MNCs in the News-2016-09-02

China’s National People’s Congress (NPC) Standing Committee considered and eventually adopted amendments to China’s “Law on Foreign-Capital Enterprises,” “Law on Chinese-Foreign Equity Joint Ventures,” “Law on Chinese-Foreign Contractual Joint Ventures,” and “Law on the Protection of Investment of Taiwan Compatriots.” Previously, it twice allowed the temporary suspension of these laws in the Fujian, Guangdong, Shanghai, and Tianjin FTZs, permitting Taiwanese and foreign investors to create businesses without government approval if their business type was not on a “negative list.” China’s Ministry of Commerce (MOFCOM) believes the previous suspensions fueled a massive surge in inward FDI by simplifying the establishment process (“China Reviews Inbound Investment Laws,” China Daily, August 30, 2016, http://europe.chinadaily.com.cn/business/2016-08/30/content_26636289.htm; “China Revised Inbound Investment Laws,” China Daily, September 3, 2016, http://europe.chinadaily.com.cn/business/2016-09/03/content_26688690.htm)

Building on the reported success of China’s currently existing four FTZs, China also will allow the creation of seven new FTZs in Liaoning, Zhejiang, Henan, Hubei, Sichuan, and Shaanxi provinces and Chongqing Municipality, though no deadlines or specific establishment procedures were set. The new policy follows the creation of a FTZ in Shanghai in 2013 and the establishment of FTZs in Fujian, Guangdong, and Tianjin in 2014. MOFCOM Minister Gao Hucheng said “‘the decision to expand the FTZs shows authorities’ strong resolution in advancing reforms and opening up.’” Each place is expected to “tap its unique geographical and industrial advantages” (“China Focus: China Adds 7 New Free Trade Zones,” Xinhua, August 31, 2016, http://news.xinhuanet.com/english/2016-08/31/c_135648835.htm)

The European Chamber of Commerce recently released its annual report on operating conditions in China for its member companies. It noted that Chinese firms are engaged in the massive acquisition of large, high quality firms in Europe while European companies have little chance of being “‘permitted to make a significant investment in an equally prominent Chinese company with advanced technological capabilities.” It warned that China’s limitations on European firm access to China was “‘politically unsustainable’” (Tom Mitchell and Christian Shepherd, “Europe Lobby Warns on China Market Barriers,” Financial Times, September 1, 2016)

MOFCOM told attendees at its news briefing last week that “it was investigating whether the merger deal between Didi Chuxing and the China unit of the US-headquartered Uber Technologies Inc. suggested a potential monopoly.” A MOFCOM spokesman said that the two companies announced their merger deal without filing any advance application. MOFCOM has required Didi to explain why it had failed to file an application and it also has obligated Didi to provide a number of documents. MOFCOM is interviewing parties to examine the potential market consequences of the deal (Meng Jing, “China’s Ministry of Commerce Investigating Didi-Uber Merger,” China Daily, September 2, 2016, http://europe.chinadaily.com.cn/business/2016-09/02/content_26682419.htm)

In China for the G-20 Hangzhou summit, British Prime Minister Theresa May confirmed she would have her National Security Council examine the potential security implications of a deal that would involve China financing and participating in the consortium (consisting of EDF and China General Nuclear Power Corp.) that would construct the Hinkley Point C nuclear power plant project. May downplayed the review saying it was her style to review the evidence before making decisions and that she hoped to continue the United Kingdom’s good relationship with China. Some say the issue is not security, but the economics of the project (“Theresa May Hopes to Assure Chinese over Nuclear Plant,” Business Standard, September 1, 2016, http://www.business-standard.com/article/international/theresa-may-hopes... William James, “UK’s Theresa May to Review Security Risks of Chinese-Funded Nuclear Deal,” Reuters, September 4, 2016, http://www.reuters.com/article/us-g20-china-britain-nuclear-idUSKCN11A0GN)

In Kenya for the 6^th Tokyo International Conference on African Development, Japanese Prime Minister Abe Shinzo pledged USD $30 billion “to boost African growth and infrastructure over the next three years,” with the sum including $11 billion of “old money” left over from a $32 billion commitment made in 2013 and private sector funds, too. $10 billion of the overall total is supposed to go to electricity-generation projects as well as upgrading urban transport systems and ports. Many see the conference and Japan’s funding pledges as a way for it to compete with the US, China, and various European countries (“Abe Dangles $30 Billion at Africa Leaders in Nairobi in Counter to China,” Japan Times, August 28, 2016, http://www.japantimes.co.jp/news/2016/08/28/national/politics-diplomacy/...)

According to Japanese media, Japanese trading companies such as Marubeni, Mitsui & Co., and Sumitomo have won numerous government power projects in Africa, which is in bad need of power. These projects are worth hundreds of billions of yen which, in turn, will yield billions of dollars of construction, equipment supply, and service opportunities to Japanese firms like Mitsubishi Hitachi Power Systems. To energize the process, Japan is providing credits, Japanese agencies like Japan’s Ministry of Economy, Trade, and Industry are providing support for studies, and the Japan Bank for International Cooperation is supplying financing for a variety of initiatives (“Japanese Trading Houses Promise to Quench Africa’s Energy Thirst,” Nikkei Asian Review, August 27, 2016, http://asia.nikkei.com/Business/Companies/Japanese-trading-houses-promis...)

Korean officials are starting to cancel, downsize, or terminate tax privileges in so-called free economic zones (FEZs), which started to gain popularity in 2003. It was thought that these FEZs would help Korea attract foreign capital, spread growth around the country, and boost employment as well as new kinds of industries. However, FEZs like the Chungbuk Free Economic Zone, East Coast Free Economic Zone (EFEZ), and Inchon FEZ have not attracted investment (from foreign or domestic firms) or developed impressively for reasons ranging from a lack of adequate incentives to a lack of special features (Choi Sung-Jin, “Free Economic Zoens Fail to Attract Foreign Investors,” Korea Times, September 3, 2016, http://www.koreatimes.co.kr/www/news/biz/2016/09/123_213377.html)

Indonesia’s state-owned enterprises (SOEs) are seeking foreign investment to finance many state projects. According to the SOE Ministry, “various funding sources including overseas ones, will play an essential role in supporting state project development given the lending capacity of domestic bank is limited to USD $37.5 billion” and Indonesia’s current administration has very ambitious infrastructure development plans to fuel economic growth. The Indonesian government is not just looking to Chinese institutions like the China Development Bank (CDB) and the Industrial and Commercial Bank of China (ICBC), but also is pursuing opportunities loans from the US, UK, Japan, and Scandinavian countries (Grace D. Amianti, “State firms hunting for foreign loans to fund projects,” The Jakarta Post, September 1, 2016, http://www.thejakartapost.com/news/2016/09/01/state-firms-hunting-for-fo...)

Vietnam and Cuba are seeking to increase their bilateral investment flows. The deputy director of Vietnam’s Foreign Investment Agency Dang Xuan Quang said that Vietnam had only one project worth less than USD $500,000 in Cuba while Cuba had only two investment projects in Vietnam. He said stunted investment was a function of a lack of access to information and the investment policies of each country’s companies. Cuba’s Ambassador to Vietnam noted that although it would be difficult for investors to invest in Cuba at first, the long-standing relationship between the two countries will help them to surmount any challenges (“Cuba, VN eye more investment,” Vietnam News, August 31, 2016, http://vietnamnews.vn/economy/302015/cuba-vn-eye-more-investment.html#mf...)