MNCs in the News-2015-09-11

China’s MOFCOM reported that inward FDI (IFDI) hit USD $8.71 billion in August, a 22 percent surge YOY. The amount for August was a 5.2 percent increase over July, with a large proportion flowing into the high-tech service industry. IFDI for the first eight months of 2015 approximated $85 billion, a 9.2 percent increase YOY. Of this, $5.5 billion went into the high-tech service sector while $6.57 billion went into high-tech manufacturing. Major foreign investors into China included Hong Kong, France, and Macao. MOFCOM highlighted that “the number of foreign businesses ending or reducing investment in China continued to drop” (“China FDI Inflow Surges 22% in August,” China.Org.Cn, September 10, 2015, http://www.china.org.cn/business/2015-09/10/content_36550261.htm)

Foreign companies in China and their business associations are increasingly worried China is becoming nationalist and protectionist in its dealings with foreign firms. To paraphrase Joerg Wuttke, the President of the European Chamber of Commerce in China, they give the feeling they are “renovating the house [instituting reforms], but foreign companies might not actually be able to move in.” A survey by the European Chamber of its 1800 members showed a subdued mood and an increase in companies questioning or delaying investments. James Zimmerman, the President of the American Chamber of Commerce in China, warned that “doors may be closing” (Simon Denyer, “A Nationalist China Unsettles Foreign Companies,” The Washington Post, September 7, 2015, https://www.washingtonpost.com/world/asia_pacific/a-nationalist-china-un... Wang Yanlin, “Foreign Business Has a More Subdued Optimism,” Shanghai Daily.com, September 8, 2015, http://www.shanghaidaily.com/business/Foreign-business-has-a-more-subdue...)

There are hopes among the US business community that Chinese President Xi Jinping’s visit to the US this month will lead to major progress on a BIT. They view a BIT as having “the potential to reshape China’s operating environment for foreign companies, much as the country’s entry into the World Trade Organization.” A US-China BIT also will have implications for China-European Union BIT negotiations. Some are skeptical there will be major progress in the absence of a crisis and wonder if the overall state of the Chinese economy will “set the wheels in motion for a truly ambitious BIT” (Tom Mitchell, “Deal hopes Spring from Xi’s Torrid Summer,” Financial Times, September 8, 2015)

Sources report Google is planning to return to China to market its online application store Google Play. According to the stories, Google is developing a “‘special’ China version of Google Play,” meaning the “‘content of the apps will be subject to Chinese regulations’” and all information will be stored on local servers. The lack of a Google Play China version has put Google far behind the local competition and may be impeding Android phone sales in China. While Google search and maps are not available in China and Gmail is blocked, Google still sells online advertising services to Chinese firms (“Google Faces Battle-Hardened Competition in Return to China,” WantChinaTimes.com, September 7, 2015; Ralph Jennings, “China Makes Google’s Gmail Almost Impossible to Use,” The Street.com, September 7, 2015, http://www.thestreet.com/print/story/13276152.html; “Google Set to Return to China,” China.Org.cn, September 8, 2015, http://www.china.org.cn/business/2015-09/08/content_36529550.htm; Gao Yuan, “Google Set to Log In Again,” China Daily, September 8, 2015, http://www.chinadaily.com.cn/business/tech/2015-09/08/content_21814204.htm)

China’s Ministry of Finance claims Apple Inc. underpaid USD 425 million yuan ($66.56 million) of taxes in 2013. Per the Ministry of Finance, Apple already has address the 425 million yuan underpayment and also paid a 65 million yuan late fee. The action comes in an environment where Beijing has been taking a harder line towards foreign firms the underpayment of taxes. In late 2014, China forced Microsoft to pay $140 million in back taxes (Fan Feifei, “Apple Underpaid $66.56m in Taxes, Says Finance Ministry,” China Daily, September 10, 2015, http://www.chinadaily.com.cn/business/tech/2015-09/10/content_21840314.htm; “China Says Apple Unit Underpaid $71 million in Tax in 2013,” Reuters, September 10, 2015, http://www.reuters.com/article/2015/09/10/us-apple-china-idUSKCN0RA18S20...)

In late September, China will host a meeting, reportedly in collaboration with Microsoft, in Seattle at which Xi Jinping and China’s internet czar Lu Wei will meet with a number of leading US technology giants. The organizers of the event have invited Baidu’s Robin Li, Alibaba’s Jack Ma, and top executives from Apple, Facebook, Google, IBM, and others. At present, it is reported that Apple’s Tim Cook will attend. The Obama administration is worried the meeting may undercut its efforts to assume a forceful position about China’s treatment of foreign technology companies as well as US sanctions against Chinese hackers (Paul Mozur and Jane Perlez, “China Flexes Tech Muscles Before a State Visit,” The New York Times, September 8, 2015, http://www.nytimes.com/2015/09/09/science/china-flexes-tech-muscles-befo...)

Taiwan’s Investment Commission announced that it would relax limits on local high-tech companies that wanted to invest on the Chinese mainland in order to permit them to compete more effectively with other major tech companies as well as to foster Taiwan’s economic growth. Under the new policy environment, Taiwanese chip firms are allowed to open “a total of three plants manufacturing chips more advanced than previously allowed.” The Investment Commission, however, will mandate that local chip firms “keep their Taiwan-produced technology a generation ahead of that made on mainland China” (“Taiwan Relaxes law on Tech Production in China,” The Jakarta Post, September 4, 2015, http://www.thejakartapost.com/news/2015/09/04/taiwan-relaxes-law-tech-pr...)

The NDRC’s Guangdong Branch will fine Dongfeng Nissan, a joint venture (JV) of Japan’s Nissan Motor Co., and 17 dealers more than $22 million for price fixing. The penalty follows the Guangdong branch’s discovery that the JV had established price fixing agreement with its dealers that “punished dealers that did not comply with the company’s price control measures.” Moreover, dealers regularly held meetings to set car prices. Dongfeng Nissan accepted the decision and has implemented measures to address the problem. Over the past year or so, Audi, Daimler Mercedes, and Toyota have suffered similar sanctions (“China Fines Dongfeng Nissan, Dealer for Price Fixing,” Nikkei Asian Review, September 11, 2015, http://asia.nikkei.com/Business/Companies/China-fines-Dongfeng-Nissan-de...)

On the sidelines of China’s 70th anniversary of the end of WW II ceremonies Chinese and Russian firms concluded numerous deals. One prominent one was Rosneft OAO agreeing to take a 30 percent stake in ChemChina Petrochemical Corporation (CCPC). Under the deal, Rosneft will increase its oil deliveries to CCPC to 4 million metric tons. Rosneft also signed a deal with Sinopec that will involve the latter taking a 49 percent stake in East Siberian Oil and Gas and Tyumenneftegaz allowing it to co-develop two Siberian oilfields. The total amount of the deals struck was estimated to be $30 billion (Du Juan, “Rosneft Links with ChemChina,” China Daily, September 5, 2015, http://www.chinadaily.com.cn/business/2015-09/05/content_21790643.htm; “Sinopec Poised to Buy Shares in Rosneft Subsidiaries,” WantChinaTimes.com, September 5, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?cid=1206&MainCatID=12&...)

Pakistani economic officials have announced, “China has acquired a 43-year lease of more than 2,000 acres of land to construct the first Free Economic Zones (FEZ) at Pakistan’s Gwadar Port.” Moreover, Pakistan will soon lease another 500 acres of land to China. While Pakistan’s Gwadar Port Authority controls the port, China’s state-owned China Overseas Port Holding Company has been operating it since 2013. There is a lot of Indian concern about China’s initiatives regarding the Gwadar Port especially given Chinese construction activities in Bangladesh, Sri Lanka, and Myanmar, which “create a chain that surrounds India” (“2,000 Acres at Pakistan’s Gwadar Port Leased to China for 43 Yrs,” WantChinaTimes.com, September 10, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150910000079&cid=...)

Indonesia’s Energy and Mineral Resources Minister Sudirman Said noted Indonesia will enhance its mining regulations as part of Indonesian President Joko “Jokowi” Widodo’s economic deregulation program. Specifically the government intended to allow contractors to propose a contract extension for projects 10 years before a contract ends, replacing the two year limit that currently exists. There are hopes that the change will boost investor certainty and reduce risks and thus encourage more activity and economic growth (Edna Tarigan, “Govt to Simplify Extensions of Mining Contracts,” The Jakarta Post, September 10, 2015, http://www.thejakartapost.com/news/2015/09/10/govt-simplify-extensions-m...)

Pursuant to its 2009 Mining Law, Indonesia requires companies to process nickel, copper, and other ores in local smelters before selling them abroad, though it granted temporary exemptions to certain firms such as PT Freeport Indonesia that had shown progress in building local smelters. The government considered removing the export ban given the difficult climate miners are facing, but decided to keep it. Energy and Mineral Resources Minister Surdiman said “‘the development of the downstream industry in the mining sector is part of an important process in our industrialization.’” Firms that invested substantially in smelters also opposed removing the ban (“Govt Withdraws Plan to Ease Ore Export Ban,” The Jakarta Post, September 8, 2015, http://www.thejakartapost.com/news/2015/09/08/govt-withdraws-plan-ease-o... “Indonesia Retains Ban on Mineral Ore Exports,” Bangkok Post, September 7, 2015, http://www.bangkokpost.com/business/world/683812/indonesia-retains-ban-o...)

Three months ago, the Vietnamese government issued Decree 60, which was designed to attract greater foreign investment by giving foreign investors the right to take greater shares in Vietnamese companies including as high as 100 percent in some cases. However, to date the law has not had much success because neither Decree 60 nor subsequent circulars issued by Vietnam’s State Securities Commission and Ministry of Finance have provided many specifics. There are some Vietnamese firms that do not welcome greater foreign investment and in some sectors foreign businesses are not keen to increase their stakes (“Vague Law Keeps Firms, Foreign Investors Apart,” Viet Nam News, September 11, 2015, http://vietnamnews.vn/in-bai/275643/vague-law-keeps-firms-foreign-invest...)

*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.