MNCs in the News-2014-08-01

A China Securities Regulatory Commission (CSRC) spokesperson recently announced that China planned to loosen limits on foreign ownership of domestic fund management firms. The first joint venture-fund management company was set up in 2012 and now there are 20 such companies with foreign firms having ownership of 49 percent in each case. According to the CSRC, the focus of changes—part of a series of measures to reform the financial sector—would be on allowing foreign firms to hold larger shareholding stakes. The announcement follows in the wake of other reforms such as to China’s registration system for mutual funds (Cai Xiao, “Foreign Ownership Rules to Ease on Fund Management Firms,” China Daily, July 26, 2014, http://www.chinadaily.com.cn/business/2014-07/26/content_17929611.htm)

To get a green card, several hundred foreign investors, the majority from China, have invested a huge amount of money in the New York Wheel, an observation Ferris Wheel that would be the world’s largest and would be located on Staten Island, the home of the Statue of Liberty. The investors obtained the green cards pursuant to the EB-5 program, which gives temporary visas to those that invest at least $500,000 and create at least 10 jobs for US workers within two years. Some studies estimate the New York Wheel would generate several thousand jobs, including several hundred permanent jobs (Adelina Zhang, “NY Wheel Reels in Chinese Investors with Visa Promise,” China Daily, July 26, 2014, http://www.chinadaily.com.cn/business/2014-07/26/content_17929612.htm

Audi plans to cut the price of spare-parts in China. The announcement comes while China’s National Development and Reform Commission (NDRC) is investigating whether foreign carmakers are abusing their dominant market position to overcharge Chinese customers for services and spare parts. Audi’s decision follows Jaguar Land Rover’s reduction of car prices and Mercedes-Benz’s dropping of service charges and spare-parts prices. It also follows NDRC investigations and/or actions against other foreign firms. In remarks that make abundantly clear the basis behind most companies’ decisions, Jaguar Land Rover China said the importance of the China market led them to review their policies (Samuel Shen and Megha Rajagopalan, “Audi Cuts Spare-Part Prices in China Amid Anti-Monopoly Probe,” Reuters, July 27, 2014, http://www.reuters.com/assets/print?aid=USKBN0FW07720140727; Lucy Hornby, “Luxury Carmakers Slash Prices in China,” Financial Times, July 27, 2014; “Audi Cuts Spare-Part Prices Amid Anti-Monopoly Probe,” China Daily, July 28, 2014, http://www.chinadaily.com.cn/business/motoring/2014-07/28/content_179339... “Jaguar to Cut Prices on 3 Models in Response to China’s Auto Probe,” China Daily, July 28, 2014, http://www.chinadaily.com.cn/business/motoring/2014-07/28/content_179419...)

Last week, China’s State Administration for Industry & Commerce (SAIC) visited multiple Microsoft offices in China to determine if the software giant is a monopoly, failed to disclose sufficient product information to other firms, and engaged in problematic product bundling practices. The case represents the latest in a series of investigations of American technology firms. During the visit, SAIC officials seized documents and computers. Per reports, China has begun to investigate MSFT China executives. Microsoft already has been experiencing the blocking of its cloud storage system in China and government opposition to the use of its Windows 8 operating system (Tim Culplan and Ian King, “China Raids Microsoft Offices in Anti-Monopoly Investigation,” Bloomberg, July 29, 2014, http://www.bloomberg.com/news/print/2014-07-29/microsoft-probed-by-regul... Gao Yuan, “Chinese Antitrust Agency Probes Microsoft,” China Daily, July 30, 2014, http://usa.chinadaily.com.cn/epaper/2014-07/30/content_18215847.htm; Charles Clover, “Microsoft Raids Highlights US Trade Troubles in Chia,” Financial Times, July 30, 2014)

One consultant termed the SAIC’s action against Microsoft a fishing expedition, asserting that Microsoft’s market dominance related to widespread piracy of its products in China. Others charged the government was retaliating against Microsoft for its unilateral decision to terminate its Windows XP maintenance and support agreements. Yet others have highlighted China’s security concerns. According to commentators, the case will further enflame problems with American businesses and the US government. Dismissing the worries, China said the investigation of Microsoft was routine and asserted “there is no so-called special zeal against any specific company, or any specific country, let alone foreign firms” (Paul Carsten and Bill Rigby, “Microsoft Targeted in Apparent Chinese Antitrust Probe,” Reuters, July 28, 2014, http://finance.yahoo.com/news/microsoft-says-government-officials-sudden... Charles Clover, “Microsoft Raids Highlights US Trade Troubles in Chia,” Financial Times, July 30, 2014; “Microsoft Probe Nothing more than Routine,” China Daily, July 31, 2014, http://www.chinadaily.com.cn/business/2014-07/31/content_18224247.htm)

Yet another deal has emerged in the wake of Chinese President Xi Jinping’s successful trip to Latin America including the region’s economic giant Brazil. IFE Elevator, one of China’s largest elevator manufacturers, announced it was considering building a plant in South America not only to tap the large Brazilian market, but also to reduce transportation costs, exploit a welcoming host government, and improving its compliance with foreign standards and services (Li Wenfang and Lyu Chang, “IFE Elevator Expansion Outlook,” China Daily, July 29, 2014, http://www.chinadaily.com.cn/business/2014-07/29/content_17945710.htm)

China’s anti-corruption campaign has reached the highest echelons as signaled by the recent news that Zhou Yongkang was under investigation. Over the past few months, many of his allies in the energy sector have been detained or punished and this has disrupted investments by China National Petroleum Corporation (CNPC) units like PetroChina. In recent months, anti-corruption investigations have spread into a wider range of industries including the food sector. China’s investigations have not only called into doubt projects in numerous countries, but also have raised uncomfortable questions such as how to manage deals when one’s Chinese partners or bosses “disappear” (Lucy Hornby, “China Corruption Probe Reaches Western Breakfast Tables,” Financial Times, July 31, 2014)

Japan’s Ministry of Economy, Trade and Industry will collaborate with Medical Excellence Japan, an organization consisting of about 40 Japanese companies including Hitachi and Toshiba, to provide a comprehensive health examination, called Ningen Dock, in Kazakhstan. The risk of cancer is higher in Kazakhstan due to Soviet era nuclear testing and the health exam will be useful in diagnosing cancers and other diseases at their early stages. The Japanese government next hopes to spread the Ningen Dock to Turkmenistan, followed by Southeast Asia and South America and is shooting to increase medical business to around 1.5 trillion yen by 2020 (http://www.nikkei.com/article/DGXLASDF28H13_Y4A720C1MM8000)

Japanese firms have been significantly affected by Indonesia’s ban on the export of unprocessed nickel, a policy designed to protect and develop the domestic smelter industry. The ban has not only constricted nickel supplies, but has led to steady increases in the price of nickel as Indonesia is a major global nickel producer. Last week, protectionist Joko Widodo was elected as Indonesian president and expected to maintain the current ban. However, one analyst contends that the ban causes massive unemployment and that, as a result, it is possible that Joko, who is supported by the working class, may lift it (“Sumitomo Metal Mining: profit depends on Indonesian New President,” Nikkei, July 30, 2014, http://www.nikkei.com/markets/kigyo/editors.aspx?g=DGXLMSGD28H0I_2907201...)

According to the Korean Ministry of Land, Infrastructure and Transport, as a result of a defective design, three models produced by GM Korea are at risk because their front drive shaft can “separate while driving on a curved road, possibly creating a condition where the power is not properly delivered to the wheel.” As a result, GM Korea will recall over 14,000 vehicles that were produced during the period between July 2008 and February 2011 (“GM Korea recalls over 14,000 vehicles,” The Korea Herald, July 28, 2014, http://www.koreaherald.com/view.php?ud=20140728000804)

In celebration of its 11th anniversary, Amway Korea is ramping up its corporate social responsibility (CSR) campaign, Hope Vitamin. The volunteer program encourages Amway’s employees and its independent business owners to participate in regular volunteer activities to improve children’s wellness. The Hope Vitamin campaign is a regional initiative, based on the company’s global CSR effort, Amway One by One Campaign for Children. The company has spent $190 million on the Hope Vitamin campaign so far (Lee Ji-yoon, “Amway Korea steps up social contributions,” The Korea Herald, July 28, 2014, http://www.koreaherald.com/view.php?ud=20140728000802)

The US Department of Commerce proposed expanded penalties on some Chinese solar-energy gear, representing a victory for the US unit of SolarWorld, which accused China of shifting production to Taiwan after losing an earlier case. The Commerce Department condemned overseas solar producers, such as Taiwan’s Gintech Energy, for dumping goods in the US below their production costs. The news led to big falls in the stock prices of Taiwan’s solar stocks, especially Motech Industries, Taiwan’s biggest solar-cell producer. The duties will likely prompt Taiwanese solar producers to rely more heavily on Japanese and Europeans markets (“Taiwan solar stocks slump after US calls for raised duties,” South China Morning Post, July 29, 2014, http://www.scmp.com/business/money/markets-investing/article/1561395/tai...)

Taiwan’s Fair Trade Commission (FTC) fined the Taiwanese branch of Chinese handset maker Xiaomi NT $600,000 (US $19,980) for rounding up sales figures of its low-cost Redmi smartphones. The FTC also indicated that Xiaomi Taiwan’s closing of online sales while some Redmi phones were still in stock curtailed customers’ ability to purchase the phones. Xiaomi Taiwan apologized publicly and indicated it would revise its purchasing rules accordingly to improve its service quality and offer its consumers a better shopping experience (“FTC fines Xiaomi Taiwan for sales data,” Taipei Times, August 1, 2014, http://www.taipeitimes.com/News/biz/archives/2014/08/01/2003596366)

*The information used herein is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content in this section does not necessarily represent the official view of the Wong MNC Center, its Board of Directors, or its Advisory Board.