MNCs in the News-2015-05-01
The Fengtai District Environmental Protection Bureau had imposed a record US $655,000 environmental fine on Beijing Simplot Food Processing Co. Ltd, a joint venture (JV) of US agricultural company JR Simplot Company and Beijing Agricultural, Industrial, and Commerce General Company which, among other things, supplies various potato products to McDonald’s. The fine resulted from pollutant discharges that were occurring while the company was improving its sewage treatment facilities to deal with some pollutant discharge problems. Given the small amount of the pollutant discharge some feel the fine is a way for the government to demonstrate its seriousness about fighting pollution (“Record Pollution Fine for Beijing McDonald’s Supplier,” China Daily, April 29, 2015, http://www.chinadaily.com.cn/business/2015-04/29/content_20580263.htm; “McDonald’s China Fries Supplier Gets Pollution Fine,” BBC, April 30, 2015, http://www.bbc.com/news/world-asia-china-32527750).
Qualcomm is continuing with its initiatives to repair the damage to its image and economic prospects caused by an anti-monopoly case and a massive fine leveled against it in February (which also was paired with reductions in the royalties that Qualcomm collected from Chinese phone makers using its chips). In this vein, it is starting to work with Chinese smartphone companies such as Xiaomi Corp. and Huawei Technologies to help them export their products. This builds on R&D investments that Qualcomm in making in the semiconductor sector in China and the company’s intensified promotion of its diverse contributions to China (Eva Dou and Don Clark, “Qualcomm Launches Unit to help Chinese Smartphone Makers Sell Overseas,” The Wall Street Journal, April 26, 2015, http://www.wsj.com/articles/qualcomm-launches-unit-to-help-chinese-smart...)
Initially, Chinese companies investing in Brazil focused on the raw materials and industrial sectors. Of late, they have been shifting their attention to infrastructure and energy. Chinese state-owned companies such as China’s State Grid and CNPC are investing in, respectively, power transmission projects and oil exploration. Chinese companies such as China Railway Eryuan Engineering Group Co. Ltd. and BYD also are actively engaging with Brazilian businesses and the Brazilian government about various railway infrastructure, subway, and electric bus production opportunities. Brazilian analysts are encouraged by the long-term vision of Chinese companies despite the country’s multiple, ongoing political and economic challenges (Ji Ye, “Brazil Embraces Third Wave of Chinese Investment,” China Daily, April 27, 2015, http://usa.chinadaily.com.cn/world/2015-04/27/content_20546698.htm)
Chinese investors including CNOOC have poured billions into Canada’s energy sector especially Alberta which has a huge amount of oil sands. Plummeting oil prices have devalued their investments. Another set of issues, though, is more political as any company investing in oil sands has to deal environmental issues, policy limits, and labor issues. Furthermore, CNOOC’s massive purchase of Nexen in 2013 triggered a backlash in Canada against foreign state-owned enterprises purchasing majority stakes in Canadian energy assets. Chinese companies also do not seem to have fully considered the benefits of partnering with Canadian firms in terms of local, political knowledge (“Investors from China Told to Hold Off on Canadian Oil and Gas,” WantChinaTies.com, April 30, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150430000132&cid=...)
The limitations of Chinese sub-contractors in African countries such as Rwanda has resulted in project delays and in one case the suspension of a contract as the government decided that contract terms were not met. Consequently, Chinese firms such as China Civil Engineering Construction Corporation (CCECC) are trying to find ways to work with local businesses to improve their abilities and quality. This has entailed training and giving internship and work opportunities to locales. As CCECC puts it, we are “trying to help those local companies to grow and to be able to operate in a regional and international competitive market” (“Chinese Company Commits to Capacity Building in Rwanda,” China Daily, April 28, 2015, http://www.chinadaily.com.cn/business/2015-04/28/content_20562630.htm)
In September 2013 Japanese company Tokyo Electron and the US semiconductor firm Applied Materials announced plans for a merger in 2014. Ultimately, however, Tokyo Electron decided to cancel the plans because of difficulties with the U.S. Justice Department. Tokyo Electron Chairman and President Tetsuro Higashi told reporters that the companies saw no possibility of resolving their disagreements with the U.S. Justice Department and were surprised that the US Justice Department considered products under development. Despite the failed merger the two countries plan to continue cooperating (“Tokyo Electron Pulls out of Merger with Applied Materials,” The Japan Times, April 28, 2015, http://www.japantimes.co.jp/news/2015/04/28/business/corporate-business/...)
Korean companies such as Lotte and CJ Group face potentially serious problems in China because of China’s new stance on variables interest entities (VIEs) which may lead to the termination of some of the arrangements that these firms have been using to operate in restricted sectors in China such as online shopping and broadcasting. Both Lotte and CJ have home shopping TV channels in China with Lotte operating its venture since 2010 and CJ Group running its operations since 2003. If China rejects VIEs, it is not clear how long it will give foreign owners time to sell their stakes (Park Si-Soo, “Lotte, CJ Ventures in China Face Risks from Proposed Law,” Korea Times, April 24, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/04/123_177710.html).
China companies such as BGX have been moving to Korea’s food cluster, Foodpolis, to benefit from Korea’s reputation for high-quality food products. As far as Chinese companies are concerned, Foodpolis is not only a way for them to expand overseas, but also a way for them to address Chinese consumer concerns about food safety. Chinese firms are further drawn to Foodpolis because of its transportation infrastructure, various incentives, the Korea-China Free Trade Agreement, and strong human capital and information technology resources. Foodpolis also has drawn companies from the US and Kenya for similar reasons and its high quality research facilities (Lee Hyo-Sik, “Food Companies Flocking to Foodpolis,” The Korea Times, April 26, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/04/123_177750.html)
Indonesia requires products in the 4G LTE spectrum sold in Indonesia to have 40 percent local content from 2017 onward. The US government, among others, has raised concerns that this will discriminate against foreign firms and products. Foreign governments also have raised concerns about Indonesia’s compliance with its World Trade Organization (WTO) Trade-Related Investment Measures obligations in terms of its local content rules pertaining to energy and local product retailing. The Indonesian government has said that it will consider the concerns of others while noting our “sizable domestic market is our capital and we expect investors to bring value locally” (Linda Yulisman, “RI to Address Concerns on Local Content Phone Manufacturing,” The Jakarta Post, April 27, 2015, http://www.thejakartapost.com/news/2015/04/27/ri-address-concerns-local-...)
Indonesia’s Investment Coordinating Board (BKPM) is pushing to attract US $100 billion foreign investments in green sector areas like biofuels, fisheries, forestry, renewables, and geothermal power. According to the BKPM, Indonesia plans to attract green investment through tax holidays, tax allowances, one-shop stop BKPM licensing services, easier immigration permits, and establishment of special economic zones in a number of areas around Indonesia. The program is geared to reducing Indonesia’s reliance on non-renewable fossil fuels and dirtier, albeit easier to access, energy sources like coal. Indonesian officials also want to promote growth while preserving the environment (Raras Cahyafitri, “Govt Eyes Billions of Dollars in Green Investments,” The Jakarta Post, April 28, 2015, http://www.thejakartapost.com/news/2015/04/28/govt-eyes-billions-dollars...)
Realized foreign direct investment (FDI) in Vietnam grew by 5 percent year-over-year (YOY) to hit US $4.2 billion in the first four months of the year. Most foreign investors put money into the manufacturing and processing sectors, with estate trading and wholesale and retail ranking as the next two largest FDI recipient sectors. South Korea was Vietnam’s largest foreign investor (with 24 percent of total registered FDI) with Turkey, the British Virgin Islands, and Japan also investing significant amounts of money. Vietnamese officials see FDI as helping to provide economic development, transfer technology, create jobs, and facilitate Vietnam’s economic globalization (“FDI Disbursement Tops $4.2b,” Vietnam News, April 25, 2015, http://vietnamnews.vn/in-bai/269591/fdi-disbursement-tops-42b.htm)