MNCs in the News-2014-03-21

A key facet of the Chinese government’s foreign economic policy since the late 1990s/early 2000s has been to encourage Chinese firms to “go out” or to invest and operate abroad. The Chinese government has supported this in various ways, one of the most visible of which is extensive financial assistance. Illustrating this, Zhejiang Geely Holding Group, based in Hangzhou, China, recently received a US $3.26 billion loan from the China Export-Import Bank that it can use to build overseas factories and international logistics bases and facilitate exports and component imports (“Geely borrows 20bln for overseas expansion,” People’s Daily Online, March 18, 2014, http://english.people.com.cn/business/8570458.html)

Tibet Hima Industry Company Limited, a Chinese consortium, signed a deal with the Ugandan government in 2013 that allows it to invest in copper mines in Kilembe which had been idled due to market forces and regional political instability. The Chinese investment is expected to create thousands of jobs, upgrade the plant, equipment, and supporting infrastructure (e.g., railways, housing, and utilities) associated with the mines, generate foreign exchange, and produce concessional fees and taxes. Job creation is vital to the Ugandan government given a youth unemployment rate that tops 60 percent. A concern is the environmental impact of the mines (Fredrick Mugira, “Changing Lives: Chinese Investment in Uganda Gives Hope to Thousands,” People’s Daily, March 17, 2014, http://english.people.com.cn/business/8568960.html)

An American Chamber of Commerce in China survey reveals that American firms are becoming increasingly frustrated with the operating environment in China. According to the survey and other sources, challenges include Internet censorship, government market competition investigations (targeting inter alia patents, baby formula, and telecommunications gear), and intellectual property protection problems. The seeming discriminatory way in which American firms are treated has led US Ambassador Max Baucus to emphasize the need for a “level playing field.” Making the challenging environment less tolerable is the fact that US firm profits are under pressure with growth rates lower than in previous years (Tom Mitchell, “Frustrations over China Increase at US Companies,” Financial Times, March 19, 2014)

In mid-March, a Chinese court, for the first time, accepted a lawsuit relating to forced labor during Japan’s occupation of China. Specifically, thirty-seven former Chinese wartime laborers and bereaved families asked for compensation for damages suffered as a result of doing forced labor for Mitsubishi Materials Corporation and Nippon Coke & Engineering Co. Ltd. The suing parties request the two firms to make a public apology and for compensation of US $162,000 per person. China may have changed its past stance due to Japanese Prime Minister Abe Shinzo’s Yasukuni shrine visit and other historical controversies (“China: First lawsuit against forceful labor, asking for compensation to 2 Japanese firms,” Mainichi Shinbun, March 18, 2014, http://mainichi.jp/select/news/20140319k0000m030077000c.html)

On widely watched television consumer product broadcast in China, the Japanese firm Nikon was specifically targeted for selling a defective camera and inadequately addressing the problem. Many viewed the attack as politically motivated and a reflection of tense China-Japan relations and Japanese Prime Minister Abe’s Yasukuni shrine visit. Yet, Nikon is not the only foreign company receiving special scrutiny. Sony, Samsung, MacDonald, Apple, Volkswagen, and Starbucks all have experienced similar campaigns in recent years. According to some analysts, China’s aim is to boost the consumption of domestic products, a goal that product quality and safety issues make difficult to achieve (“Nikon, Alibaba are targeted by Chinese state broadcaster,” Wall Street Journal, March 16, 2014, http://online.wsj.com/news/articles/SB1000142405270230354620457944114301... “China’s attack on Japanese products, national media targets Nicon,” Nikkei, March 15, 2014, http://www.nikkei.com/article/DGXNASGM15025_V10C14A3FF8000/

Three major Chinese banks are currently under a joint inspection by the South Korean Financial Supervisor Service (FSS) and the Bank of Korea. FSS and BOK have been examining the China Construction Bank, the Industrial and Commercial Bank of China, and the Bank of China to assess if there is money flowing out to China. The concern is that some Chinese banks in Seoul have sent excessive amount of Yuan to China in order to profit from interest rate differentials. Foreign bankers worry that the FSS and Bank of Korea’s actions may herald additional regulations for foreign banks in Korea (Tae-jong Kim, “Chinese banks under inspection,” The Korea Times, March 21, 2014, http://www.koreatimes.co.kr/www/news/biz/2014/03/488_153819.html)

Korea’s antitrust regulator, the Fair Trade Commission (FTC), said that it would join forces with China and others in an effort to protect smaller players from a mega alliance of the world’s top three container carriers. According to the FTC, the main goal is to prevent the Big 3 (Maersk Line, CMA CGM, and MSC), which have applied for an approval for a P3 Alliance, from forming an alliance that would allow them to obtain excessive control over the container market. If approved, the P3 would control more than 50 percent of Asia-Europe and about 30 percent of trans-Pacific routes (Kyong-ae, Choi, “Korea, China to block mega shipping alliance,” The Korea Times, March 17, 2014,http://www.koreatimes.co.kr/www/news/biz/2014/03/123_153560.html

For the first time in 27 years, Taiwan’s steelmakers are facing an anti-dumping investigation by the US government. The US Department of Commerce has issued a preliminary ruling against six Taiwanese steelmakers, claiming that the firms received state subsidies to export cheap, non-oriented electrical steel products to the US, which generates unfair price competition for domestic US companies. The US will impose countervailing duties ranging from 6.41 to 12.82 percent for US imports, which US Customs believes is the value of the subsidies each steelmaker received from the Taiwanese government (Helen Ku, “US finds Taiwanese steel firms guilty of dumping,” Taipei Times, March 21, 2014, http://www.taipeitimes.com/News/biz/archives/2014/03/21/2003586150)