AMCHAM Blasts China’s ‘Opaque’ Investment Rules

September 22nd, 2014 Haylle Sok Leave a comment

Los Angeles, CA – A major US trade promotion group is asserting that Beijing is targeting foreign companies “with opaque laws and rules that contribute to a deteriorating environment for investment.”

According to the American Chamber of Commerce in China (ACCC), 60 percent of those US-based businesses that responded to a recent survey said they feel foreign businesses “are less welcome in the country than before” – up from the 41 percent of respondents in a previous survey conducted in late 2013.

In addition, the group said, 49 percent stated that foreign companies are being “singled out” in the Chinese government’s ongoing pricing and anti-corruption campaign, which, many of those surveyed said, is “politically motivated and threatens to exacerbate a decline in foreign direct investment in the world’s second-largest economy.”

ACCC members say they have “growing perceptions that multinational companies are under selective and subjective enforcement by Chinese government agencies,” according to ACCC Chairman Greg Gilligan.

The country’s laws and rules, he said, “lack transparency and are at times only vaguely related to the particular case.”

Dozens of foreign companies “are being targeted in probes, with regulators opening an anti-monopoly investigation into Microsoft Corp. in July and state media accusing Apple Inc. of using its iPhone to steal state secrets, said Gilligan, who serves as Vice President and Managing Director for PGA Tour China.

In an interview with the state-run China Daily newspaper, Xu Kunlin, the head of China’s National Development and Reform Commission’s anti-monopoly bureau, called the charges that the country is specifically targeting foreign companies “groundless and baseless.”

Xu’s reactions were echoed by a spokesman for the Foreign Ministry in Beijing, who said that China’s anti-monopoly measures “are transparent, fair and done in accordance with the law.”

China, the spokesman said, “will as always welcome foreign companies and enterprises to develop cooperation in all fields and build a good market economy. At the same time, we request foreign companies observe Chinese laws while in China.”

American Chamber members have “concerns that rules are shifting again for foreign companies in China in ways that are highly opaque and difficult for local managers to anticipate or adapt to,” according to the ACCC’s Gilligan.

The group’s members, he said, “strive hard for full compliance and need support and greater clarity to achieve that goal.”

The ACCC’s membership representatives from more than 1,000 US-based companies of all sizes including Microsoft, Johnson & Johnson, Dell, Oshkosh, Qualcomm, and Mead Johnson.

09/22/2014

Archives, Global Trade Daily, News

FDI in China Drops to New Low; Anti-Trust Actions Blamed

August 21st, 2014 Haylle Sok Leave a comment

Los Angeles, CA – China attracted $71.1 billion in foreign direct investment from January to July, down 0.4 percent on the same period in 2013, with FDI in the country reaching $7.8 billion in July alone, the first decline in overseas capital inflow in 17 months.

The slashing of spending in China’s manufacturing sector by companies from the US, Japan and the European Union is being blamed, primarily, on an increase in Beijing’s recent crackdown on foreign companies alleged to be engaging in “anti-competitive” business practices.

Over the past year, China has taken action against a number of ‘big ticket’ foreign companies, accusing them of breaking the country’s anti-trust regulations, which many feel are opaque and in violation of World Trade Organization rules.

Most recently luxury car brand Mercedes-Benz has been accused of manipulating prices for after-sales services in the country, while Beijing has imposed fines on milk powder companies including Mead Johnson Nutrition Co and Danone SA, alleging breach of its anti-monopoly laws.

China has also launched a probe into US-based Microsoft and chip maker Qualcomm over anti-trust claims, while several pharmaceutical companies including GlaxoSmithKline are facing probe in the country over alleged corruption and price fixing.

The probes have raised concerns among foreign investors that the country is targeting foreign firms operating there in an effort to, as one source out it, “flex its muscles.”

According to the Ministry of Commerce in Beijing, though, the anti-trust investigations aren’t responsible for the drop in FDI. Instead, the agency said, the “volatility of FDI” is a natural reaction to the country’s “efforts to balance the economic structure.”

The monthly decline “is not sufficient enough to reflect the general trend. It must not be linked to the anti-monopoly probes into some foreign invested companies or be associated with other baseless speculations,” said Commerce Ministry spokesman Shen Danyang.

“All market players should operate their business according to the law,” he added. “They should be punished according to the law and be subject to appropriate legal penalties if they violate the law.”

Beijing, he said, “expects foreign investment to keep a steady growth in the coming years and total FDI in 2014 to remain at a similar level with last year.”

08/21/2014

Acquisitions, Archives, Banking on Global Trade, Global Trade Daily, News

Mergers and Acquisitions Touted Over FDI

July 29th, 2014 Haylle Sok Leave a comment

Washington, DC – For decades, state and local governments have offered packages of tax breaks and other incentives before foreign companies in the hope of luring them to the US to create jobs.

A new study published by the Brookings Institute asserts that strategy is “deeply flawed” and that “mergers and acquisitions are driving foreign investment in the US, not the opening of new establishments.”

Civic leaders, in turn,” would accomplish far more by bolstering industrial amenities to retain overseas companies than by offering rich subsidies designed to attract new ones,” it said.

“Policies that narrowly focus on (new business) openings are probably not going to give you a big bang for your buck,” according to Devashree Saha, a senior policy analyst at Brookings and lead author of the report.

In 2011, only 26 percent of all jobs at US locations of foreign companies were created by the opening of a new factory, office or store, while nearly a third were generated by foreign takeovers of US companies, Saha said, citing data from the Organization for International Investment (OFII) that found that, over the past two decades, 84 percent of foreign companies that came to the US did so through an acquisition.

“Federal, state and local governments should invest more to build strong industry clusters by ensuring an adequate supply of skilled workers, modernizing US infrastructure and increasing investment in research and development, among other initiatives,” the Brookings study said.

According to Nancy McLernon, president of the Washington, DC-based OFII, state and local leaders often ignore foreign companies that come to the US through mergers instead of connecting them with suppliers, customers and skilled workers. “That aftercare is critically important,” she said.

The US share of global foreign direct investment plunged from 37 percent in 2002 to 17 percent in 2012, according to OFII. The US is still the worldwide leader, but emerging markets such as China have grabbed a growing share of foreign dollars.”By recognizing the importance of mergers and acquisitions, we can capture more of that market share,” said McLernon.

Foreign-owned companies employ about 5.6 million workers in the US, or about 5 percent of private payrolls, according to the Brookings paper. Their employment grew steadily from 1991 to 2000, but has stagnated since.

Yet, it said, the firms generate outsize benefits, accounting for a fifth of US goods exports and 15.4 percent of all private research-and-development in 2011 with foreign owners of US operations paying higher wages than US companies — $77,000 vs. $60,000, on average.

07/29/2014

Archives, Banking on Global Trade, Global Trade Daily, News

FDI Tax Breaks, Incentives Slammed in New Report

July 1st, 2014 Haylle Sok Leave a comment

Washington, DC – The use of tax breaks and other incentives by state and local governments and economic development agencies across the country to attract foreign businesses has come under fire in a study just released by The Brookings Institution.

Calling the practice “deeply flawed,” the economic think tank states that “mergers and acquisitions are driving foreign investment in the US, not the opening of new establishments.”

Civic leaders, it said, “would accomplish far more by bolstering industrial amenities to retain overseas companies than by offering rich subsidies designed to attract new ones.”

According to Devashree Saha, a senior policy analyst at Brookings and lead author of the report, “Policies that narrowly focus on new business openings are probably not going to give you a big bang for your buck.”

In 2011, only 26 percent of all jobs at US locations of foreign companies were created by the opening of a new factory, office or store, while nearly a third were generated by foreign takeovers of US companies, he said, adding that over the past 20 years, 84 percent of foreign companies that came to the US did so through an acquisition.

“Federal, state and local governments “should invest more to build strong industry clusters by ensuring an adequate supply of skilled workers, modernizing US infrastructure and increasing investment in research and development, among other initiatives,” the study found.

While the US is still the global leader in attracting FDI, the US share of global foreign direct investment (FDI) shrank from 37 percent in 2002 to 17 percent in 2012 with China and other developing economies grabbing a growing share of foreign business, according to data from the Washington, DC-headquartered Organization for International Investment (OFII).

“Outsize Benefits” Generated

Foreign-owned companies employ about 5.6 million workers in the US, or about 5 percent of private payrolls, according to the Brookings study. Their employment grew steadily from 1991 to 2000, but has stagnated since.

“Yet, the firms generate outsize benefits, accounting for a fifth of US goods exports and 15.4% of all private R&D in 2011,” the study said. “Foreign owners of US operations also pay higher wages than US companies — $77,000 vs. $60,000, on average.”

The report also ranks states and “metro areas” based on their share of jobs at foreign-owned establishments.

In 2011, Delaware led with 8.5 percent of all private-sector jobs at foreign-owned locations, particularly in the pharmaceutical, medicine, manufacturing and insurance sectors, followed by South Carolina with 7.5 percent of its private jobs at foreign-owned companies, largely in the auto industry.

Bridgeport, Connecticut, led among US “metro areas” with foreign firms accounting for 13.6 percent of private payrolls, particularly in the computer systems design and brokerage fields.

Greensboro, North Carolina, ranked second with 9 percent – primarily retail grocery stores, auto manufacturing, and pharmaceuticals). Worcester, Massachusetts tied for second place with most of its foreign-owned employers in the power generation, electrical products and insurance sectors.

In the 20 metro areas analyzed for the Brookings study, FDI made up more than half of all jobs in the largest industries active in Dayton, Ohio; Chattanooga, Tennessee, and Charleston, South Carolina, and San Jose, California.

07/03/2014

AMCHAM Blasts China’s ‘Opaque’ Investment Rules

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