MNCs in the News-2017-03-31
China’s “Made in China 2025” initiative, designed to boost China’s abilities in higher value-added areas, is garnering new governmental support. This includes pledges from the People’s Bank of China (PBOC), the Ministry of Industry and Information Technology (MIIT), and financial regulators to make it easier for businesses to access loans initial public offerings, and debt, pressure on financial institutions to sink more into manufacturing, and pushing banks to take more diverse collateral. These activities also have something to do with bolstering investment in the real economy (Fran Wang, “‘Made in China 2025’ Initiative Gets New Boost,” Caixin, March 29, 2017, http://www.caixinglobal.com/2017-03-29/101072116.html)
In January, China introduced a law requiring joint ventures (JVs), which are required in the auto sector, to demonstrate they have “the complete technology for ‘new energy vehicles’ before the government will grant a license for production. This has worried carmakers which fear they will be forced to transfer technology to gain access to China’s market. Chinese officials, though, have denied that technology transfers are required. Foreign car company executives are waiting to see what happens later before they conclude they can trust Beijing (Charles Clover, “Foreign Carmakers on Edge Despite China Tech Transfer Assurances,” Financial Times, March 30, 2017)
Chinese media reported that the Beijing Intellectual Property Court “has ruled in favor of Apple in design patent disputes between it and Shenzhen Baili Marketing Service which claimed that Apple’s iPhone 6 and iPhone 6 Plus violated the patent for the design of its mobile phone 100c. The Beijing Intellectual Property Court decided that Apple and Zoomflight, a local Chinese retailer, did not violate Shenzhen Bali’s design patent and lifted the Beijing Intellectual Property Office’s ban on the sale of the aforementioned iPhones (“Chinese Court Rules in Favor of Apple in Local Design Patent Disputes,” Reuters, March 25, 2017, http://www.reuters.com/article/us-apple-china-idUSKBN16W0KT)
Days before United States (US) President Donald Trump is to meet with Chinese President Xi Jinping, the United States Trade Representative (USTR) office issued a report detailing numerous trade barriers confronting the US. Of particular interest to multinational corporations (MNCs) in China, the report criticized China’s overcapacity, cybersecurity barriers, and policies (e.g., conditional licensing, conditional financing, and anti-monopoly law) to force American firms to transfer technology to China or the Chinese government. China’s poor job in enforcing intellectual property rights also was highlighted (David Lawder, “U.S. Trade Barriers Report Slams China on Overcapacity, Tech Transfer,” Reuters, March 31, 2017, http://www.reuters.com/article/us-usa-china-trade-barriers-idUSKBN1720GL)
Chinese officials continue to stress the logic of regulating Chinese outward foreign direct investment (FDI) more tightly. The State Administration of Foreign Exchange notes, “‘China has always encouraged overseas investment, but more needs to be done to ensure it occurs in a more rational manner.’” This is an issue relating to the sectors where money is flowing, but also the fact some companies with high debts are borrowing to go abroad, others are just sending money overseas, and yet others are targeting excessively large targets (Jiang Xufeng, “Economic Watch: China Guards against Overseas investment Mania,” Xinhua, March 26, 2016, http://news.xinhuanet.com/english/2017-03/26/c_136159275.htm)
China Development Bank and China’s national chip fund will provide Tsinghua Unigroup Ltd. 150 billion yuan (around USD $22 billion) to “pursue acquisitions and build a world-class semiconductor industry.” Unigroup has not specified how it will use these funds, but it already is building a $30 billion memory chip facility in China and has purchased, in collaboration with other entities, Spreadtrum Communications and RDA Microelectronics, and made an unsuccessful effort to buy Western Digital, a deal which ultimately fell through due to intense US government scrutiny (“China’s Top Chipmaker Secures $22 Billion to Expand Globally,” Bloomberg, March 28, 2017, https://www.bloomberg.com/news/articles/2017-03-28/china-s-largest-chipm...)
After two years of delays linked to public protests and domestic unrest, Myanmar announced construction on a China financed oil pipeline (paired with a gas pipeline that started full operation in 2013) will resume. To reach this stage, the two parties settled issues relating to transport tariffs and Myanmar’s tax take, though there remain unresolved issues. Myanmar’s government may be moving forward to enhance relations with China in other areas. China also has a multi-billion dollar natural gas contract with Myanmar (Cao Siqi and Shan Jie, “Sino-Myanmar Oil Pipeline Launch a Good Signal: Experts,” Global Times, March 28, 2017, http://www.globaltimes.cn/content/1039861.shtml).
Last week, the Chinese business community in Kenya established the Kenya Chinese Chamber of Commerce (KCCC), described as a “trade lobby bringing together the Chinese business community” there. KCCC Chairman Han Jun “said the new body is expected to unite and empower members to form a cohesive force among domestic and overseas Chinese.” The body also will help those Chinese firms that have been attracted to Kenya to participate in infrastructure like the Mombasa-Nairobi Standard Gauge Railway and to profit from Kenya’s important position in Africa (“Chinese Business Community Launches Trade Lobby in Kenya,” China Daily, March 26, 2017, http://www.chinadaily.com.cn/business/2017-03/26/content_28681515.htm)
Ailing Japanese multinational Toshiba announced this week it could suffer a net loss of USD $9 billion for fiscal year 2016 as a result of its American nuclear division Westinghouse filing for bankruptcy protection. This would be the largest net loss in its 140-year history. Regarding a U.S. senior official’s national security concerns that had been reported earlier, Japan’s Chief Cabinet Secretary Yoshihide Suga commented that “both the governments of Japan and the U.S. are cooperating closely” on Westinghouse’s Chapter 11 filing (Shotaro Tani, “Westinghouse bankruptcy leaves Toshiba facing 1tn yen net loss,” Nikkei Asian Review, March 29, 2017, http://asia.nikkei.com/Business/Companies/Westinghouse-bankruptcy-leaves...)
Russia has suggested building wind turbines and aqua farming facilities on the Kuril Islands. The Russian-held territories, which are also claimed by Japan, are nominated as “the site of joint economic projects.” In March, Moscow proposed 26 projects, while Japan proposed 30 plans for the Islands and offered USD $43 billion of “combined investments, loans and credit lines for Russia.” No proposals have been finalized yet, with talks to be expected to continue during Japanese Prime Minster Abe’s visit to Moscow late April (Elizabeth Shim, “Russia, Japan discuss economic projects on Kuril Islands,” United Press International, March 31, 2017, http://www.upi.com/Top_News/World-News/2017/03/31/Russia-Japan-discuss-e...)
SK Innovation Co. froze its battery packing plant operation in China. However, it strongly denied this move related to China’s retaliation against South Korea’s deployment of the Terminal High Altitude Area Defense (THAAD) system. SK Innovation pronounced that its action flowed from “Beijing's move to stop a subsidy to electric vehicle makers that use parts from non-Chinese manufacturers.” A company official said his firm’s joint venture partners Beijing Electronics and Beijing Automotive Industry Holdings are currently negotiating with the Chinese government to resume operations (Jung Min-hee, “SK Innovation Shuts Down Battery Plant in China,” Business Korea, March 30, 2017, http://www.businesskorea.co.kr/english/news/industry/17665-battery-busin...)
Doosan Heavy Industries & Construction Co. has clinched a deal worth USD $422.05 million to build a seawater reverse osmosis desalination (SWRO) plant in Saudi Arabia. In late March, it signed a contract with Saudi Arabia’s Saline Water Conversion Corporation and will play a key role in the SWRO plant in Shuaibah as “the engineering, procurement, and construction contractor.” The completed facility will have the capacity to process 400,000 tons of seawater day, providing fresy water for around 1.3 million people (Jung Suk-yee, “Doosan Heavy Wins KRW470 Billion Seawater Desalination Deal in Saudi Arabia,” Business Korea, March 30, 2017, http://www.businesskorea.co.kr/english/news/industry/17668-seawater-desa...)
PT Freeport Indonesia has agreed to convert its contract of work (CoW) into a special mining permit, laying a foundation for a solution in its long-running dispute with the Indonesian government. A company spokesman stated it was willing to do so “so long as it is granted investment stability, entailing legal and fiscal certainty, equal to the certainties outlined in our CoW.” The firm also “wants to continue talks on levies imposed in Papua.” The progress comes right before U.S. Vice President Mike Pence’s visit in April (Fedina S. Sundaryani, “Freeport accepts govt terms,” Jakarta Post, March 31, 2017, http://www.thejakartapost.com/news/2017/03/31/freeport-accepts-govt-term...)
Lamonphet Apisitniran, “Alibaba EEC drive to start in 2017,” Bangkok Post, April 1, 2017, http://www.bangkokpost.com/business/news/1225036/alibaba-eec-drive-to-st...
Chatrudee Theparat, “Hirata targets Thai joint venture,” Bangkok Post, March 31, 2017, http://www.bangkokpost.com/business/news/1224100/hirata-targets-thai-joi...
“Mustapa: Hollande's state visit to draw more French investments to Malaysia,” The Star Online, March 28, 2017, http://www.thestar.com.my/business/business-news/2017/03/28/hollande-sta...
“Economists have mixed feelings about FDI from China,” Vietnam Net, March 31, 2017, http://english.vietnamnet.vn/fms/business/175396/economists-have-mixed-f...