MNCs in the News-2015-04-03

According to a recently released Ministry of Commerce (MOFCOM) and National Development and Reform Commission (NDRC) guideline, Chinese partners in automobile JVs will have to have a greater than 50 percent stake starting after April 10. The guidelines further limit foreign auto companies to establish, at most, two JVs for passenger and commercial vehicles or motorcycles. However, the guidelines apparently do not apply to situations “where a foreign firm joints with domestic counterparts in mergers” (“New Guidelines for Auto Joint Ventures,” China Daily, March 29, 2015, http://www.chinadaily.com.cn/business/motoring/2015-03/29/content_199416...

China already has begun to implement new bank technology rules designed to ensure bank technology is “secure” and “controllable” that will put foreign technology companies under severe pressure to reveal proprietary information in order to receive necessary China Banking Regulatory Commission (CBRC) certifications. However, in the face of heavy pressure from foreign governments and businesses which claim the rules are protectionist, the CBRC reported has agreed to postpone the implementation of some rules. It is not known, though, exactly what China is going to delay implementing and for how long (Eva Dou and William Kazer, “China to Delay Some Bank Technology Rules,” The Wall Street Journal, March 30, 3015, http://www.wsj.com/articles/ustreasurysecretarypresseschinaonbanktechnol...

US Treasury Secretary Jack Lew, visiting China in preparation for the upcoming Strategic and Economic Dialogue, has made China’s counterterrorism law and banking technology rules a central focus of his visit. Lew stated “‘we have already made clear our concerns regarding forced technology transfer and other attempts to bar technological competition, most recently in the banking sector.’” US President Barack Obama also has raised corners about the new measures with China’s President Xi Jinping. Separately, the US Trade Representative has suggested that China’s new measures and the way they were adopted may run afoul of its World Trade Organization commitments (Kevin Yao, “Treasury Secretary Lew Urges China Tech Policy Reform,” Fox Business, March 30, 2 015, http://www.foxbusiness.com/economypolicy/2015/03/30/treasurysecretarylew... Krista Hughes, “Update 2-U.S. Trade Office Says Chinese Laws May Breach WTO Rules,” Reuters, http://www.reuters.com/article/2015/04/01/china-security-usa-idUSL2N0WY1...)

Korean firms invested in China are worried about the State Council’s decision to rein in benefits extended by local governments to attract foreign investment. The State Council wants to curtail and eliminate these benefits, which include tax cuts and other preferential treatment, because it believes they are resulting in “‘excessive’ competition” that also is hurting local government financial healthy. The Korean International Trade Association assesses the policy changes will result in higher taxes and higher land costs. It warns that the move will discourage investment, though China’s growing economy and expanding consumer market will continue to draw in Korean firms (Lee Hyo-Sik, “China to Scrap Incentives for Korean Firms,” Korea Times, April 1, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/04/123_176318.html)

During a visit to Beijing last week for a state visit, Indonesian President Joko Widodo called for Chinese firms to invest more in Indonesia’s maritime and mining sectors. He also encouraged more Chinese investment in railways, ports, airports, power plants, and other infrastructure and said Indonesia looked forward to the Asian Infrastructure Investment Bank making a significant contribution to Indonesia and Southeast Asia. Chinese Premier Li Keqiang told Joko that the government would “encourage more reputable companies to invest in Indonesia and participate in the construction of high-speed railway, metro rail and port industrial parks” (“Indonesia and China Eye Further Infrastructure Cooperation,” WantChinaTimes.com, March 29, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150329000044&cid=...)

Indonesia’s Investment Coordinating Board (BKPM) will work with the country’s National Intelligence Agency (BIN) “to generate more reliable data on the political and security conditions in new investment sites.” The idea is to produce richer data on “local social and political conditions” which in turn will help to develop region-specific investment policies. As the BKPM often lacked such information, the BIN will be an invaluable partner. The partnership further aims to help “investors find appropriate business partners as well as to weed out bogus investors” and to reduce the problem of unrealized investment due to investor problems with local administrations (Linda Yulisman, “BKPM Teams Up with Spy Agency to Help Investors,” The Jakarta Post, April 1, 2015, http://www.thejakartapost.com/news/2015/04/01/bkpm-teams-with-spy-agency...)