In fall 2024, the BIOSECURE Act, which blocked the United States (US)’s government’s use of goods and services from Chinese…
MNCs in the News-2015-09-25
China announced it would take its “negative list” nationwide by 2018, opening up more sectors to FDI progressively after piloting the list in various regions after 2015. However, it provided no timelines, details, or implementation guidelines. An official noted that it is possible there will be separate rules for foreign investors. The vague of the announcement raised concerns among Western businesses, which feel China is “backpedaling on promises to open the market.” Many worry China will move as it has in the case of the Shanghai Free-Trade Zone where the “opening of sectors has not happened in any significant way” (Laurie Burkitt and Mark Magnier, “Western Business Groups Troubled by Lack of Details on China Investor List,” The Wall Street Journal, September 17, 2015, http://www.wsj.com/articles/western-business-groups-troubled-by-lack-of-details-on-china-investor-list-1442498233; Lan Lan, “Negative List System for Investment to Boost Market Appeal,” China Daily, September 22, 2015, http://www.chinadaily.com.cn/business/2015-09/22/content_21943381.htm; “Negative List System to Boost Market Appeal,” China.Org.cn, September 22, 2015, http://www.china.org.cn/business/2015-09/22/content_36646414.htm)
In speeches and written interviews, Chinese President Xi Jinping has stressed “‘attracting foreign investment is our long-term policy” and “will not change,” a point Chinese Premier Li Keqiang stressed in a separate meeting with the French Finance Minister. Xi also said China would not change “‘protecting the lawful rights of foreign companies in China’” or its “‘commitment to provide better services in favor of foreign companies in China.’” Xi argued China gave “equal and fair treatment to all market players,” and touted China’s moves to ease things for foreign businesses. He also stressed China’s continuing attractiveness as an FDI destination (“Li: China to Further Expand Market Access for Foreign Investors,” China.Org.cn, September 20, 2015, http://www.china.org.cn/business/2015-09/20/content_36634666.htm; “Xi Says China Will not Change Policy on Foreign Investment,” WantChinaTimes.com, September 23, 2015, http://www.wantchinatimes.com/news/content?id=20150923000148&cid=1201; and James Cook, “Xi Jinping Says China Open to Foreign Business amid Economic Reforms,” BBC News, September 23, 2015, http://www.bbc.com/news/world-asia-china-34332843)
Commentators opine President Xi Jinping’s gatherings with technology firm executives in Seattle are partly about getting American firms to oppose the US government retaliating against China for commercial espionage that is costing American firms hundreds of billions of dollars of lost profits. It also is about demonstrating to companies how much money is to be made from firms that play according to China’s rules. According to one analysis, tech firms are suffering billions in lost business opportunities in China because of Chinese censorship. However, these companies still strike all kinds of deals because they have a “‘gun to their head’” (Christopher Mims, “China Seeks Out Unlikely Ally: U.S. Tech Firms,” The Wall Street Journal, September 21, 2015; http://www.wsj.com/articles/china-seeks-out-unlikely-ally-u-s-tech-firms-1442808042; Julie Makinen, “Chinese Censorship Costing U.S. Tech Firms Billions in Revenues,” Los Angeles Times, September 22, 2015, http://www.latimes.com/business/la-fi-china-tech-20150922-story.html)
Cisco will partner with Chinese server maker Inspur Group Co. It is a reflection of the company’s effort to regain traction in a market where it had been experiencing strong growth, but has suffered difficulties following the Chinese government’s move to require more local equipment purchases and to control the ways in which foreign technology is used. Cisco CEO Chuck Robbins noted, “‘there are certain geopolitical dynamics that we have to navigate…it’s been a tough couple of years.’” On top of the Inspur partnership, Cisco has promised to make more than US $10 billion in partnerships and investments in China (Eva Dou and Don Clark, “Struggles in China Push Cisco to Strike Deal,” The Wall Street Journal, September 22, 2015, http://www.wsj.com/articles/struggles-in-china-push-cisco-to-strike-deal-1442965527)
Microsoft has announced various partnerships with “politically connected Chinese companies” including a “state-owned military-technology consortium.” Specifically, its Chinese cloud partner 21Vianet Group Inc. will set up a joint venture with Tsinghua Unigroup Ltd. Microsoft also will work with China Electronics Technology Group Corp. on a localized version of Windows 10 for Chinese government agencies and SOEs operating “critical infrastructure.” It further has agreed to make Baidu the default search engine for its China Internet browser. Over the past few years, Microsoft has faced a probe about its software distribution practices and limits on government procurement of computers using Windows 8 (Robert McMillan and Gillian Wong, “Microsoft Forms New Partnerships in China,” The Wall Street Journal, September 23, 2015, http://www.wsj.com/articles/microsoft-signs-search-pact-with-baidu-in-china-1443045343; He Yini, “Baidu Replaces Bing as Microsoft’s Default Search Engine in China,” China Daily, September 24, 2015, http://www.chinadaily.com.cn/business/tech/2015-09/24/content_21973360.htm)
China’s ICBC Financing Leasing Co., a unit of state-owned enterprise (SOE) Chinese bank Industrial and Commercial Bank of China (ICBC), China Aviation Supplies Holding Company, and China Development Bank Leasing will buy 300 Boeing aircraft. In conjunction with this deal, Boeing signed a deal with Commercial Aircraft Corporation of China pursuant to which it will build an aircraft completion center for its 737 passenger jet in China. Although details were not revealed, it is likely the finishing center will do interior installation and painting. Boeing’s main competitor in China, Airbus, recently signed an agreement to build its second Chinese plant (Fang Yan and Matthew Miller, “Boeing to Sell 300 Jets to China Firms, Set Up China Plan: Xinhua,” Reuters, September 23, 2015, http://www.reuters.com/article/2015/09/23/us-icbc-leasing-boeing-idUSKCN0RN16120150923)
Regarding progress on a BIT, Myron Brilliant, the executive vice president of the U.S. Chamber of Commerce, said negotiating progress had been “‘incremental, not substantial’” and that while China had reduced the number of restricted sectors from 80 to 35-40, “‘there’s still a long way to go…[and] China has got to come much further with its offer.’” Chinese representatives said progress could be expected in regards to Xi’s visit to the US, but would not offer any thoughts on when a deal would be reached. Brilliant said US industry had hopes for biotechnology and market access for pork and beef (David Brunnstrom, “U.S. Lobby Disappointed by Slow Progress Towards China Treaty,” Reuters, September 21, 2015, http://www.reuters.com/article/2015/09/21/us-usa-china-investment-idUSKCN0RL2DW20150921)
Chinese Premier Li Keqiang recently has encouraged Chinese SOEs “to play a key role in the drive by the nation’s industries to ‘Go Global.’” He added that “‘Chinese SOE’s participation in global cooperation on production capacity, especially through the newly introduced Silk Road Economic Belt and the 21st Century Maritime Silk Road, will benefit not only the Chinese economy but other economies.’” Moreover, SOEs should “form the backbone of the global expansion drive by Chinese industries and competition with multinationals” and cooperate more with foreign firms by “purchasing their core technologies, key parts, and components” and jointly explore third-party markets (“Li calls on SOEs to keep ‘Going Global,’” China.Org.Cn, September 21, 2015, http://www.china.org.cn/business/2015-09/21/content_36636674.htm)
British Chancellor of the Exchequer George Osborne is pushing for China to invest in/finance the Hinkley Point nuclear power station. The nearly US $40 billion project involves France’s EDF Energy, China General Nuclear Power Group, and China National Nuclear Group, but ran into financial difficulties after France’s Areva withdrew. Britain is now offering a multi-billion dollar loan guarantee to encourage China to increase its investment in the project. The deal could be a platform for China’s involvement in the Bradwell nuclear power plant (which is might even fully own) as well as the internationalization of China’s nuclear industry and technology (“Obsorne to Push for China’s Investment in UK Nuclear Project,” China.Org.cn, September 21, 2015, http://www.china.org.cn/business/2015-09/21/content_36637189.htm; Paul Sandie and Karolin Schaps, “China Could Develop and Own Nuclear Plant in Britain: UK Finance Minister,” Reuters, September 21, 2015, http://www.reuters.com/article/2015/09/21/us-energy-nuclear-britain-hinkley-idUSKCN0RL1IE20150921; Lucy Hornby and Tom Mitchell, “Osborne Garners Favour with China—at a Price,” Financial Times, September 24, 2015).
At the recently concluded third Sino-French High Level Economic and Financial Dialogue, China and France “agree to set up a joint fund…to channel capital into investment projects in markets other than the two nations.” Chinese Premier Li Keqiang said that, “the fund is a breakthrough that will bring more openness and market vitality.” French Finance Minister Michel Sapin said the two countries were looking at markets such as Africa where France “has traditional strength.” The fund would be split equally between the two nations with the size of the fund and project allocations to be determined at a later date (“Sino-French Fund to Invest in Markets Worldwide,” China.Org.cn, September 19, 2015, http://www.china.org.cn/business/2015-09/19/content_36628543.htm)
Revelations of Volkswagen’s manipulation of pollution data from its diesel vehicles to pass emissions tests in the US has spurred the Korean Ministry of Environment to launch an investigation of all Volkswagen and Audi vehicles brought into the country. According to an official from the Ministry, “we will…test whether the vehicles are equipped with the software program at issue, which manipulates the level of emissions.” Although Volkswagen faces up to $18 billion in fines in the US, the Korean government currently does not have a basis for fining Volkswagen if the cars it sells in Korea have the deceptive software (Lee Hyo-Sik, “Korea to Inspect Volkswagen Vehicles,” Korea Times, September 22, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/09/123_187337.html)
Indonesia recently terminated a high-speed rail project for which a Chinese consortium was the leading contender. While China’s Ministry of Commerce said the Chinese side “felt sorry that its high-speed rail bid was rejected,” Indonesia and China have continued to strike deals such as for the construction of a coal-fired power plant and an electricity grid. On top of this, the ICBC signed a $500 million agreement with Indonesia’s state-run Eximbank that would be “channeled to Indonesia’s state-run firms” to boost Indonesia’s foreign trade and infrastructure. The deal was part of a $20 billion loan facility signed earlier this year (Chung Ning, “Indonesia Signs New Deals with China after high-speed rail bid rejected,” WantChinaTimes.com, September 20, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150920000009&cid=1201)
Indonesia’s Energy and Mineral Resources Minister Sudirman Said stated that the government planned to “give private companies broader opportunities to enter the downstream sector of the oil and gas industry, which…has been dominated by state oil and gas company PT Pertamina.” The government has been pressured by investors such as Saudi Aramco who are planning on investment in the upstream and midstream (refining) oil and gas sectors and various countries such as Saudi Arabia have reiterated the desire for their companies to get more opportunities in filling stations and the like. Investors in refining also are calling for more incentives (Raras Cahyafitri, “Govt opens Downstream to Private Oil Companies,” The Jakarta Post, September 22, 2015, http://www.thejakartapost.com/news/2015/09/22/govt-opens-downstream-private-oil-companies.html)
Starting in 2014, Indonesia banned the export of raw mineral ores. However, it continues to allow exports of semi-finished products until 2017 provided mineral firms show progress in bulding smelters that will turn minerals into end products. As a result of this, it has allowed PT Newmont Nusa Tenggara (NNT), a subsidiary of American firm Newmont, to continue exporting. The permit, though, expired and thus NNT is trying to renew a deal with Freeport Indonesia on developing a smelting plant in order to get a new export permit. Freeport also has been struggling with the construction of its smelting plant (“Raras Cahyafitri, “Newmont Seeks New Deal as Export Permit Set to Expire,” The Jakarta Post, September 23, 2015, http://www.thejakartapost.com/news/2015/09/23/newmont-seeks-new-deal-export-permit-set-expire.html).
The government of Thailand has been moving to give greater support to the investment and operation of Japanese small and medium-sized enterprises (SMEs) such as providing easier access to loans for firms facing cash crunches due to the country’s economic situation. This is not surprising given that Japanese firms are major investors in Thailand and plan to use the country as an ASEAN investment base. The Thai Industry Ministry and Ministries of Commerce, Agriculture, and Finance are working to learn how they can help SMEs deal with their problems. Japanese SMEs have asked the government for “more measures and privileges” (“Japanese Ask Ministry for SME Support,” Bangkok Post, September 22, 2015, http://www.bangkokpost.com/business/news/701844/japanese-ask-ministry-for-sme-support)
