MNCs in the News-2016-11-24

A spokesman with China’s Ministry of Commerce (MOFCOM) said that “China would continue to embrace foreign investment from companies from the European Union (EU), adding that “China will not change its policies on absorbing foreign investment, and will continue to protect the legitimate rights of foreign-invested enterprise and offer better services to them.” Firms from the EU are major investors in China, having poured more than USD $131 billion in foreign direct investment (FDI) into the country—USD $8.36 billion in the first ten months of 2016 alone—and having created more than 42,500 companies (“China to Further Open Up Business Sectors to Embrace Foreign Investment,” China Daily, November 17, 2016, http://europe.chinadaily.com.cn/business/2016-11/17/content_27411980.htm)

Liu Yunshan, a member of the Standing Committee of the Politburo of the Chinese Communist Party Central Committee met with Microsoft CEO Satya Nadella in mid-November. He told Nadella that “he hoped Microsoft would share its technology with China and contribute to cooperation between Chinese and US businesses.” Liu also “called on the United States to work on cybersecurity with China with an open and inclusive attitude.” Nadella replied that his company, which benefitted from cooperating with China, “will continue to work with the country to develop new products with world class standards and security” (“Senior CPC official meets Microsoft CEO,” China Daily, November 15, 2016, http://europe.chinadaily.com.cn/business/2016-11/15/content_27380049.htm)

Following a multi-year investigation, China’s State Administration for Industry and Commerce (SAIC) announced that it would levy a USD $97 million fine on Tetra Pak, a Swedish company involved in food processing and packaging, for abusing its market position in violation of China’s anti-trust laws. According to the SAIC, between 2009 to 2013, Tetra Pak exploited its market dominance to “force businesses to purchase its packaging, restrict suppliers’ cooperation with its rivals, and hamper fair competition.” Tetra Pak expressed disappointment with the decision, but said it will not appeal it (“Tetra Pak Fined in China after Anti-Trust Probe,” Xinhua, November 16, 2016 http://news.xinhuanet.com/english/2016-11/16/c_135834863.htm)

Qualcomm’s President said his company “expected to start shipping-China-customized server chips around mid-2018.” The chips will be produced through a joint-venture (JV), called Guizhou Huaxintong Semiconductor Technology Co., in which the government of Guizhou province has a 55 percent stake. The JV also set up a research and development center in Beijing. Qualcomm “‘provided all the licensed technologies to the joint venture’” and that “‘the chips will have a customized security element for the China market.’” Some deem the initiative “an example of how international companies are adjusting their strategies in China, where State-owned firms are embracing homegrown IT products” (“Qualcomm to Ship Customized Server Chips,” China Daily, November 19, 2016, http://europe.chinadaily.com.cn/business/2016-11/19/content_27428541.htm)

Sources report Facebook has “worked on special software so it could potentially accommodate censorship demands in China.” Mark Zuckerberg commented, “‘it’s better for Facebook to be a part of enabling conversation, even if it’s not yet full conversation.’” Facebook regularly takes down content at government request, but has never let a government a priori prevent the posting of content. Some of the sources for the report said the software would not necessarily be implemented. Even if Facebook enters China, it is far clear it would be popular given the competition. Still it may see opportunities in areas like live streaming (Dave Lee, “Facebook ‘Made China Censorship Tool,’” BBC News, November 23, 2016, http://www.bbc.com/news/technology-38073949; Adam Minter, “Why Facebook Won’t Give Upon on China,” Bloomberg, November 24, 2016, https://www.bloomberg.com/view/articles/2016-11-25/why-facebook-won-t-gi...)

The Committee on Foreign Investment in the United States (CFIUS) said it would recommend a Chinese investment consortium not be allowed to purchase Germany’s Aixtron. The reason seems to be because Aixtron technology is used to make gallium nitride which boosts the power and sensitivity of radars, antennas, and lasers while reducing their energy consumption. Last month, Germany withdrew its approval for the deal, saying that its concerns were independent of Washington’s and that it was conducting its own investigation. An Aixtron spokesman claims the firm has “objective arguments to overcome” US and German concerns (Eyk Henning, “U.S. Regulators Move to Stop Chinese Takeover of German Tech Firm Aixtron,” Wall Street Journal, November 20, 2016 http://www.wsj.com/articles/u-s-regulators-move-to-stop-chinese-takeover... Harro Ten Woldeand Sabine Siebold, “U.S. Fears over Sensitive Compound Hits Chinese bid for Aixtron,” Reuters, November 21, 2016, http://www.reuters.com/article/us-aixtron-m-a-fujian-usa-idUSKBN13G0OI; “Aixtron Says Has Arguments to Overcome Worries over China Deal,” Reuters, November 21, 2016, http://www.reuters.com/article/aixtron-ma-fujian-usa-idUSF9N1D404R)

In its annual report to Congress, the U.S.-China Economic and Security Review Commission said “U.S. lawmakers should take action to ban China’s state-owned firms from acquiring U.S. companies,” arguing China uses “state-backed enterprises as the primary economic tool to advance and achieve its national security objectives.” To enact a ban, the Commission says Congress should amend the law on CFIUS. China said, “the report ‘has again revealed the commission’s stereotypes and prejudices’” and called for “‘relevant countries to create a level playing field.’” While the recommendation is advisory, some believe Trump and the incoming Congress might be receptive to it (David Lawder and Denny Thomas, “U.S. Panel Urges Ban on China State Firms Buying U.S. Companies,” Reuters, November 17, 2016, http://www.reuters.com/article/us-usa-china-idUSKBN13B1WO)

As part of a JV (BPI), Japan’s Itochu Corporation and Electric Power Development Co. Ltd (J. Power) will provide full support for the construction of a coal-fired Batang power plant in Central Java. This power plant, which is expected to be the cleanest and the most efficient plant in Southeast Asia, is a USD $4.2 billion project and would be Itochu’s second in Indonesia. J. Power said the plant will be constructed using ultra-supercritical (USC) technology and Regenerative Activated Coke Technology. The Japan Bank for International Cooperation agreed to provide about $2 billion of the total loan of $3.4 billion (Hendarsyah Tarmizi, “Japanese giants fully support Batang power plant,” The Jakarta Post, November 15, 2016, http://www.thejakartapost.com/news/2016/11/15/japanese-giants-fully-supp...)

Shinzo Abe, Japan’s Prime Minister, visited Argentina in late November to promote investment in the Latin American country. It is a historical visit because it has been almost sixty years since the last visit by a Japanese Prime Minister to Argentina. According to the Argentine foreign ministry, the visit strengthens bilateral ties “‘in the political and economic spheres and in trade, investment and cooperation in science, technology, culture and sport.”’ Japan is planning to increase its investment to Argentina from current US $100 million/year to US $3 billion/year. Japan’s ambassador said that present relations are very concentrated on enhancing investment (“Japan’s Abe to visit Argentina to boost trade,” Business Standard, November 19, 2016, http://www.business-standard.com/article/pti-stories/japan-s-abe-to-visi...)

Recently China’s Ministry of Industry and Information Technology revised the country’s automobile battery standard to create a de facto requirement that companies “significantly increase production facilities in mainland China” if they want their electric car batteries to be certified. This requirement means that Korean battery companies such as LG Chem, Samsung SDI, and SK Innovation will be unable to get approval for several years as it takes time to expand production. Some see Beijing’s action as protectionism. Others view it as retaliation against Korea’s decision to deploy the Terminal High Altitude Area Defense Terminal High Altitude Area Defense (THAAD) system (Michael Herh, “Chinese Government Virtually Blocking Korean Batteries from Entering Chinese Market,” Business Korea, November 26, 2016, http://www.businesskorea.co.kr/english/news/industry/16570-regulations-b...)

China’s Insurance Regulatory Commission recently rejected Korean Re’s, a South Korean insurance company, request to open a branch in Shanghai. This follows a South Korean financial company getting far less of a share in a JV than it originally anticipated it would receive. As well the China Banking Regulatory Commission delayed the approval of KEB Hana Bank’s request for starting a credit card business in China. All of this is attributed to the Chinese government trying to punish South Korea for its decision to accept the missile defense THAAD system (Jung Suk-Yee, “South Korean Financial Companies Negatively Affected in China,” Business Korea, November 24, 2016, http://www.businesskorea.co.kr/english/news/money/16574-another-aftermat...)

Although there are broad concerns that FDI flows into Indonesia will drop off due to uncertainties in financial markets engendered by Donald Trump’s presidential election victory, the Indonesia Investment Coordinating Board (BKPM) still maintains its investment realization targets. In fact, some argue the election of Trump may even encourage U.S. companies to expand their business domestically and internationally, especially into emerging markets like Indonesia. Indonesia has a high economic growth rate, sound fiscal policies, and positive demographic trends, which creates huge potential for long-term investment (Tabita Diela & Dion Bisara, “Trump Effect Unlikely to Reduce Investment in Indonesia: BKPM,” Jakarta Globe, November 15, 2016, http://jakartaglobe.id/business/trump-effect-unlikely-reduce-investment-... “Impact Trump Presidency on Foreign Direct Investment in Indonesia,” Indonesia Investment, November 16, 2016, http://www.indonesia-investments.com/news/news-columns/impact-trump-pres...)

The economic relationship between China and Indonesia seems to be robust, which may indicate that Indonesia has shifted its orientation away from “traditional” partners, such as Japan, towards China. However, the Indonesian government strongly dismisses this notion. In fact, investments from Japan are expected to reach between USD $3.5 billion to $4 billion by the end of 2016, which is larger than China’s. Recently, the Indonesian government offered Japan a chance to take part in a USD $7.64 billion railway project, though other countries, including China, will participate in the bidding process. This may stir another round of heated competition (Viriya P. Singgih, “Japan still deeply tied to Indonesia,” The Jakarta Post, November 14, 2016, http://www.thejakartapost.com/news/2016/11/14/japan-still-deeply-tied-to...)

After wooing Chinese investors about two weeks ago, Malaysian Prime Minister Najib Razak is now moving to strengthen his country’s relationship with Japanese investors. In this vein, Prime Minister Najib has welcomed Japanese captains of industries to scour for investment opportunities in Malaysia. Najib noted, “Malaysia is no longer competing at the level of low technology, but we want to move up to ensure that our people will benefit from higher paying jobs.” Next year, Malaysia and Japan will celebrate the 60th anniversary of their diplomatic relation and this will provide a great opportunity for them to expand their collaboration (“Look for More Opportunities In Malaysia, Najib Tells Japanese Corporate Leaders,” Malaysian Digest, November 16, 2016, http://www.malaysiandigest.com/frontpage/282-main-tile/643343-look-for-m...)

A Vietnamese official said his country will continue to push for legal reforms, improve the economic environment, and restructure its banking system. The official also invited foreign companies to participate in the restructuring of local banks. The Vietnamese banking sector has recently completed a five-year restructuring program and is planning for the next phase of drastic change. Daniel Wu, the chairman of the Asian Bankers Association, observed that many global investors would like to be involved in Vietnam’s banking system. Up to now, Vietnam has seven wholly-owned foreign banks with assets of USD $35.8 billion (Dam Tuan, “Vietnam welcomes foreign investors for banking restructuring,” VN Express, November 12, 2016, http://e.vnexpress.net/news/business/vietnam-welcomes-foreign-investors-...)

Vietnam’s Deputy Minister of Industry and Trade notes that the failure of the country’s food processing industry to meet market needs suggests a huge opportunity for investors. Consequently, the Deputy Minister urges foreign companies to enter Vietnam’s food industry and further encourages Vietnamese businesses and organizations to actively solicit foreign investment. To date, Vietnam has attracted total FDI of USD $290.6 billion, but only USD $7.6 billion of this is in the food processing industry. It needs to be recognized that compared to other regions, Vietnam provides relatively competitive investment incentives regarding income tax, land rental, and raw material zones (“Việt Nam's food processors court global investors”, Vietnam News, November 18, 2016, http://vietnamnews.vn/economy/346454/viet-nams-food-processors-court-glo...)

*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.