MNCs in the News-2014-07-11

Rising public concern about pollution has led the Chinese government to pay greater attention to industrial emissions. The first week of July, the Beijing equivalent of an environmental protection agency fined a subsidiary of U.S. energy products and services provider Babcock & Wilcox almost 600,000 yuan for air pollution, a result of the company failing to rectify behaviors for which it previously was fined. The fine was the largest since Beijing put various air pollution prevention and control regulations into effect. Two months earlier, Babcock & Wilcox Beijing was fined 300,000 yuan for releasing harmful organic compounds into the air (“Babcock & Wilcox Fined for Beijing Air Pollution,” Xinhua, July 7, 2014, http://news.xinhuanet.com/english/business/2014-07/07/c_133466126.htm)

China’s State Administration of Taxation (“SAT”) has put forth a new regulation that requires greater disclosure in terms of content (place of establishment, shareholders, and profit distributions), frequency, and activities by mainland companies of investments in which they have a direct or indirect controlling stake of 50 per cent or more. SAT stated that the purpose of the regulation was to enhance the Chinese central government’s ability to collect taxes from Chinese companies overseas. The regulation fits into China’s broader, ongoing effort to improve tax compliance as well as to obtain more information about the overseas investments of Chinese firms (Toh Han Shih, “China Tightens Tax Noose on Companies with Overseas Assets,” South China Morning Post, July 7, 2014, http://www.scmp.com/print/business/china-business/article/1548279/china-...)

China recently confirmed what many already knew: it has supplied major amounts of foreign aid to Africa, a continent in which Chinese companies have actively invested. According to a government policy paper, between 2010 and 2012, China provided more than US $7 billion, half of all its foreign aid (grants, loans, and debt relief), to Africa. China emphasized its aid has been given without political conditions, has helped boost local infrastructure, and has helped trained locals. Some have criticized China for supporting governments with questionable human rights records, backing projects that harm the environment, and doing little for local economies (Ben Blanchard and Megha Rajagopalan, “China Says More than half of Foreign Aid Given to Africa,” Reuters, July 10, 2014; http://www.reuters.com/article/2014/07/10/us-china-aid-idUSKBN0FF0YN2014...)

CNOOC Offshore Oil Engineering Company, a subsidiary of China National Offshore Oil Corporation, concluded a US $1.6 billion deal with Russia’s Novatek to build equipment for a liquefied natural gas (LNG) project, the Yamal LNG Project, in Siberia. The project involves Novatek, France’s Total, and China’s China National Petroleum Corporation (CNPC). CNPC already has signed a major deal to buy LNG from Yamal as has Russia’s Gazprom. Not long ago, in a deal shepherded through by China and Russia’s leaders at a time of warming Sino-Russian relations, CNPC agreed to a 20-year gas contract worth US $400 billion with Gazprom (“China Signs $1.6b engineering deal for Siberian LNG Project,” China Daily, July 11, 2014, http://www.chinadaily.com.cn/business/2014-07/11/content_17728838.htm)

China’s First Automotive Works (FAW) Group Corporation and the China-Africa Development Fund are jointly funding a US $57 million vehicle assembly plant investment in the COEGA Industrial Development Zone in Eastern Cape Province. The South African government welcomed the investment since it views manufacturing as an important pillar of economic development and believes it will help boost foreign investor sentiment. South African President Jacob Zuma, who has had a good political and economic relationship with China, touted the assembly plant’s potential for job creation and ability to enhance local lives (“S. African president Unveils Chinese-funded vehicle assembly plant,” China Daily, July 11, 2014, http://www.chinadaily.com.cn/business/motoring/2014-07/11/content_177246...)

News sources report that Facebook, which is banned in China, has signed a multi-year lease in a prime office space in Beijing’s Central Business District. Despite operating limits in China and once noting in its IPO prospectus that it faced many legal and regulatory challenges in entering China, Facebook has been selling ads on behalf of Chinese companies that want to reach others outside China. Facebook has been tapping into China’s technical expertise with thousands of application developers. While Facebook has not officially acknowledged the office space, it touted Facebook’s ability to extend the reach of Chinese businesses and others (“Facebook Leases Office in Beijing with Eye on Long-Term prospects,” China Daily, July 5, 2014, http://www.chinadaily.com.cn/business/tech/2014-07/05/content_17649782.htm)

Foreign voices are increasingly expressing the sentiment that China has become a less attractive investment environment due to greater competition from Chinese firms, slowing economic growth, government preferences for domestic companies, market access restrictions, and pressures to transfer technology. Some have opined the “golden age of multinationals in China is over.” Foreign companies have become more sensitive to difficulties they previously ignored and now must face up to the fact they may be accosted rather than acclaimed. The situation has worsened in the wake of Edward Snowden’s revelations about American spying with China pushing to distance itself from foreign technology (Simon Denyer, “U.S. Companies Feel A Chill in China, Even as Many Still Rake in Profits,” Washington Post, July 4, 2014; Charles Clover, “Tech Sector Caught in War of Words over US-China Spying Claims,” Financial Times, July 9, 2014)

Japan will hold a National Security Council meeting at the end of July to endorse the export of high-tech sensors, key parts for interceptor missiles, to the US, pursuant to the three principles governing the transfer of defense equipment and technology that were introduced in April. This will be the first case of post-War Japan exporting defense equipment to a foreign country. The US will build missiles with the parts procured from Japan and export them to Qatar. The Japanese government says that the export of these sensors, used to identify and track missile targets, will not escalate any conflicts (“The Japanese government to allow the U.S.’s export of missile parts made by Mitsubishi Heavy to the third party by the end of this month,” Nikkei, July 7, 2014, http://www.nikkei.com/article/DGXNASFS04017_V00C14A7MM8000/)

According to the Chairman of France’s nuclear agency, Bernard Bigot, Mitsubishi Heavy Industries is likely to assist in the development of Astrid (Advanced Sodium Technological Reactor for Industrial Demonstration), a new type of reactor. At a summit in France in May, Japanese Prime Minister Shinzo Abe agreed to strengthen cooperation between Japan and France in this project. Japan’s Toshiba and various French energy companies such as Alstom and Areva also are participating as will the Japan Atomic Energy Agency. Astrid is said to decrease the amount of nuclear waste and greatly shorten the amount of time that radiation is emitted (Takahisa Miwa, “Mitsubishi Heavy to help French next-generation nuclear project,” Nikkei Asian Review, July 8, 2014, http://asia.nikkei.com/Business/Companies/Mitsubishi-Heavy-to-help-Frenc...)

PT Bhimasena Power Indonesia was a planned US $4 billion coal-fired power plant to supply electricity to 13 million people in Central Java Province. It was promoted by the Japanese government-linked Electric Power Development Co. and a Japanese trading firm, Itochu Corp., and was to be largely funded through Japanese investment. However, significant opposition by local villagers concerned with the power plant’s environmental impact ultimately forced the Indonesia-Japan consortium to declare force majeure. The consortium is committed to the continuation of the project and is seeking assistance from the Indonesian government to resolve the situation (“Indonesia-Japan consortium declares force majeure on power plant,” The Mainichi Newspapers, July 8, 2014, http://mainichi.jp/english/english/newsselect/news/20140708p2g00m0bu0610...)

Chinese interest in investing in South Korea has been reinforced by Chinese President Xi Jinping’s recent visit to South Korea. According to the Korea Trade-Investment Promotion Agency, 93 percent of Chinese investment in South Korea during the first half of this year has been in the service sector. Geographically, it has focused on places outside Seoul. Specifically, Chinese investment in Jeju and Gangwon Province surged, highlighting the fact that Chinese investment has been diversifying and shifting to non-metropolitan areas as a result of changes in Chinese investment policy that provide Chinese investors with more autonomy (M. H. Lee, “China Eyes Investment Opportunities in South Korea,” The Korea Bizwire, July 5, 2014, http://koreabizwire.com/china-eyes-investment-opportunities-in-western-a...)

*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.