MNCs in the News-2015-08-14

China’s MOFCOM reported that inward FDI in July rose 5.2 percent year-over-year (YOY) to reach USD $8.2 billion. This was an improvement over the YOY figure for June, which only showed a 0.7 percent increase. Over the first seven months of 2015, inward FDI grew 7.9 percent to reach approximately $76 billion. Foreign investors favored high-tech services and manufacturing with high-tech service investment jumping to $4.9 billion during the January to July period with Intel taking a large stake in Tsinghua Unigroup. The European Union was a major source of investment during the same period, pouring $4.5 billion in China (“FDI Growth Quickens in July,” China.Org.cn, August 13, 2015, http://www.china.org.cn/business/2015-08/13/content_36296779.htm)

China’s State Council will generate a draft antitrust guideline for the automobile industry by the end of 2015. China’s National Development Reform Commission (NDRC) already is soliciting views from players including car manufacturers, dealers, and trade associations. “The guidelines will cover antitrust issues related to auto and parts supply, vehicle distribution and after-sales services, as well as new business formats such as…parallel imports.” Specific issues include “resale prices, territorial restrictions, and exclusive supply and purchase” agreements. Automakers and suppliers have voiced concerns about to the profitability of dealers, security and quality of parts, and so depending upon the guidelines’ content (Lan Lan, “Antitrust Rules for Auto Sector Soon,” China Daily, August 13, 2015, http://www.chinadaily.com.cn/business/motoring/2015-08/13/content_215851...)

Zhu Weibin, Vice Chairman of the Shanghai Association of Enterprises with Foreign Investment, stated in an interview with Shanghai Daily and Eastday.com, organized in tandem with an award program for companies that promotion innovation in Shanghai, that “foreign companies have a key role to play in the development of Shanghai as an international center for science and innovation.” He specifically stated “‘foreign investment is an engine of growth. Chinese companies…should learn from foreign firms to enhance their ability to innovate’” (Wang Yanlin, “Foreign Firms ‘Helping to Drive Innovation,’” ShanghaiDaily.com, August 12, 2015, http://www.shanghaidaily.com/business/finance/Foreign-firms-helping-driv...)

Earlier this year, China’s NDRC imposed a nearly USD $1 billion fine on Qualcomm for abusing its market position. Since that time the American telecommunications giant has taken numerous steps to enhance its position in China including building cooperation with various Chinese firms and governments like Guizhou. One partnership Qualcomm had joined before this was a partnership with China’s Semiconductor Manufacturing International (SMIC) pursuant to which it would produce lower-end smartphone processors. Recently, SMIC’s successfully produced the Snapdragon 410, a Qualcomm chip. The partnership with SMIC benefits Qualcomm by giving its bargaining power against Taiwan Semiconductor Manufacturing, its biggest supplier (“Qualcomm Improves Position in China,” WantChinaTimes.com, August 13, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150813000023&cid=...)

China is working aggressively to develop its own indigenous chip capabilities, especially in the area of telecommunications. Pursuant to this Beijing-based Tsinghua Unigroup has been purchasing a number of Chinese chip companies including Spreadtrum Communications and RDA Microelectronics. It also has been contemplating purchasing US chip firm Micron Technology. Beyond this, Tsinghua Unigroup’s parent Tsinghua Holdings plans to spend roughly USD $5 billion on telecommunication chip research and development. Finally, it has welcomed a major investment from US chip player Intel and allegedly has courting Microsoft and Facebook as partners (Yeh Wen-Yi et al., “Tsinghua Holdings to Invest RMB30Bn in Smartphone Chips,” WantChinaTimes.com, August 13, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150813000144&cid=...)

Zhou Liujun, Director of MOFCOM’s Department of Outward Investment and Economic Cooperation, stated China’s non-financial outbound direct investment (ODI) enjoyed a strong increase during the period between January to July 2015. The amount grew close to 21 percent YOY to reach USD $63.5 billion. Favored ODI destinations included the US which received $3.83 billion, a 35.8 percent increase, and countries in the One Belt, One Road (OBOR) initiative, which received $7.39 billion, a 58.5 percent increase. Aside from host country attractions, OFDI received a boost from streamlined government approval procedures and opportunities to invest in a wider range of sector (“China Outbound Direct Investment Jumps in Jan-July,” The Shanghai Daily, August 14, 2015, http://www.shanghaidaily.com/article/article_xinhua.aspx?id=297641)

In a recent interview with Xinhua, Wang Weidong, the Commercial Counselor of the Chinese Embassy in Germany, observed, “‘Chinese investment in Germany is rocketing up in both terms of project numbers and investment values.’” This investment, which primarily has taken the form of M&A, has been going into sectors like finance, aerospace, renewable energy, steel, and tourism. Chinese investors often retain local managers and workers as a path to localize which Wang commented is a “‘must for Chinese companies to succeed in Germany.’” Companies, though, still have not always become sufficiently knowledgeable about tax, business culture, and other local factors (“Chinese Investment in Germany More than Doubles in Past Year,” WantChinaTimes.com, August 9, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150809000104&cid=...)

Mitsubishi Materials is on the verge of settling with the majority of individuals seeking compensation for the forced labor they had to perform during WW II. Aside from still needing to settle with one of the four groups representing claimants, Mitsubishi Materials needs to settle on a Chinese party that can manage any restitution fund. Mitsubishi Materials’ total payments will run in the tens of millions given that it has offered roughly USD $16,000 per person and there are close to 4000 individuals deserving compensation. The sense seems to be Mitsubishi has taken action to avoid alienating the Chinese government (Oki Nagai, “Mitsubishi Materials Nears Settlement on Chinese-forced Labor Claims,” Nikkei Asian Review, August 8, 2015, http://asia.nikkei.com/Business/Companies/Mitsubishi-Materials-nears-set... Yukio Okamoto: “POWs, Chinese Laborers Subjected to Inhuman Conditions,” Dispatch Japan, August 9, 2015, http://www.dispatchjapan.com/blog/2015/08/yukio-okamoto-pows-chinese-lab...)

A Korean Chamber of Commerce and Industry (KCCI) survey found close to nine of ten South Korean companies would be willing to operate in North Korea after reunification. 30 percent of companies saw potential in natural resource exploitation with others viewing North Korea as a host for manufacturing plants and a place with rich infrastructure opportunities. There did not seem to be much support among those surveyed for maintaining economic sanctions against North Korea, with some arguing economic cooperation would “‘significantly lower the costs of unification when it happens.’” KCCI also contends increased private sector relations can boost bilateral relations (Lee Hyo-Sik, “8 in 10 Firms Willing to Invest in North Korea,” Korea Times, August 10, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/08/123_184529.html)

As previously reported China and Japan have been competing to win a high-speed train system contract in Indonesia that would involve the building of a railway between Jakarta and Bandung, Indonesia’ historically-famous 4^th largest city. There are some who contend Japan is in the favored position to win the contract given it will offer a lower interest rate loan than China, but others note that China may be offering more favorable terms in regards to construction times, after-sales service, and technical schemes. Indonesia may establish a neutral third-party commission to evaluate the two side’s proposals (“Japan and China Compete for Indonesia Bullet Train Contract,” WantChinaTimes.com, August 11, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150811000023&cid=...)

To simplify and speed up business license processing, the Indonesia Energy and Minerals Resources Ministry has given the Investment Coordinating Board (BKPM) one-stop service the authority to handle 10 out of 42 permits in the oil and gas sector and 11 permits in the minerals and coal mining sector that relate inter alia to mining exploration, mining production, and mining services. The move is seen as part of Indonesia President Joko “Jokowi” Widodo’s administration’s efforts to attract FDI and spur greater growth. This year, the BKPM has processed two times as many permits as in the same period last year (“BKPM Now Handling Energy, Mining Permits,” The Jakarta Post, August 14, 2015, http://www.thejakartapost.com/news/2015/08/14/bkpm-now-handling-energy-m...)