MNCs in the News-2014-10-31

According to a recent Wall Street Journal (WSJ) report, Hewlett-Packard (H-P) is striving to sell, in whole or in part, H3C Technologies (formerly a unit of 3Com Corp.), its China-based networking unit. The WSJ implies this is a function of a tougher operating environment in China, which has seen Chinese security concerns and government industrial policy working to encourage government and other so-called sensitive sectors like the financial industry to use domestic firms. As well, foreign networking firms are facing increased competition from local Chinese firms as well as online offerings (Rick Carew, Dana Mattioli, and Juro Osawa, “H-P Seeks Local Buyer for Networking Business in China,” The Wall Street Journal, October 26, 2014, http://online.wsj.com/articles/h-p-seeks-local-buyer-for-its-chinese-net...)

China’s State Council announced “qualified” domestic and foreign firms can apply to set up bank card-clearing operations. The change could give foreign firms such as Visa Inc. new opportunities and undercut China UnionPay Co. (owned largely by state-owned banks)’s monopoly on clearing renminbi-denominated payments. China has not given details or timelines, leading one US Chamber of Commerce executive to state “until we see proof of it…we don’t have a deal.” China’s move links to a 2012 WTO decision that found China was not giving national treatment to foreign firms and, perhaps, increasing confidence in UnionPay’s ability to withstand foreign competition (Dinny McMahon, “China Eases Monopoly on Handling of Credit-Card Payments,” The Wall Street Journal, October 30, 2014, http://online.wsj.com/articles/china-to-open-domestic-bank-card-clearing... Gabriel Wildau, “China to Open Bank Cards to Foreign Competition,” Financial Times, October 30, 2014; “China Open Bank Card Clearing to Foreign Investors,” WantChinaTimes.com, October 30, 2014)

The Chinese Chamber of Commerce of Metals, Minerals, and Chemicals Imports and Exports has published “Guidelines for Social Responsibility in Outbound Mining Investments,” which it developed with China’s Ministry of Commerce and the German development agency GIZ and guidance from the OECD and Global Witness. The Guidelines include standards relating to labor, environmental protection, and human rights. They urge Chinese companies to have “‘ethical and fair operations, provide safe working conditions, minimize pollution, avoid contributions to armed groups, and improve the lives of local communities.’” The Guidelines seek to mitigate concerns about Chinese mining investment and improve the business environment (Becky Davis, “Chinese Mining Group Sets Guidelines for Overseas Interaction,” New York Times, October 24, 2014, http://www.nytimes.com/2014/10/25/business/international/chinese-mining-... Du Juan, “Guidelines for Overseas Mining Deals Announced,” China Daily, October 29, 2014, http://www.chinadaily.com.cn/business/2014-10/29/content_18818550.htm)

Xiaomi, a Chinese low-cost smartphone player which has quickly risen to the ranks of the top smartphone sellers worldwide, has moved to set up a data center in India to deal with concerns that its devices transmit user data back to China. In fact, India’s air force has cautioned its personnel about using Xiaomi devices. Xiaomi has faced similar concerns elsewhere and has begun to move non-Chinese data out of Beijing to address such anxieties (“Xiaomi to Open India Data Centre to Allay Privacy Fears,” BBC News, October 27, 2014, http://www.bbc.com/news/technology-29786324)

In February 2014 Lenovo concluded a deal with Google to purchase smartphone maker Motorola Mobility, making it the world’s 3rd largest smartphone manufacturer, though Lenovo most sought Motorola’s patents and licenses. To conclude, the deal had to win approval from authorities in Brazil, China, the European Union, Mexico, and the US and the US Committee on Foreign Investment and many expected it to go very slowly. However, it moved quickly despite various frictions between China and the US. Lenovo’s CEO said “the complicated politics presented no hurdles to the purchase.” “‘Wherever we do business, we should comply with local regulations’” (Charles Clover, “Lenovo Completes $2.91bn purchase of Motorola from Google,” Financial Times, October 30, 2014).

Japan and Turkey will establish a public-private joint committee this year to increase bilateral investment, trade and cultural exchange. Japanese firms are increasing their interactions with Turkey and this committee will provide a convenient forum for government officials and corporate managers to hold business discussions. Recent examples of Japan-Turkey business cooperation include a Japanese business consortium (involving Mitsubishi Heavy Industries), which is building a nuclear power plant in Turkey, and Toyota, which is increasing local production there. In the realm of cultural exchange, Japan will accept over 60 Turkish students a year to study in Japanese colleges and graduate schools (“Japan to establish a public-private committee with Turkey this year to promote investment to the country,” Nikkei, October 30, 2014, http://www.nikkei.com/article/DGXLASFS29H31_Z21C14A0PP8000/)

A shale gas plant in Louisiana (US) held its groundbreaking ceremony on October 23. Japan’s big trading houses, Mitsui & Co. and Mitsubishi, are involved in the project and the Japanese government expects it to ease the pressures faced by Japanese electric firms, which have been adversely affected by the Fukushima nuclear power plant disaster. The US government approved shale gas exports to Japan last month and four companies, including Tokyo Gas Co. and Tokyo Electric Power Company, have already concluded contracts to start importing shale gas beginning in 2018 (“The U.S. shale gas plant, which will export LNG to Japan, to commence a groundbreaking ceremony,” NHK News, October 24, 2014, http://www3.nhk.or.jp/news/html/20141024/k10015671061000.html)

Indonesian President Joko Widodo announced the cabinet members of his new administration on the 26. He emphasized experienced personnel and experts and chose Rahmat Gobel as a Trade Minister. Gobel is a graduate of Japan’s Chuo University, Chairman of the Indonesia-Japan Friendship Association, and a a Senior executive of a Panasonic local venture. Japan and Indonesia have a broad and deep trade and investment partnership and Japanese carmakers have a 95 percent share of the Indonesian new automobile market. The appointment of Gobel is expected to boost ties with Japan (“Indonesian new trade minister Rahmat Gobel, a senior executive of a Panasonic local venture” Nikkan Kogyo Shinbun, October 28, 2014, http://www.nikkan.co.jp/news/nkx1320141028agas.html)

A South Korean court has ordered Japanese firm Nachi-Fujikoshi Corporation to pay compensation to around 30 Koreans workers who served as slave laborers during the Second World War. The money will go to workers or, if they are not alive, their families. In 2013, Korean courts ordered Mitsubishi Heavy Industries, Nippon Steel, and Sumitomo Metal Corporation to pay compensation. These companies have or will file appeals. South Korean workers first sued in Japan, but Japanese courts rejected their claims as, initially, did Korean courts. However, a South Korean Supreme Court rulings in 2012 forced the cases back into lower courts (Choe Sang-Hun, “South Korean Court Orders Japanese Firm Nachi-Fujikoshi to Pay Forced Laborers,” New York Times, October 30, 2014, http://www.nytimes.com/2014/10/31/world/asia/nachi-fujikoshi-south-korea...)

Singapore seeks to become an economic center for foreign multinational corporations as the world’s economic focus shifts to Southeast Asia and more firms across different sectors are moving their operations to the region. Singapore offers a good investment opportunity due to its strong intellectual property protection and advanced manufacturing abilities. The Singapore Economic Development Board (EDB) announced plants to build a large manufacturing hub at Nanyang Technical University where diverse companies could conduct R&D. Companies who have already developed capabilities in Singapore are Nestle, French-based Essilor and American firms Hill-Rom and Becton, Dickinson and Company (Chia Yan Min, “S’pore Ready to Serve as Innovation Center for MNCs,” Asia One Business, October 29, 2014, http://business.asiaone.com/news/spore-ready-serve-innovation-centre-mncs )

The Taiwanese Ministry of Foreign Affairs reports that, over the past few years, Taiwanese businesspeople in mainland China have been increasingly subjected to land expropriation carried out by local governments. These small and medium enterprises, which are mostly in the manufacturing industry and began their operations in China in the 1990s have been expropriated due to Taiwanese misunderstanding of Chinese property laws. This will add to the burdens of Taiwanese firms, which already are pressured by the slowing Chinese economy (Lauly Li, “Taiwanese Businesses in China Hit by Expropriations,” Taipei Times, October 27, 2014, http://www.taipeitimes.com/News/biz/archives/2014/10/27/2003602989)

*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.