MNCs in the News-2015-07-24

China is working on developing incentive schemes for alternative energy vehicles that cover the production, sale, and usage of traditional gas-electric hybrids. In the past, it excluded such vehicles from its alternative energy vehicle initiatives “because that segment of the market was dominated by Japanese companies such as Toyota Motor Corp.” While Chinese firms such as SAIC Motor Corp. will benefit from the new program, which is used in California (US), the new program will benefit companies such as General Motors and Volkswagen and help China address its fuel economy standard regulations which will become increasingly aggressive up to 2020 (Jakes Spring, “China Prepares ‘California-style’ Scheme for Green Cars,” Reuters, July 23, 2015, http://www.reuters.com/article/2015/07/23/us-china-autos-electric-vehicl...)

In the first sixth months of 2015, China’s utilized FDI totaled more than US $48 billion, representing a year-over-year (YOY) increase of 8 percent. According to China’s MOFCOM, the increase, far better than the 2.2 increase in the same period in 2014, had to do with the “‘widening of pilot reforms in Free Trade Areas, fewer government restrictions, and the active opening up in certain industries and inland areas.’” More than 63 percent of the FDI went into the service sector, which experienced a large YOY increase, while MOFCOM reported high-end manufacturing—e.g., communications, electronics, and pharmaceuticals—did well, too (“China’s FDI Usage Grows Faster in H1: MOC,” China.Org.Cn, July 18, 2015, http://www.china.org.cn/business/2015-07/18/content_36090187.htm)

Chinese MOFCOM Vice Minister Wang Shouwen told Chinese media that FDI inflows “will rebound in 2015 on the back of a robust expansion in the first six months.” He stated the expectation was that FDI for 2015 would increase 4 percent YOY to USD $125 billion versus 1.7 percent in 2014. Still, he noted that the 2^nd half of 2015 would not show results as strong as the first 1^st because of a “slow economic recovery in major FDI sources and the tapering of U.S. quantitative easing” (“China’s FDI Growth to Pick Up Amid Challenges,” China.Org.Cn, July 19, 2015, http://www.china.org.cn/business/2015-07/19/content_36093291.htm; “China FDI Growth to Pick Up Amid Challenges: Minister,” WantChinaTimes.com, July 19, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?cid=1202&MainCatID=12&...)

China is working on developing incentive schemes for alternative energy vehicles that cover the production, sale, and usage of traditional gas-electric hybrids. In the past, it excluded such vehicles from its alternative energy vehicle initiatives “because that segment of the market was dominated by Japanese companies such as Toyota Motor Corp.” While Chinese firms such as SAIC Motor Corp. will benefit from the new program, which is used in California (US), the new program will benefit companies such as General Motors and Volkswagen and help China address its fuel economy standard regulations which will become increasingly aggressive up to 2020 (Jake Spring, “China Prepares ‘California-Style’ Scheme for Green Cars,” Reuters, July 23, 2015, http://www.reuters.com/article/2015/07/23/us-china-autos-electric-vehicl...)

China’s outward FDI flows (OFDI) will soon match its inward FDI flows with OFDI in RMB terms increasing by almost 30 percent in the first half of 2015 YOY. By comparison, inward FDI jumped “only” 8.3 percent. According to MOFCOM, total OFDI hit 343.2 billion RMB while inward FDI totaled around 420.5 billion RMB. Chen Bingcai, a researcher with the Chinese Academy of Governance, said “‘the turning point will take place within this year…with institutions like the Asian Infrastructure Investment Bank and Silk Road Fund, China’s overseas investment will only accelerate, and this trend will reshape the global economic landscape’” (“China Outbound Investment Expands as Nation Boosts Global Clout,” Bloomberg, July 20, 2015, http://www.bloomberg.com/news/articles/2015-07-21/china-outbound-investm...)

In the 1980s, the American semiconductor industry proposed creating an industry-wide joint venture called US Memories Inc. to deal with the Japanese chip firm challenge. While the initiative failed, new American semiconductor firms such as Micron arose. Now there are new worries about the challenge presented by a foreign industrial powerhouse, though this time the powerhouse is China and the immediate threat is the possible acquisition of Micron by Tsinghua Unicom, which despite widespread skepticism and Micron’s informal rejection of a bid, Tsinghua believes can occur. Threat perceptions exist because the potential acquirer is Chinese and semiconductors have military applications (Richard Waters, “China Tech Expansion hits a Phase that Will Worry the US,” Financial Times, July 23, 2015; Michael Gold, “Tsinghua Holdings Chief Says Still in Micron Talks, Hopeful on Deal,” Reuters, July 23, 2015, http://www.reuters.com/article/2015/07/23/us-tsinghua-micron-chairman-id...)

Despite a slowing economy, China remains the largest investor in Myanmar. Although Chinese outward FDI in Myanmar increased “marginally in June from the previous month” and was less than April and YOY, China still represented 26 percent of Myanmar’s total FDI. Thailand, the second largest investor, constituted 18% of Myanmar’s total investment. One academic commentator attributed most of the decline to cooler political relations, adding “‘I think the Chinese realized that they had overplayed their hand when they were the only real investor in the old…regime,’” signing “too many exploitative deals...[that] caused hostility.” Still Chinese investment is expected to return (“China Tops Myanmar FDI Table But Pace Slows,” Bangkok Post, July 20, 2015, http://www.bangkokpost.com/business/news/628100/china-tops-myanmar-fdi-t...)

In its first enforcement action against one of China’s four largest state-owned banks, the U.S. Federal Reserve Bank (FRB), the U.S. Central Bank, “told China Construction Bank [CCB] to ramp up its anti-money laundering framework.” Specifically, it said that CCB had 60 days to “submit plans for compliance programs for anti-money laundering controls, customer due diligence programs, and methods for spotting suspicious transactions.” The US FRB, however, did not fine or impose sanctions on CCB (“US Fed Raps China Construction Bank over Money Laundering,” Business Standard, July 22, 2015, http://www.business-standard.com)

Jiang Jianqing, the Chairman of Industrial and Commercial Bank of China (ICBC), the world’s largest bank in terms of assets, met with the President of Kenya Uhuru Kenyatta and pledged to increase direct investments, to facilitate Chinese investment in Kenya, and to encourage greater Chinese tourism to Kenya. Jiang, who was in Kenya for the China-Africa Entrepreneurs Forum, stated, “‘we are impressed by the progress going on in Kenya.’” President Kenyatta noted, “‘we are open for business and our only formula is that it must be on a win-win basis’” (“ICBC Pledges to Scale Up Investments in Kenya,” China.Org.Cn, July 22, 2015, http://www.china.org.cn/business/2015-07/22/content_36123370.htm)

This week, Japanese firm Mitsubishi Materials offered a landmark apology at a ceremony at the Simon Wiesenthal Center (USA). It “became the first major Japanese company to apologize for using captured American soldiers as slave laborers during the Second World War.” Senior Executive Officer Hikaru Kimura said, “‘today we apologize remorsefully for the tragic events in our past.’” During World War II, Mitsubishi was associated with six prisoner-of-war (POWs) camps. According to Kyodo News agency, Mitsubishi Materials also plans to apologize to Chinese slave laborers and pay compensation, which would be path breaking given Japan’s stance compensation is not needed (“Japan’s Mitsubishi to make Prisoners of War Apology,” BBC News, July 18, 2015, http://www.bbc.com/news/world-asia-33584704; Mariko Lochridge, “Mitsubishi Materials Apologizes for Using U.S. POWs as Slave Labor,” Reuters, July 20, 2015, http://www.reuters.com/article/2015/07/20/us-usa-mitsubishimaterials-apo... Shivam Srivastava, “Japanese Company to Compensate for Wartime Forced Labor-Kyodo,” Reuters, July 23, 2015, http://www.reuters.com/article/2015/07/23/us-mitsubishi-ma-compensation-...)

The John Tung Foundation (Taiwan) has begun a campaign against a huge USD $300 million planned investment by Japan Tobacco International (JTI) in the Tainan Technological Industrial Park. According to the Foundation, JTI’s investment would violate the World Health Organization’s Framework Convention on Tobacco Control, which Taiwan has signed. The Tainan city government has asked the central government to issue an opinion about the project and promises to stop the project if the central government deems that it violates the FCTC, though it should be noted that the Ministry of Economic Affairs and other entities have already screened the project (Liao Pei-Yu, Huang Wen-Po, Tsao Ting-Ting, Tsai Yi-Wen, and others, “Japanese Tobacco Firm’s Plan to Set Up Plant in Tainan Creates Controversy,” WantChinaTimes, July 19, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150719000006&cid=...)

Indonesia did well in attracting FDI in 2014, drawing in USD $23 billion versus $19 billion in 2013. The conclusion of the Presidential election, progress in Association of Southeast Asian Nations economic integration, and other factors have led to expectations of better results for 2015. There are those who feel Indonesia will be hard pressed to meet its objective of attracting $35 billion of FDI because of competition from others like Vietnam. Moreover, a representative of the Indonesian Employers Association observed the government is “deterring many businesses with complicated and often contradictory investment rules and rhetoric heavy on economic nationalism” (“Indonesia Top Region’s FDI Despite Sluggish Growth,” Bangkok Post, July 20, 2015, http://www.bangkokpost.com/business/news/628236/indonesia-tops-region-fd...)

The Director-General of the Thailand Business Development Department stated that “more foreign companies were approved to operate businesses in Thailand in July than in previous month,” though the value was much less, 63 percent lest than the previous month. For the first seven months of the year, the government approved 242 foreigners to run businesses, an increase of 18 percent YOY. The licenses were granted to 20 service suppliers from, for example, China, Japan, Netherlands, Spain, and Singapore (the largest category by far), wholesaler businesses from Japan, Singapore, and India, and other types of entities (“More Invest in Thailand But Value Plummets,” Bangkok Post, July 20, 2015, http://www.bangkokpost.com/business/news/628472/more-invest-in-thailand-...)