MNCs in the News-2014-10-17

Inward foreign direct investment (IFDI) for September grew year-over-year (YOY), following a “sharp drop in August.” Even so, IFDI flows have fallen for three straight months. As well, China’s IFDI for the first nine months of 2014 hit $87.4 billion, down 1.4 percent YOY. China’s Ministry of Commerce downplayed the declines, expecting “FDI to keep its stable path.” IFDI continues to pour into the service sector while it is dropping in the manufacturing sector. Korea and the UK remain important sources of IFDI while Japanese IFDI has plunged. Many attribute the current FDI situation to questions about China’s growth prospects (Xiaoyi Shao and Pete Sweeney, “China September FDI Recovers on Month But Still Down 1.4 Percent for the Year,” Reuters, October 16, 2014,

Intel recently made a large investment in two Chinese mobile chipmakers by buying shares in a Tsinghua University holding company. Subsequent analyses paint the deal as helping Intel make ground on Qualcomm, the leading mobile chipmaker, show it is a “true partner,” and protect its intellectual property. As for China, the deal helps advance its decade-long quest to build up its domestic semiconductor sector to undercut the position of foreign players like Qualcomm and Samsung and enhance information security. The deal follows the release of a Chinese State Council semiconductor sector policy in June that set ambitious sectoral growth targets (Gerry Shih, Noel Randewich, and Matthew Miller, “Intel Gains A New Ally in China’s Chip Wars-Beijing,” Reuters, October 13, 2014,

Warm Chinese-German politico-economic relations, distilled in an earlier MNCs in the News digest, have spilled into Sino-German business-to-business interactions. Last week, Volkswagen (VW), which relies heavily on the China auto market for its overall sales and profits, announced an extension of its joint venture (JV) with China FAW Group by 25 years from 2016 to 2041. VW, a very early entrant into China, will increase its R&D activities in China as well as accelerate work on fuel-saving technology. According to analysts, the extension was logical given VW’s heavy dependence on China. VW also has a JV with SAIC Motor Corp. (“Volkswagen Extends China Joint Venture by 25 Years to Tighten Market Grip,” China Daily, October 11, 2014,

Flowing reports of a deal about two weeks ago, European Union (EU) representatives recently announced that the EU and China had finally resolved their long-running telecommunications dispute. While EU Trade Commissioner Karel De Gucht did not offer any specifics, past reports indicate that the deal would include, among other things, China limiting subsidies to Huawei and ZTE, both sides monitoring the market share of Chinese firms in Europe and European firms in China, and China opening up wider its telecommunications sector. The EU would drop its investigation of Chinese subsidy practices (Philip Blenkinsop, “EU, China Have Resolved Telecoms Dispute: EU Trade Chief,” Reuters, October 14, 2014,

A visit to Italy by Chinese Premier Li Keqiang, who is attending Asia-Europe Meetings, has produced numerous economic deals. They relate to financing, joint investment projects between the Italian state investment fund FSI and the China Investment Corporation, and helicopter sales. The intensification of economic interactions comes during a year when China’s central bank has been investing in Italian blue-chip companies while Chinese state-owned firms have been taking significant stakes in Italian firms. Italian Prime Minister Matteo Renzi said the deals were an “‘antipasto’” and that Italy had to “‘bring more China to Italy and take more Italy to China’” (Francesca Landini and Steve Scherer, “Italy and China Sign Business Deals Worth $10 billion,” Reuters, October 14, 2014,

Sino-Russian deals show no abatement with the conclusion of new energy, trade, high-speed rail, financial, and currency accords at the beginning of this week. Russia needs Chinese money, markets, and political backing, especially at a time it faces Western sanctions. China wants Russian resources, particularly oil and gas, infrastructure opportunities, and defense cooperation and goods. While the relationship is destined to grow, there are some signs of caution among Russian elites and Chinese SOEs and private banks and firms who worry about the downsides of operating in Russia and the geopolitical risks of cooperating with a country under Western sanctions (Jack Farchy and Kathrin Hille, “Chinese Lenders Grow Wary of Russia,” Financial Times, October 12, 2014; Vladimir Solidatkin, “Russia Signs Deals with China to Help Weather Sanctions,” Reuters, October 13, 2014, Henry Meyer and Evgenia Pismennaya, “Putin Deals China Winning Hand as Sanctions Power Rival,” Bloomberg, October 13, 2014, “Russia, China Sign Deal on Kazan-Moscow High-Speed Rail,”, October 14, 2014,

The US-China Business Council (USCBC) released a letter signed by more four dozen American chief executive officers that called on US President Barack Obama to make a US-China Bilateral Investment Treaty a priority when he next meets Chinese President Xi Jinping in November. USCBC President John Frisbie argues that a “high-standard US-China Bilateral Investment Treaty [BIT] will have a significant and lasting impact on the trajectory of the US-China commercial relationship.” Advocates of a US-China BIT tout it will open the Chinese market further to US goods and services, provide predictability for businesses, and help Chinese firms in the US (Paul Welitzkin, “US CEOs Want Trade Treaty a Priority in Obama-Xi Meeting,” China Daily, October 17, 2014,

Per Japan’s request, the EU has excluded three Japan Railways—East Japan Railway Co., Central Japan Railway Co. (JR Tokai), and West Japan Railway Co.—from the World Trade Organization’s government procurement accord that requires international competitive bids for government procurement above a certain threshold. Although these railways were completely privatized in 2006, the EU had opposed the exclusion of these companies for a long time, arguing that they should be opened to foreign competition. This decision may facilitate negotiations for a free trade agreement between the EU and Japan (“EU to exclude Japan Railway from government procurement rule: diplomatic source,” The Japan Times, October 16, 2014,

Japanese giant trading conglomerate Marubeni Corp. will cooperate with Thailand’s national energy company to build a cutting-edge thermal power plant in Myanmar. This will bolster Myanmar’s electricity supplies and will give it new economic opportunities by allowing it to supply power to neighboring countries like Thailand. Marubeni will sign a memorandum of understanding with the Myanmar government to collaborate with Myanmar’s construction firm to establish a joint-venture by 2016. Marubeni has worked with twenty-three countries on power plant projects, making it the largest Japanese trading house in terms of the amount of power generation overseas (“Marubeni to build a most-advanced thermal power plant in Myanmar as well as supplying power to Thailand,” Nikkei, October 10, 2014,

The Japanese Health Care Ministry is planning to organize a health care facilities tour next week for Southeast Asian officials who work in the social welfare and health care fields. The program focuses on equipment and food for the elderly in order to promote Japanese-style nursing care business in Southeast Asia. Nursing care product makers and care service providers, including Riei and EN Otsuka Pharmaceuticals, will present their products and services. Japan has the most rapidly aging society in the world and has developed many elderly care products. Thus, the government sees opportunities in promoting such products in neighboring countries (“Japan to market nursing products to Southeast Asia,” Nikkei, October 16, 2014,

On October 14, during a tech business dinner meeting in Seoul, German government representatives called on Korean companies to invest in the country’s information and communication technology (ICT). Jürgen Friedrich, Chief executive of Germany Trade & investment urged investors to consider doing business in Germany, emphasizing the country’s favorable conditions such as highly skilled workforce and high quality infrastructure. Furthermore, Friedrich emphasized the market potential for Korean companies in Germany given the latter’s status as the European R&D leader (Park Ji- Won, “Germany Courts Korean Investment in the ICT Sector,” Korea Times, October 15th, 2014,

Reports indicate that a large number of South Koreans are switching away from domestic messaging services such as KakaoTalk to foreign services such as Telegram as a result of concerns about government monitoring. Concerns emerged after Korean prosecutors said they would crackdown on online rumor-mongering. Specifically, the Supreme Prosecutors’ Office created a task to “step up cyber surveillance and investigations into those spreading false information on the internet.” Moreover, an opposition party member claimed the government had snooped on his KakaoTalk chat records. Kakao has moved to assuage worries by offering encryption and keeping data for shorter periods of time (Song Jung-A, “Koreans Lose Faith in Homegrown Chat Apps,” Financial Times, October 16, 2014).

In an attempt to push the mining industry to use more local products, the Indonesian Industry Ministry signed a memorandum of understanding (MOU) with PT Freeport Indonesia, the local arm of mining company Freeport McMoran Copper & Gold Inc. (US), to increase the use of locally produced goods and services. Prior to the MOU signing, the Indonesian government had heavily criticized Freeport for its heavy reliance on imported goods and services. The new arrangement could generate revenues up to US $1.28 billion for local firms (Tama Salim, “Ministry Inks Deal with Freeport on Increased Use of Local Components,” The Jakarta Post, October 16, 2014,

The EU has signed a free trade deal with Singapore, which includes investor protection clauses that will ensure a stable and fair regime for foreign investors. The agreement includes an investor-state dispute settlement (ISDC) provision allowing companies to take defensive legal action against governments. Some critics say that the agreement gives companies too much power. This is the EU’s first deal with a Southeast Asian economy and is seen as a stepping stone for similar deals with other regional economies (“EU, Singapore Conclude Investment Protection Talks,” Asia One Business, October 17, 2014,

*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.