MNCs in the News-2015-04-10
At the just concluded National People’s Congress (NPC) and Chinese People’s Political Consultative Conference meeting, China amended its Legislation Law. The law makes explicit the NPC’s responsibility for introducing new taxes, setting or changing tax rates, and regulating tax collections. The NPC already had some authority but lost power to the State Council in the 1980s, which gained the authority to pass tax regulations. The changes are beneficial because they make tax law more formal, sophisticated, and transparent. Moreover, the opportunity for comment becomes available. Foreign firms thus will be able to better plan and try to influence government policy (Steve Elsinga, “No More Surprises as China moves to Formalize Taxes,” China Briefing, April 3, 2015, http://www.china-briefing.com/news/2015/04/03/no-surprises-china-moves-f...)
Three Chinese citizens have sued China’s Ministry of Agriculture, with Monsanto being added as a party to the case, to release the report allowing for the use of Monsanto’s herbicide Roundup, which is widely used in China on genetically resistant crops. The Ministry of Agriculture said that it could not release the report because it would reveal trade secrets. Newfound attention to whether or not Roundup causes cancer flows from a World Health Organization report suggesting a key Roundup component might be carcinogenic. Interestingly, a Chinese court refused a similar case calling for the Agricultural Ministry to release GMO data (“Monsato Implicated in Litigation in China,” WantChinaTimes.com, April 7, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150407000034&cid=... Dominique Patton, “Chinese Citizens Sue Government over Transparency on Monsanto Herbicide,” Reuters, April 8, 2015, http://www.reuters.com/article/2015/04/08/us-china-monsanto-court-idUSKB...)
Beginning on June 1, China’s State Administration of Foreign Exchange (SAFE) will allow foreign-invested enterprises settle foreign exchange capital without submitting proof of use of funds in advance. Previously SAFE did not allow this in order to deter speculative activity. The main purpose of the rule change is to increase greater use of the RMB and boost trade, but it obviously is an attractive change to foreign companies because it will ease exchange settlement. Prior to expanding the program, SAFE allowed for the practice in the Shanghai Free Trade Zone (“China Eases Forex Controls for Foreign-Invested Enterprises,” WantChinaTimes.com, April 10 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150410000014&cid=...)
China’s State Council said in a statement that China should “‘clear up or remove unreasonable restrictions [such as burdensome approval procedures] or costs holding back investment overseas to allow our industries to charge out into the world unfettered and rise up through facing competition on the global stage.’” Chinese Premier Li Keqiang also encouraged greater financial support for outward investment. Overall, the government believes easing outward investment will boost growth and help China “‘withstand the downward economic pressure.’” Premier Li added that China had the “expertise and capacity to provide equipment and services to developing countries for big engineering projects” (“Chinese Premier Pledges Support for Firms to ‘Charge into the World,’” Reuters, April 4, 2015, http://www.reuters.com/article/2015/04/04/us-china-economy-overseas-idUS...
The Chinese government is facilitating the overseas expansion of Chinese firms involved in traditional Chinese medicine (TCM) as producers, distributors, and medical service providers, among other things. Examples of support included tax refunds and working to bolster the image of TCM abroad. Chinese President Xi Jinping has noted that China also will work with the World Health Organization to “accelerate the overseas development of” TCM. Chinese companies such as Tong Ren Tang are benefitting from this policy, an incremental approach to expansion, cooperative programs with local universities to train talent, growing acceptance of TCM, and the hiring of local talent (Wang Wen, “Finding a New Prescription for Growth,” China Daily, April 8, 2015, http://www.chinadaily.com.cn/business/2015-04/08/content_20022610.htm)
Building upon the visit of Indonesian President Joko “Jokowi” Widodo’s to Japan in March, a delegation of Keidanren members met with high-ranking Indonesian foreign ministry officials to stress their intent in boosting investments in Indonesia’s manufacturing, infrastructure, service, and automotive sectors. Major Japanese multinationals such as Asahi, Toyota, and Mitsubishi all expressed an interest in increasing their production activities in areas like food and beverage, bus manufacturing, and car production. They see greater investment as a route not only to accessing the Indonesian market, but also to tapping the wider Association of Southeast Asian community (“Japanese Companies to Step Up Investment in RI,” The Jakarta Post, April 9, 2015, http://www.thejakartapost.com/news/2015/04/09/japanese-companies-step-in...)
The Korea Rural Community Corp. (KRC) is working to win an Indian project to reclaim tidal flats through the building of a seawall and land reclamation, and transform reclaimed areas into industrial zones that could, in turn, help India draw in substantial amounts of foreign investment. The so-called Kalpasar/Saemangeum project could be worth US $10 billion to Korean companies. The KRC Corp. had considered the project in 2009, but backed away due to various profitability concerns. Now, it believes that the Asian Infrastructure Investment Bank and the positive tenor of Korean-Indian relations are setting the stage for a successful project (Lee Hyo-Sik, “Korea Seeks to Export Saemangeum Knowhow to India,” Korea Times, April 6, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/04/123_176596.html)