MNCs in the News-2015-01-02

The head of MOFCOM’s Foreign Investment Division Tang Wenhong said FDI flows into the country were likely to have remained stable in 2014 (approximately US $120 billion versus $117.6 billion the previous year) and were expected to remain stable in 2015. Tang touted China’s good investment environment and its efforts to create an “equitable, transparent, and predictable business environment” as the reasons for the stability. He also pointed to the country’s labor and supplier diversity as other factors providing a foundation for stable FDI inflows (“China to See Steady FDI Inflow: Official,” WantChinaTimes.com, December 30, 2014, http://www.wantchinatimes.com/news-print-cnt.aspx?cid=1202&MainCatID=12&...)

According to the latest news reports, the large American telecommunications chip giant Qualcomm will reduce the prices of its CDMA chips as one of the steps it takes to placate China’s National Development and Reform Commission (NDRC) which is conducting an anti-monopoly investigation of the firm and may impose a multiple billion dollar fine on it. Moreover, the NDRC may challenge Qualcomm’s entire standard patent licensing practice, with potential severe implications for Qualcomm’s revenues globally. Observers note Qualcomm’s move might also serve as a response to competitors such as MediaTek who may be coming out with their own CMDA chips (“Qualcomm to Cut Prices to Avoid Anti-Monopoly Fine,” WantChinaTimes.com, December 27, 2014, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20141227000128&cid=... Noel Randewich and Matthew Miller, “For Qualcomm, China Settlement May be Just the Beginning,” Reuters, December 28, 2014, http://www.reuters.com/assets/print?aid=USKBN0K702C20141229).

American sandwich chain Subway, which has more than 480 franchisees in China, recently found itself in the spotlight after Chinese media charged workers at a Beijing franchise with modifying food expiration and production dates. Subway argued that what transpired, if valid, was “not representative,” later announced a surprise inspection had revealed no violations at the franchise, and directed staff and franchisees to inspect their operations. A Subway spokesman said the firm inspected its franchises monthly and regularly trains its staff about food safety. Following the episode, China Daily published an “exposé” of foreign food chains and producers food safety problems (Patti Waldmeir, “Subway in China Food Safety Scandal,” Financial Times, December 29, 2014; Adam Jourdan, “Subway Investigates China Media Reports of Doctored Expiry Dates,” Reuters, December 29, 2014, http://www.reuters.com/assets/print?aid=USKBN0K70CW20141229; “Fast Food Chain Probes Reports of Doctored Expirations,” China Daily, December 30, 2014, http://www.chinadaily.com.cn/business/2014-12/30/content_19197722.htm)

The China Automobile Dealers Association complained to the government about foreign automakers forcing dealers to accept excessive sales targets which in essence required individual dealers to buy their cars and stockpile autos which could not be sold, causing, in turn, serious losses among dealers who either could not move the inventory or had to cut prices drastically. Reacting to the complaint, foreign car makers such as Honda, BMW China, and FAW Toyota have been reducing their wholesale sales, modifying sales targets, and otherwise trying to help dealers “‘adjust’ their inventories” (Samuel Shen and Norihiko Shirouzu, “Foreign Automakers Taken to Task in China over Dealers’ Bloated Inventories,” Reuters, December 30, 2014, http://www.reuters.com/assets/print?aid=USKBN0K80FE20141230)

As reported in diverse “MNCs in the News” posts and media outlets, Facebook has been probing ways to expand its presence in China. Many have been concerned about the lengths to which Facebook will go to satisfy Chinese government restrictions. One recent story notes Facebook suspended the account of a prominent exiled dissident, with Facebook arguing this was because the individual posted a nude picture while the individual suggested it was political. Several days prior to this, a Tibetan writer reported her post relating to the self-immolation of a monk was deleted, with Facebook replying the content was too graphic (Austin Ramzy, “Facebook Deletes Post on Tibetan Monk’s Self-Immolation,” New York Times, December 27, 2014, http://sinosphere.blogs.nytimes.com/2014/12/27/facebook-deletes-post-on-... Ian Johnson, “Facebook Blocks Account of Liao Yiwu, Exiled Chinese Writer,” New York Times, December 31, 2014, http://sinosphere.blogs.nytimes.com/2014/12/31/facebook-blocks-account-o...)

The Beijing Economic-Technological Development Area, which includes 9,000 enterprises with invested capital topping US $40 billion, has connected with LinkedIn, an American-based social network for professionals, to ensure BDA companies are able to recruit the global talent they need. This is the first time LinkedIn, which has 330 million users worldwide, has worked with a government. LinkedIn will provide training to companies in the Development Area and teach these firms how to build and market their brands and attract talent. In regard to the latter, LinkedIn offers firms a way to reach out to individuals who are not actively searching (Su Zhou, “Beijing Linking Up with Talent on LinkedIn,” China Daily, December 29, 2014, http://www.chinadaily.com.cn/business/tech/2014-12/29/content_19190648.htm)

Of late, Gmail has been facing a more challenging environment in China. Recently, it endured a sustained period of outage over a five-day or so period including with respect to communication protocols that were not previously disrupted. Google did not directly blame China while a US State Department spokesman said “‘we encourage China to be transparent in its dealing with international companies and to consider the market signal it sends with such acts.’” Chinese media suggested Google might be to blame. Google has faced a tough time in China since it shifted its servers offshore in 2010 and relocated its Chinese search service outside the mainland (Paul Carsten, “Google’s Gmail blocked in China,” Reuters, December 29, 2014, http://www.reuters.com/assets/print?aid=USKBN0K70BD20141229; Richard Waters and Charles Clover, “Gmail’s China Block Adds to concerns over Internet Censorship,” Financial Times, December 30, 2014; “State Media Blame Google for blocking of Gmail on Mainland,” China Economic Review, December 31, 2014, http://www.chinaeconomicreview.com/node/66773)

Japan and Thailand are discussing the construction of three railway routes, which will connect to Bangkok, Thailand’s capital. According to Thai Transport Minister Air Chief Marshal Prajin Junthong, talks between the two governments are still in process and things will become more definitive after the conclusion of Japanese elections. The aforementioned railway routes constitute part of the military junta’s big plans to try to revive the economy through infrastructure spending. Japan is Thailand’s biggest foreign investor, investing heavily in car manufacturing and high tech industries (“Thailand Looking to Japan for Railway Revamp,” Japan Today, December 21, 2014, http://www.japantoday.com/category/business/view/thailand-looking-to-jap...)

Foreign pharmaceutical companies operating in Korea are planning on cutting local job though voluntary early retirement program (ERP) because of increasing profit pressures. The profit pressures flow from falling drug prices resulting from the government’s move to bring down medicine costs. An example is Johnson & Johnson’s Korean pharmaceutical unit, which has announced plans to shed 10 percent of its employees through a voluntary ERP. These firms are likely to experience difficulties implementing downsizing programs because they currently are locked in disputes with labor unions (Park Ji-Won, “Foreign Drug Companies Shedding Jobs,” The Korea Times, December 22, 2104, http://www.koreatimes.co.kr/www/news/biz/2014/12/123_170363.html)

Korea’s Hyundai Motor, the world’s fifth large automaker, won approval from local governments in Changzhou and Chongqing to build its fourth and fifth China factories. Hyundai originally planned to build one factory in Chongqing but later agreed to build another one after the Chinese government requested it build a new factory closer to Beijing. Hyundai is betting the new factories will help it reach the production levels needed to meet Chinese demand as well as give it a foundation from which to compete more effectively against other foreign car giants (Park Jin-Hai, “Hyundai Motor to Build 2 Plans in China,” The Korea Times, December 30, 2014, http://www.koreatimes.co.kr/www/news/biz/2015/01/388_170843.html; “Hyundai Motor to Build Two More Plants in China,” CTV News, December 30, 2014, http://www.ctvnews.ca/business/hyundai-motor-to-build-two-more-plants-in...)

Malaysia plans to ease restrictions imposed on Indonesian banks operating in the country in order to fulfill obligations pertaining to the integration of financial services among Association of Southeast Asian Nations (ASEAN) member countries. Indonesian banks frequently have complained about restrictions imposed by the Malaysian banking authority. The new agreement stresses reciprocity and national treatment between Malaysia and Indonesia and should provide easier access and operational flexibilities for Indonesian banks (Tassia Sipahutar, “Malaysia Eases Restrictions on RI Banks,” The Jakarta Post, January 2, 2015, http://www.thejakartapost.com/news/2015/01/02/malaysia-eases-restriction...)

Vietnam’s Ministry of Planning and Investment has launched a new foreign investment system in order to simplify the foreign investment process, to enhance data collection and analysis, and to reduce bureaucratic processing mistakes. The ministry hopes the new system will encourage investment both by reducing red tape and by increasing awareness of the investment situation in Vietnam. It also expects the new system to make it easier to monitor investments after they have been licensed. The new system also will serve as a basis to publicize projects soliciting foreign investment (“Vietnam to Launch National Foreign Investment System,” Vietnam Briefing, December 31, 2014, http://www.vietnam-briefing.com/news/national-foreign-investment-informa...)

*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.