen in pollution control equipment (“Mitsubishi to sell a package of PM2.5 removal equipment to a coal-fired power plant in China,” Nikkei, April 30, 2014, http://www.nikkei.com/article/DGXNASDZ300EB_Q4A430C1MM8000/)

Demand for political risk insurance is increasing rapidly and Singapore has become the world’s second largest market for this type of insurance coverage. Due to the growing number of firms that have to guard against political risk as a result of expansion into emerging markets, there has been a surge in political risk policies insured in Singapore, with the Monetary Authority of Singapore estimating that premiums have increased 10 percent per year since 2008. Twenty-five of the forty-five global insurers now have a presence in Singapore, which represents a major increase from 10 years ago (Chia Yan Min, “Demand for credit, political risk insurance going up,” Asia One Business, April 30, 2014, http://business.asiaone.com/news/demand-credit-political-risk-insurance-...)

According to government statistics, through the end of March, Taiwan has received nearly US $6.6 billion of investments from overseas Taiwanese investors. Ministry of Economic Affairs (MOE)- designed programs have much to do with these latest investment inflow increases. One example is a program launched in 2012 to promote investment in the local economy by providing incentives such as raising the limit on foreign workers companies are allowed to hire should they establish a research and development center in Taiwan. So far the MOE has approved 43 project applications, with the expectations that this will create around 30,000 new jobs (CNA, “Overseas Taiwan firms invest nearly NT$200 bil. in Taiwan,” The China Post, April 27, 2014, http://www.chinapost.com.tw/business/asia-taiwan/2014/04/27/406299/Overs...)

*The information used herein is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content in this section does not necessarily represent the official view of the Wong MNC Center, its Board of Directors, or its Advisory Board.