MNCs in the News-2015-12-04

China’s Genera Administration of Quality, Supervision, Inspection, and Quarantine announced recently that Mercedes-Benz, the German automobile firm, would recall more than ten thousand vehicles as a result of faulty airbags, which may not work resulting in the airbags deploying even in the absence of a collision. The vehicles, involving Mercedes C-class and GLK models, were manufactured between early 2007 and late 2008. Mercedes-Benz will replace defect airbag control units in the cars free of charge (“Mercedes-Benz to Recall Vehicles in China over Airbag Flaws,” China Daily, December 1, 2015, http://www.chinadaily.com.cn/business/motoring/2015-12/01/content_225959...)

China is the world’s second biggest global drugs market after the US and is one of the most appealing in numerous areas like diabetics, cancer, and lung diseases because of population characteristics or factors like changing dietary habits, pollution, and an aging population which are creating new medical conditions and/or the need for new kinds of treatments. Foreign multinationals have profited richly from this environment. The Chinese government is turning its attention to bringing more local drugs to market by supporting local generics firms, more rapidly approving new drugs, and fostering local drug research clusters in collaboration with foreign firms (Ben Hirschler and Adam Jourdan, “Beijing Aims to Refill Medicine Chest with ‘Made in China’ Drugs,” Reuters, November 30, 2015, http://www.reuters.com/article/2015/11/30/us-china-pharmaceuticals-idUSK...)

China is negotiating with Djibouti to build a logistics facility to facilitate its Gulf of Aden anti-piracy patrols. China has been conducting such patrols since 2008, but has been relying on foreign ports for resupply. Many are worried about China’s intentions given its dual-use port construction activities elsewhere. China has described the port as part of its effort to contribute to UN peacekeeping, undertake escort duties, and provide humanitarian assistance. Ultimately the port reflects China’s need to protect its growing overseas investments and other interests. Djibouti welcomes the port’s contribution to its quest to become a regional and international hub (Charles Clover, “China Seeks Own Navy Facility in Djibouti,” Financial Times, November 27, 2015: Ben Blanchard and Michael Martina, “China Military in Talks for Logistics ‘Facilities,’” Reuters, November 26, 2015, http://www.reuters.com/article/2015/11/26/us-china-djibouti-idUSKBN0TF0T...)

On the eve of the China-Africa Cooperation Summit, MOFCOM Vice Minister Qian Keming stated “‘China will expand investment to Africa and promote cooperation in the emerging industries of aviation, finance, tourism, the marine economy, and green economy.’” As of 2014, Chinese firms had poured USD $30 billion into Africa, 64 times the 2000 amount. Qian noted rising Chinese investment in Africa was complementary with Africa promoting its “Belt and Road Initiative (OBOR) and industrial cooperation while African countries are in the midst of industrialization and modernization.’” Qian underlined that China has capital and “advanced technologies suitable to less developed regions (“Senior China Official Vows More Africa Investment,” China.org.cn, December 1, 2015, http://www.china.org.cn/business/2015-12/01/content_37203054.htm)

In South Africa for the China-Africa Cooperation Summit, Chinese President Xi Jinping oversaw the signing of agreements with South Africa with a value of about $6.5 billion. A large proportion of this is for the purpose of South African infrastructure construction, with a significant amount of this consisting of loans rather than outright investment. South Africa and China also plan to expand nuclear cooperation, though details are lacking at present. In Africa, other African countries such as Nigeria will press China to invest more while some countries “may push for debt moratoriums and technology transfers” (“China signs US$6.5b Deals in S. Africa,” China.org.cn, December 4, 2015, http://www.china.org.cn/business/2015-12/04/content_37232610.htm)

Hong Kong Nicaragua Development Group (NKND) has announced at least a one-year delay in its plan to build a USD $50 billion canal across Nicaragua. For some, the delay only confirms their doubts about the viability of a project they never felt would be built in the first place due to environmental and other issues (e.g., the lack of other financial partners), doubts that intensified with the massive decline in the wealth of HKND founder Wang Jing. A spokesman for Nicaragua’s canal commission said the delay was due to a “rigorous environmental approval process” and argued that “‘resources are available’” (Jude Webber, “Nicaragua’s $50bn Canal Plan Delayed,” Financial Times, November 27, 2015)

CRRC, a state-owned enterprise (SOE) railway equipment maker, announced last week that it was setting up a joint venture (JV) in Russia to make electromagnetic vehicles for the Moscow-Kazan high-speed rail project, which is designed to be completed by 2018 before the Russia FIFA World Cup and also to become an integral part of the Beijing-Moscow high-speed railway system. The Chinese JV partner would be Changchun Railway Vehicles Co., a subsidiary of CRRC and has experience making equipment that can tolerate very low temperatures, having already built equipment hospital to the harsh winter climates of Harbin, the capital of Heilongjiang (“China, Russia Plan Bullet Train Joint Venture,” China.org.cn, November 27, 2015, http://www.china.org.cn/business/2015-11/27/content_37176150.htm)

In 2013, during Xi Jinping’s first official visit to Malaysia, Xiamen University, established by an ethnic Chinese Malaysian businessman in 1921, a deal was sealed for Xiamen University to open a Malaysia campus. The campus will enroll students from Malaysia, other Southeast Asian countries, and China and will offer undergraduate programs in English (except for select subjects) and aims to have more than 5000 students by 2022. The President of Xiamen University opined that the campus in Malaysia would support China’s OBOR initiative by creating the foreign talent (in terms of skills and regional knowledge) needed to nurture the initiative (Ching Yee Choo, “Chinese College Opens Campus to Back Silk Road Initiative,” Nikkei Asian Review, December 3, 2015, http://asia.nikkei.com/Business/Companies/Chinese-college-opens-campus-t...)

In 2011, US District Judge Richard Sullivan ordered Bank of China to provide information on customers accused of selling fake goods. BOC refused to turn over records saying such actions would violate China’s privacy laws. Responding to BOC’s non-compliance, the District Court of Manhattan held BOC in contempt and imposed a USD $50,000/day fine. The case relates to a 2010 lawsuit filed by a group of luxury retailers including Gucci and Yves Saint Laurent which sued various Chinese companies for selling counterfeit goods. Judge Sullivan said a large fine was needed to force compliance while BOC counters Sullivan lacks jurisdiction (“Bank of China Faces Daily Fine in US,” BBC News, December 2, 2015, http://www.bbc.com/news/business-34981059)

In April, France raised its stake in Renault to 19.7 percent from 15 percent which allowed it to secure double voting rights. Nissan has responded with a number of proposals to limit Renault (which owns 43.4 percent of Nissan) and France’s interference in the Renault-Nissan alliance. Specifically, it is seeking “limits to state voting rights in Renault as well as written guarantees against intervention in its operations by the French carmaker.” If no compromise is found, Nissan has threatened to raise its stake in Renault to the point that would activate voting rights. Both sides reportedly are seeking a compromise (Laurence Frost and Gilles Guillaume, “New Nissan Bid to End Renault Control and Curb French Clout: Sources,” Reuters, December 2, 2015, http://www.reuters.com/article/us-renault-nissan-idUSKBN0TL19T20151202#m...)

The Japanese Ambassador to Indonesia and Indonesia’s Foreign Ministry Director General for the Asia Pacific signed a loan agreement worth USD $1.14 billion to help support a number of infrastructure projects including Jakarta’s Mass Rapid Transit (MRT) system and an electricity transmission network that will “deliver electricity between Java and Sumatra.” The deal deal follows Indonesian president Joko “Jokowi” Widodo’s visit to Japan in March during which time Japanese Prime Minister Abe Shinzo pledged continued cooperation with Indonesia. A number of large Japanese companies including Shimizu, Tokyu, and Sumitomo Mitsui are involved in the construction of the Jakarta MRT system (Dylan Amirio, “RI, Japan Ink Loan Deal for Infrastructure Projects,” The Jakarta Post, November 28, 2015, http://www.thejakartapost.com/news/2015/11/28/ri-japan-ink-loan-deal-inf...)

The government of Botswana has selected Marubeni, a Japanese trading house, and Posco Energy, a Korean company, to build a massive power plant worth USD $800 million that will involve equipment from many multinationals. The two companies aim to complete the project, which will draw upon assorted sources of financing, by 2020. The project constitutes Marubeni’s first time operating a power station in sub-Saharan. Botswana Power, a state-owned utility, will sign a 30-year contract to buy power. Botswana is in dire need of power as it “suffers repeated power outages and shortages” and has to import energy from other countries (“Marubeni tapped in Deal to Run Botswana Power plant,” Nikkei Asian Review, December 2, 2015, http://asia.nikkei.com/Business/Companies/Marubeni-tapped-in-deal-to-run...)

According to Marcus Winsley, director of trade and investment at the British Embassy in Bangkok, British companies, in areas like tunneling and signaling, have significant interest in investing in various projects in Thailand pursuant to the country’s public-private partnership (PPP) scheme. They are very interested in partnering in rail, mass transit, and port development, but also food, drink, and fashion. British officials highlighted the “world-class expertise” of British firms in engineering, design, and project management (“The British Are Coming to Invest in Infrastructure,” Bangkok Post, December 3, 2015, http://www.bangkokpost.com/business/news/783333/the-british-are-coming-t...)

Regardless of the slow pace of negotiations, which relates to disagreements over construction costs, Thai Prime Minister Prayut Chan-o-cha said the delayed Thai-Chinese development railway project must start soon: “‘This project must materialize even if there are some hiccups in the investment details,’” given its potential to help Thailand become a regional transport hub. General Prayut remarked that Laos “had already signed a contract for a railway linking to the Thai-Chinese route.” He added that the “Chinese government reassured him it was keen to start the project as Chinese exports could more cheaply penetrate the ASEAN market through this railway” (“Thai-Chinese Rail on Fast Track,” Bangkok Post, November 28, 2015, http://www.bangkokpost.com/business/news/778749/thai-chinese-rail-on-fas...)

Luhut Panjaitan, Indonesia’s Co-ordinating Minister for Political, Legal, and Security Affairs and a very close aid to Indonesia President Joko Widodo, said that Indonesia would not be pushed to make a decision as to whether or not Freeport-McMoRan would receive a license to continue to operate the Grasberg mine, one of the world’s richest copper and gold mines, beyond 2021. Freeport-McMoRan has been seeking clarification now even though Indonesian regulations say the government cannot begin negotiations until 2019. Yet in October Indonesia President Widodo seemed to indicate that his country was willing to negotiate with the US firm before then (Avantika Chilkoti, “Freeport-McMoRan Suffers License Setback in Indonesia,” Financial Times, December 3, 2015).

Vietnam reported that the country received USD $20.22 billion of FDI up to November 2015, a 16.7% increase year-over-year. Of the more than 2500 foreign investment projects, more than 1800 constituted new investments while the balance entailed a boost to existing investments. More than 64 percent or nearly $13 billion involved investment in the manufacturing and processing sector with the second largest amount of money going into the production and distribution of electricity, gas, hot water, steam, and so on. The largest investor during the period was Korea with the Asian countries representing the second, fourth, and fifth largest investors (“FDI Disbursements up 17.9% in 11 Months,” Viet Nam News, November 30, 2015, http://vietnamnews.vn/economy/279199/fdi-disbursement-up-179-in-11-month...)