MNCs in the News-2014-08-29

Reports that Beijing banned Chinese banks from working with IBM (USA) due to security concerns now seem wrong or, at best, seriously incomplete. D.C. Chien, the chairman and CEO of IBM China, told reporters that IBMs currently is working with local banks. Moreover, the Industrial and Commercial Bank of China (ICBC) and IBM recently jointly announced that ICBC would use a new IBM mainframe system. According to analysts, technical issues mean local banks need years to replace IBM and other foreign servers. This fact, plus the worries engendered by rumors of a ban, led Chinese banks to lobby against one (Gao Yuan, “IBM’s Sever Business Remains On,” China Daily, August 22, 2014, http://www.chinadaily.com.cn/business/tech/2014-08/22/content_18468355.htm; “ICBC Deal Shows IBM Still Engaged in China,” China Daily, August 27, 2014, http://www.chinadaily.com.cn/business/2014-08/27/content_18492612.htm).

2014-08-01 and 2014-08-08 “MNCs in the News” digests highlighted that China had begun an investigation of Microsoft (USA) to determine if it was a monopoly, its product bundling practices were problematic, and it had failed to disclose product compatibility information to competitors. Last week, the head of China’s State Administration for Industry and Commerce (SAIC) said that while MSFT has not been fully transparent about its China sales data, it has expressed a willingness to cooperate. Sources indicate SAIC is focusing on Microsoft’s bundling practices, specifically its bundling of its web browser and media player with its Windows operating system (Gerry Shih and Paul Carsten, “Chinese Antitrust Regulator Targets Microsoft’s Web Browser, Media Player,” Reuters, August 26, 2014, http://www.reuters.com/assets/print?aid=USKBN0GQ06920140826; “Microsoft Not Transparent with Sales Information: Regulator,” China Daily, August 26, 2014, http://www.chinadaily.com.cn/business/2014-08/26/content_18489131.htm)

Despite the pressure against Microsoft and other foreign firms like Symantec and Qualcomm, partly related to heightened Chinese government concerns about the security of foreign technology in the wake of Edward Snowden spying revelations as well as other factors such as techno-nationalism and suspected protectionism, foreign firms continue to win government IT contracts in China. For instance, Australian anti-counterfeiting firm YPB Group entered into a deal with China’s Ministry of Public Security that would provide the latter with YPB’s invisible tracer products and T1 scanners (“Australian Company Signs Security Deal with Chinese Govt,” China Daily, August 25, 2014, http://www.chinadaily.com.cn/business/2014-08/25/content_18483091.htm)

Enhanced food safety, a major concern of the Chinese government, which the Shanghai Husi meat scandal and more recent scandals involving tainted infant cereal and poisoned chicken feet, highlighted as an area needing persistent attention, continue to beef up foreign investment in China. For example, private equity firm KKR & Co. recently spent $400 million for an 18 percent stake in Chinese chicken producer Fujian Sunner Development Co. Ltd. Other private equity firms fishing around for deals include Carlyle Group and Olympus Capital who aim to use better technology and management techniques to meet China’s growing demand for safer food (Stephen Aldred, “KKR Agrees to Buy 18 Percent of China Chicken Firm for $400 million,” Reuters, August 26, 2014, http://www.reuters.com/assets/print?aid=USKBN0GQ1A320140826; “KKR Agrees to Buy 18% of China Chicken Firm for $400m,” China Daily, August 27, 2014, http://www.chinadaily.com.cn/business/2014-08/27/content_18492803.htm)

Mars, a global food conglomerate with well-known candy and drink brands such as Dove, Wrigleys, and Uncle Ben’s, will set up a global food safety center in Beijing that will undertake activities relating to food safety research, training/education, food safety standard setting, the identification of food safety threats, and university and research center networking. The center also will offer laboratory and technical facilities to regulators. It will be Mars’ first such center and one of the first such entities in China. The company aims to mitigate risks to its consumers, its supply chain, and its China production and export operations (Wang Zhuoqiong, “Mars to Set Up Food Safety Center,” China Daily, August 27, 2014, http://www.chinadaily.com.cn/business/2014-08/27/content_18493424.htm)

The Chief Executive of German auto parts maker ElringKlinger stated the Chinese government was demanding that three German car parts suppliers find local partners and establish joint ventures (JVs). He labeled the Chinese action “expropriation.” JV requirements already exist for foreign automakers, but are new for component makers. Around the same time, China’s Central Commission for Discipline Inspection of the Chinese Communist Party announced its was investigating some Chinese executives linked to Volkswagen’s Chinese JV FAW-Volkswagen for serious legal violations. As summarized in past “MNCs in the News” digests China already has been pressuring foreign auto companies regarding diverse practices (“German Car Parts Suppliers Asked to Form JVs in China: Stuttgarter,” Reuters, August 25, 2014, http://www.reuters.com/assets/print?aid=USKBN0GP0LV20140825; “China Corruption Watchdog Investigating Executives at Volkswagen JV,” Reuters, August 26, 2014, http://www.reuters.com/assets/print?aid=USKBN0GQ0L720140826)

The Chinese government keeps steeping on the brakes as far as foreign automobile companies are concerned. Following its decision to fine 12 Japanese auto parts and bearing companies for price-fixing and bid-rigging about 1 week ago, China’s National Development and Reform Commission now plans to turn its attention to vertical monopolies in the sector. Its aim seems to be to give Chinese companies access to parts and logistics systems that they cannot currently access and to make it easier for Chinese car dealers to determine their own car prices and the suppliers from which they will procure their auto parts (“NDRC to Target Vertical Monopolies in China’s Auto Market,” WantChinaTimes.com, August 28, 2014, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20140828000017&cid=...)

53 foreign firms in Shanghai collectively released their corporate social responsibility (CSR) reports for the first time on August 12. They did so to meet the requirements of the Shanghai Municipal Commission of Commerce which looks at CSR reports to assess a foreign company’s “comprehensive performance and contribution to the development of” Shanghai in areas like charity and the environment. While releasing CSR reports is nothing new for many of the firms participating in the collective release, these reports are specifically oriented toward China and are a way for firms to show their commitment to the China market and society (Wu Yiyao, “Foreign Firms in China Release CSR Reports,” China Daily, August 27, 2014, http://www.chinadaily.com.cn/business/2014-08/27/content_18493776.htm)

According to China’s Ministry of Commerce, Beijing, Shanghai, Jiangsu, Fujian, and other provinces will take part in a pilot program that will allow foreign investors to wholly own private hospitals, which have been exploding in number. Only investors from Macao, Hong Kong, and Taiwan, however, will be allowed to practice traditional Chinese medicine. The initiative is a way to alleviate pressure on the public system, to satiate local demand for higher quality care, and to elevate the quality of health care by bringing in foreign resources. Some estimate the Chinese health care market will reach US $1 trillion by 2020 (“Restrictions Loosened on Overseas Ownership of Hospitals,” China Daily, August 28, 2014, http://www.chinadaily.com.cn/business/2014-08/28/content_18500131.htm)

GM Korea announced that it had resumed production of its Damas minivan and the Labo mini-truck after an eight-month suspension resulting from its failure to meet new safety and environmental regulations. Customer, especially small business owner, resentment of the ban pushed the government to give GM Korea a grace period to comply with the new regulations. GM Korea resumed production on August 1, pledging to improve overall product quality. Pre-orders for the vehicles have been soaring at dealerships, thanks to their popularity and the government’s decision to allow them to be used as food trucks (Lee Ji-yoon, “GM Korea restarts Damas, Labo production,” The Korea Herald, August 27, 2014, http://www.koreaherald.com/view.php?ud=20140827001008)

At a signing ceremony attended by Kia’s Vice Chairman Lee Hyoung-Keun, Mexican President Enrique Pena Nieto, and Governor of Nuevo Leon Rodrigo Medina, Kia Motors announced it will build a $1 billion auto plant in Pesqueria, a city in Nuevo Leon, by 2016. Per Kia representatives, the new plant will facilitate the company’s entry into South American markets and ensure a stable supply of cars to its North American markets. The plant is expected to produce 300,000 compact cars a year and increase Kia’s annual production capacity to 3.37 million (Park Jin-hai, “Kia to invest $1 billion in Mexico,” The Korea Times, August 28, 2014, http://www.koreatimesus.com/kia-to-invest-1-billion-in-mexico/)

Despite the fact that the Seoul municipal government had ruled its operation illegal, Uber Korea, the local affiliate of US-based transportation network company Uber, announced recently that it would start its trial operation of an expanded ride-sharing service in Seoul that would allow the selection of a wider range of vehicles instead of just upscale limousines. Last month, the Seoul city government insisted that the company’s service was illegal and that it may ban its service. However, Uber said it would continue its launch of an UberX app that could be downloaded by smartphone users (“Uber Korea to start trial run of expanded ride-sharing service,” The Korea Herald, August 29, 2014, http://www.koreaherald.com/view.php?ud=20140829000608)

The Coca-Cola Korea Youth Foundation, established by the local affiliate of Coca-Cola, celebrates its 10th anniversary and a decade of helping teenagers lead a healthy lifestyle. The Foundation has been providing physical training and nutrition consulting to teenagers, offering them the opportunity to evaluate their health status. During summer and winter times, the Foundation operates sports camps to improve participants’ muscle power and cardiopulmonary function as well as their nutrition intake. The Foundation has also expanded access to its services to children from underprivileged families (Bae Ji-sook, “Coca-Cola celebrates 10th year of supporting youth health,” The Korea Herald, August 26, 2014, http://www.koreaherald.com/view.php?ud=20140826000772)

*The information compiled in the MNCs in the News digest is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content of the MNCs in the News digest does not necessarily represent the view of the Wong MNC Center, its Board of Directors, or its Advisory Board, but is intended for the non-commercial use of readers in order to foster debate and discussion and to facilitate and stimulate research.