MNCs in the News-2014-12-12

The R&D-Based Pharmaceutical Association Committee (RDPAC), an industry association, has raised concern about the CFDA’s institution of a new marketing approval procedure, which involves the separation of clinical trial and sales permission approval, that may delay the marketing of new medicines up to two years, costing hundreds of millions of dollars in lost sales. It is not just potential financial losses that irritates foreign pharmaceuticals, but the CFDA’s changing policy without any transition period and the effective shortening of patent protection that results from delays in the period when a drug starts to be marketed (Li Hui, “Foreign Drug Companies in China See Approval Delayed,” Bloomberg, December 7, 2014, http://www.bloomberg.com/news/print/2014-12-07/foreign-drug-companies-in...)

Despite examples such the above and other serious issues, foreign investors, drug companies, hospital firms, and others are investing huge amounts in hospitals, pharmaceutical companies, and medical equipment firms. They are salivating over the opportunities emerging as a result of China’s aging population, rising incomes, and Chinese government reforms designed to enhance the quality and accessibility of health care services at a time when government funding of health care is declining. As one of its strategies for addressing the country’s health care needs, China not only has been welcoming foreign investment, but also has been giving foreign investors greater rights (“Chinese Health Care Draws Investors,” New York Times, December 20, 2014, http://dealbook.nytimes.com/2014/12/10/chinese-health-care-draws-investors)

Qualcomm, under the potential threat of a National Development and Reform Commission US $1 billion anti-trust fine and other sanctions that will force it to change the way it does business in China, will invest US $40 million in Chukong Technologies, Unisound, and China Walden Venture Investments in order to help companies in the mobile and wireless technologies space, areas of obvious interest to Qualcomm. The investment was part of a US $150 million investment commitment already made by Qualcomm. To date, Qualcomm’s challenges in China already have cost it millions in uncollected patent royalties (Gao Yuan, “Qualcomm Set to Provide Assistance to Tech Startups,” China Daily, December 13, 2014, http://www.chinadaily.com.cn/business/tech/2014-12/13/content_19078410.htm)

In early December, Facebook founder Mark Zuckerberg and other high-tech big-wigs such as Apple’s Tim Cook, received Lu Wei, the head of China’s Cyberspace Administration, who was touring the US. Reports later came out that Zuckerberg strategically placed a copy of Chinese President Xi Jinping’s book on his desk and told Chinese media he purchased several copies for his colleagues so they could learn about “‘socialism with Chinese characteristics.’” As many know, China blocks Facebook. The reports led internet and human rights activists to lash out at Zuckerberg, whose company, like others, is salivating over China’s 650 million internet users (Paul Mozur, “Warm West Coast Reception for China’s Web Czar (Chillier in Washington),” New York Times, December 8, 2014, http://mobile.nytimes.com/blogs/bits/2014/12/08/a-trip-to-california-for... Edmond Lococo and Lulu Yilun Chen, “Zuckerberg, Cook Meet China’s Internet Minister in U.S.,” Bloomberg, December 8, 2014, http://www.bloomberg.com/news/print/2014-12-08/china-s-internet-minister... “Many ‘Unlike’ Zuckerberg’s Attempts at Wooing Beijing,” WantChinaTimes, December 12, 2014, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20141212000060&cid=... “Report: Zuckerberg Reads Chinese President’s Book,” Washington Post, December 13, 2014, http://www.washingtonpost.com/world/asia_pacific/report-zuckerberg-reads...)

Commercial Aircraft Corp. of China (Comac) and Russia’s United Aircraft Corp., both state-owned, have agreed to cooperate on jumbo jet development, meaning “wide-body aircraft design, research and manufacturing,” though, according to sources, no final agreement has been signed. At present, China and Russia do not have any viable alternatives to models sold by Airbus and Boeing. Nevertheless, Comac is working vigorously on a narrow-body. China hopes a wide-body model will reduce imports, enhance exports, and build up its domestic aviation supply chain. Russia reportedly seeks to revive prospects for its Ilyushin IL-96 aircraft for which Chinese financing would be critical (Yu Dawei, “China, Russia Near Deal for Wide-Body Aircraft,” Caixin, December 11, 2014).

CSR continues to be a major theme for foreign auto companies in China, a major market and profit center for them. For instance, German company Volkswagen (VW) has been a leader in backing the use of child safety seats and indeed in supporting legislation requiring the use of child safety seats. More specifically, VW has been working on raising awareness and donating thousands of car seats. VW further has been supporting school soccer programs, migrant assistance programs, and other initiatives (Li Fusheng, “VW’s CSR Focus on Children’s Safety and Vocational Education,” China Daily, December 1, 2014, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20141212000060&cid=...)

CCCC, a publicly-traded, Chinese state-owned company, struck a deal with Leighton Holdings to buy John Holland, a large Australian engineering and construction company, which will give it a major presence in Australia, a country that is spending tens of billions of dollars on infrastructure projects. Australia’s Foreign Investment Review Board still needs to approve the transaction, though problems are not expected given Australia’s welcoming attitude to Chinese investment and the recent conclusion of an Australia-China bilateral free trade agreement. In buying John Holland, CCCC is seeking technology and skills and a local presence that could facilitate bidding on local tenders (Jamie Smtyh and Tom Mitchell, “Leighton Sells John Holland to China SoE,” Financial Times, December 12, 2014)

Apple revealed plans to build a R&D center in Yokohama, Japan. The company is expanding its operations in Japan in response to Prime Minister Shinzo Abe’s initiatives to restart the economy, which includes diverse measures to attract foreign investors such as devaluing the yen. Abe described the center as among the largest in Asia, though Apple has not disclosed the type of research that it will do or the exact investment it will make. Japan is one of Apple’s most important markets, with Apple holding a 48 per cent share of the Japanese smartphones market (Eric Pfanner, “Apple to Open New Research Site in Japan,” Wall Street Journal, December 9, 2014, http://blogs.wsj.com/digits/2014/12/09/apple-to-open-new-research-site-i...)

South Korea is reforming its eight free economic zones (FEZs) in hopes of attracting larger amounts of FDI. Poised to surpass Hong Kong and Singapore in terms of attracting foreign direct investment (FDI), it will now allow foreign investors to enjoy free rent, tax breaks, and tariff exemptions. The Director General of South Korea’s FEZ planning office said that FDI flowing into “South Korea used to be mainly from the US and EU, but now we can see more investments from our largest trading partner” (Dai Tian, “S Korea Reforms FEZs to Take HK, Singapore,” Asia One Business, December 9, 2014, http://business.asiaone.com/news/news/s-korea-reforms-fezs-take-hk-singa...)

In conjunction with Indonesian President Joko “Jokowi” Widodo’s policy to foster economic development by attracting FDI, the Indonesian chapters of the American Chamber of Commerce and Korean Chamber of Commerce have signed an agreement that expresses their commitment to support greater FDI flows into Indonesia. South Korean companies in Indonesia already have created about 1 million jobs for locals and are expected to expand their investment in the future. US investment in Indonesia reached about US $100 million between January to September and is expected to grow by $61 billion over the next five years (Grace D. Amianti, US, S. “Korea Agree to Support Investment in RI,” The Jakarta Post, December 8, 2014, http://www.thejakartapost.com/news/2014/12/08/us-s-korea-agree-support-i...)

Petronas, Malaysia’s state-owned energy firm, has entered into a US $550 million joint venture with YPF, an Argentine firm, that will help Argentina develop its massive shale oil resources. YPF already had struck a US $2.8 billion deal with Chevron and hundred million dollar deals with Total and Royal Dutch Shell. Argentina has been aggressively courting foreign investors, but has found it tough to get partners given its reputation for heavy-handed intervention and July debt default. Argentina hopes shale oil development will end its need for foreign oil. Petronas previously struck a technology sharing deal with YPF and Mexico’s Pemex (Benedict Mander, “Petronas Signs Argentina Shale Deal,” Financial Times, December 12, 2014)

*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.