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Since the PRC Anti-monopoly Law came into effect on August 1, 2008, the Anti-Monopoly Bureau (“AMB”) under the Ministry of Commerce (“MOFCOM”) has received over 10 applications for antitrust review of concentration of business operators. According to MOFCOM, 13 of such applications have been formally accepted, eight of which have been granted decisions. One of the most widely reported examples is the Belgian brewer Inbev’s $52 billion takeover of Anheuser Busch Inc. (“AB”).
This takeover is reported to be subject to antitrust reviews in three jurisdictions, i.e., Belgium, U.S. and China where both parties have their respective strong market positions.
The AMB of China approved the proposed takeover, but imposed the following four conditions on the new company’s post-takeover investment in China:
- it shall not increase AB’s current 27% shareholding in Tsingtao Brewery;
- it shall not increase Inbev’s current 28.56% shareholding in Zhujiang Brewery;
- it shall not seek to hold any stake in China Resources Snow Brewery or Beijing Yanjing Brewery; and
- it shall notify MOFCOM if there are any changes to its controlling shareholders or the shareholders of such controlling shareholders.
Inbev must report to MOFCOM and obtain its approval before implementing any change to the above conditions.
Showing posts with label Business. Show all posts
Showing posts with label Business. Show all posts
Thursday, December 4, 2008
Wednesday, December 3, 2008
China’s Energy Sector: Pipelines and Nuclear Power to Increase Domestic Demand
To increase the domestic demand in China, the energy sector plays an indispensible part. It is reported that certain energy infrastructure projects have been internally determined by the government, and will be formally initiated soon.
The Standing Committee of the State Council recently approved three energy related construction projects, which are two nuclear power projects (one as new construction, and the other as expansion) and one natural gas pipeline project (between Northern-Western part of China to Guangzhou and Hong Kong). The three projects amounted to a government investment of RMB188.5 billion in total.
Chinese energy experts anticipated, based on the above approvals, that pipelines and nuclear power projects would constitute the primary focus of China’s energy sector in the near future.
It is also reported that the Chinese government plans to invest RMB4 billion as fiscal support for rural and urban grid construction and/or transformation.
The Standing Committee of the State Council recently approved three energy related construction projects, which are two nuclear power projects (one as new construction, and the other as expansion) and one natural gas pipeline project (between Northern-Western part of China to Guangzhou and Hong Kong). The three projects amounted to a government investment of RMB188.5 billion in total.
Chinese energy experts anticipated, based on the above approvals, that pipelines and nuclear power projects would constitute the primary focus of China’s energy sector in the near future.
It is also reported that the Chinese government plans to invest RMB4 billion as fiscal support for rural and urban grid construction and/or transformation.
Beijing: Judicial Interpretations to Clarify Commercial Bribery
Recently, the Supreme People’s Court and Supreme People’s Procuratorate jointly promulgated the Opinions on Certain Issues Concerning Application of Laws in Handling Criminal Cases of Commercial Bribery (the “Opinions”).
The Opinions clarified certain aspects of application of law in criminal cases of commercial bribery, i.e., (i) scope of commercial bribery; (ii) scope of subject of this crime; (iii) criminal liability for commercial bribery in specific sectors, such as pharmaceutical procurement and sales, construction, government procurement; (iv) delineation of illegitimate interest in commercial bribery; (v) legal basis for determining accomplice in commercial bribery.
Particularly, the Opinions addressed the issue of how to distinguish gifts between friends (which are common in a “relationship” society of China) and commercial bribery. Four factors should be taken into account: (i) historical relationship between the parties; (ii) amount of gifts; (iii) cause, timing and means of offering the gifts, especially whether to request the recipient to do something by taking advantage of his/her position; and (iv) whether the recipient takes advantage of his/her position to do that favor.
Given the complexity of commercial bribery in business practice, the Opinions also expanded the crime into offering not only property but also other proprietary interests or benefits.
The Opinions clarified certain aspects of application of law in criminal cases of commercial bribery, i.e., (i) scope of commercial bribery; (ii) scope of subject of this crime; (iii) criminal liability for commercial bribery in specific sectors, such as pharmaceutical procurement and sales, construction, government procurement; (iv) delineation of illegitimate interest in commercial bribery; (v) legal basis for determining accomplice in commercial bribery.
Particularly, the Opinions addressed the issue of how to distinguish gifts between friends (which are common in a “relationship” society of China) and commercial bribery. Four factors should be taken into account: (i) historical relationship between the parties; (ii) amount of gifts; (iii) cause, timing and means of offering the gifts, especially whether to request the recipient to do something by taking advantage of his/her position; and (iv) whether the recipient takes advantage of his/her position to do that favor.
Given the complexity of commercial bribery in business practice, the Opinions also expanded the crime into offering not only property but also other proprietary interests or benefits.
Tuesday, November 18, 2008
China’s Outbound Investment: Time to Prosper?
China’s direct outbound investment in 2007 amounted to USD26.51 billion, representing a 25.3% increase than that of 2006. By the end of 2007, over 7000 Chinese companies have established their overseas presence covering 173 countries or regions across the globe.
The statistics jointly published by the Ministry of Commerce, National Statistics Administration, and State Administration for Foreign Exchange indicated that more privately-owned enterprises in China are investing overseas, and major invested countries and regions include Hong Kong, the United States, Russia, Vietnam, Japan, the United Arab Emirates, German, Australia and Singapore.
In spite of the perceived boom, it is reported that among the acquisitions Chinese companies have had in German during the past five years, only about 20% of the acquired companies were operated relatively well and stably.
As commented by an official from the Development and Research Center of the State Council, the major issues of Chinese companies’ outbound investment are (i) lack of strategic long-term vision, (ii) insufficiency of feasibility studies, (iii) incapability in cross-border integration, (iv) more as high-risk investment by the government, and (v) insufficient participation by mega privately-owned enterprises.
As some of those international business consultants have pointed out, the primary issue for Chinese companies’ outbound investment is their lack of capabilities in cross-cultural integration, which is a vital after-acquisition process to allow Chinese companies to achieve real success of overseas acquisitions.
The statistics jointly published by the Ministry of Commerce, National Statistics Administration, and State Administration for Foreign Exchange indicated that more privately-owned enterprises in China are investing overseas, and major invested countries and regions include Hong Kong, the United States, Russia, Vietnam, Japan, the United Arab Emirates, German, Australia and Singapore.
In spite of the perceived boom, it is reported that among the acquisitions Chinese companies have had in German during the past five years, only about 20% of the acquired companies were operated relatively well and stably.
As commented by an official from the Development and Research Center of the State Council, the major issues of Chinese companies’ outbound investment are (i) lack of strategic long-term vision, (ii) insufficiency of feasibility studies, (iii) incapability in cross-border integration, (iv) more as high-risk investment by the government, and (v) insufficient participation by mega privately-owned enterprises.
As some of those international business consultants have pointed out, the primary issue for Chinese companies’ outbound investment is their lack of capabilities in cross-cultural integration, which is a vital after-acquisition process to allow Chinese companies to achieve real success of overseas acquisitions.
Friday, November 7, 2008
Shanghai: Clean Energy Vehicles for Expo?
As the host city of Expo 2010, Shanghai is pressured to reduce vehicle emission. An obvious solution is to convert from traditional vehicles into those clean energy ones; however, with a variety of different choices, what will be the right ones for Shanghai Expo?
In fact, Shanghai has been working on alternatives to diesel and gasoline for a while. For instance, Shanghai has already put some hybrid electric vehicles into operation. Furthermore, Shanghai is also looking into hydrogen fuel cell vehicles and built up the first hydrogen station for filling up such vehicles with hydrogen. Apart from that, LNG (liquefied natural gas) and DME (di-methyl ether) vehicles are in the market too.
Different clean energy vehicles employ various technologies, which are currently at different stages in terms of maturity of technologies and extent of commercialization. For example, LPG (liquefied petroleum gas) and CNG (compressed natural gas) vehicles, though more mature in terms of technological development, are not perfect given their emission. Hydrogen fuel cell and electric vehicles are much cleaner, but still not ready for large-scale commercialization. Thus, what Shanghai needs is a blueprint to achieve zero-emission step by step.
When choosing the type of clean energy vehicles, there is a 4E principle to follow, which is Environment, Energy, Easy, and Economy. From that perspective, Shanghai will start from reducing emission, and gradually move toward the target of zero emission.
Based on the current blueprint, for buses, as a first step, Shanghai will restrict those “polluting” buses in outskirts of Shanghai city, and within in the city, the government plans to expand the use of CNG buses.
When the technologies for LNG or DME buses are more developed, LNG buses will take over, supplemented by some DME and electric buses. To meet that end, most of the CNG stations will be transformed into LNG stations then.
In the meantime, Shanghai will keep with demonstration projects of hydrogen fuel cell buses, and expect to reach the stage where electric buses constitute the majority, supplemented by hydrogen fuel cell buses. At that time, those LNG stations will be transformed into hydrogen stations.
For taxis, Shanghai plans to use more LPG cars at first, which will be gradually taken over by LNG ones in the mid term, and eventually reach the stage where hydrogen fuel cell cars constitute the majority, supplemented by LNG ones.
In fact, Shanghai has been working on alternatives to diesel and gasoline for a while. For instance, Shanghai has already put some hybrid electric vehicles into operation. Furthermore, Shanghai is also looking into hydrogen fuel cell vehicles and built up the first hydrogen station for filling up such vehicles with hydrogen. Apart from that, LNG (liquefied natural gas) and DME (di-methyl ether) vehicles are in the market too.
Different clean energy vehicles employ various technologies, which are currently at different stages in terms of maturity of technologies and extent of commercialization. For example, LPG (liquefied petroleum gas) and CNG (compressed natural gas) vehicles, though more mature in terms of technological development, are not perfect given their emission. Hydrogen fuel cell and electric vehicles are much cleaner, but still not ready for large-scale commercialization. Thus, what Shanghai needs is a blueprint to achieve zero-emission step by step.
When choosing the type of clean energy vehicles, there is a 4E principle to follow, which is Environment, Energy, Easy, and Economy. From that perspective, Shanghai will start from reducing emission, and gradually move toward the target of zero emission.
Based on the current blueprint, for buses, as a first step, Shanghai will restrict those “polluting” buses in outskirts of Shanghai city, and within in the city, the government plans to expand the use of CNG buses.
When the technologies for LNG or DME buses are more developed, LNG buses will take over, supplemented by some DME and electric buses. To meet that end, most of the CNG stations will be transformed into LNG stations then.
In the meantime, Shanghai will keep with demonstration projects of hydrogen fuel cell buses, and expect to reach the stage where electric buses constitute the majority, supplemented by hydrogen fuel cell buses. At that time, those LNG stations will be transformed into hydrogen stations.
For taxis, Shanghai plans to use more LPG cars at first, which will be gradually taken over by LNG ones in the mid term, and eventually reach the stage where hydrogen fuel cell cars constitute the majority, supplemented by LNG ones.
Wednesday, November 5, 2008
Beijing: China and Kazakhstan to Expand Cooperation in Natural Gas
China National Petroleum Corporation (“CNPC”) recently entered into a framework agreement with KazMunaiGaz, Kazakhstan’s national oil and gas company to expand cooperation in natural gas.
KazMunaiGaz has agreed to annually supply five billion cubic meters of natural gas to phase II of the Kazakhstan-China Gas Pipeline, and ensure the transport of natural gas produced by CNPC from the Aktobe field via such pipelines.
Meanwhile, the two sides will jointly develop the Urikhtau gas condensate field and export 5-10 billion cubic meters of natural gas to China on a yearly-basis, subject to the demand in southern Kazakhstan.
Based on the above, the two companies will jointly construct and operate the Beineu-Bozoy-Kyzylorda-Shymkent section of the Kazakhstan-China Gas Pipeline, the natural gas transport capacity of which is designed to be 10 billion cubic meters per year.
The parties also agreed to expand phase I of the Kazakhstan-China Gas Pipeline based on further assessment of incremental natural gas resources.
According to the joint statement of China and Kazakhstan, the Kazakhstan-China Gas Pipeline is a milestone project for cooperation between the two countries, which is expected to be completed by the end of 2009.
KazMunaiGaz has agreed to annually supply five billion cubic meters of natural gas to phase II of the Kazakhstan-China Gas Pipeline, and ensure the transport of natural gas produced by CNPC from the Aktobe field via such pipelines.
Meanwhile, the two sides will jointly develop the Urikhtau gas condensate field and export 5-10 billion cubic meters of natural gas to China on a yearly-basis, subject to the demand in southern Kazakhstan.
Based on the above, the two companies will jointly construct and operate the Beineu-Bozoy-Kyzylorda-Shymkent section of the Kazakhstan-China Gas Pipeline, the natural gas transport capacity of which is designed to be 10 billion cubic meters per year.
The parties also agreed to expand phase I of the Kazakhstan-China Gas Pipeline based on further assessment of incremental natural gas resources.
According to the joint statement of China and Kazakhstan, the Kazakhstan-China Gas Pipeline is a milestone project for cooperation between the two countries, which is expected to be completed by the end of 2009.
Tuesday, November 4, 2008
OEMs and CMs: Risks and Precautions
OEMs (original equipment manufacturers) are prevalent in today’s cost competitive environment. Despite the popularity, intellectual property risks lie on both sides --OEMs and CMs (contract manufacturers).
For OEMs, one major risk is that CMs may over-manufacture the designated products without OEMs’ authorization, and re-sell such products to third parties or directly to end users, which may dilute OEMs’ market. Another risk is that CMs may use, disclose or disseminate OEMs’ confidential information, without due authorization. Such act may be intentionally taken by CMs for profit-making, or due to negligence in restricting their employees in complying with their confidentiality obligations. Whatever the reason, such undue disclosure of confidential information exposes OEMs to business risks and harm.
For CMs, the primary risk is their inadvertent infringement of third party intellectual property rights due to OEMs’ lack of relevant rights. In this scenario, third party right holders may directly sue CMs for infringement, and if CMs are not properly protected under OEM contracts, CMs’ losses can hardly be indemnified by OEMs.
Awareness of risks leads to design of precautions. Suggested steps for OEMs and CMs include:
1. CMs should conduct intellectual property due diligence of OEMs, making sure that OEMs are legitimate holders of relevant intellectual property rights;
2. OEMs and CMs should specify detailed rights, obligations and remedies under their contracts, especially with respect to potential intellectual property disputes;
3. OEMs may require CMs to keep detailed records of how the designated products are manufactured, and entitle themselves to review and inspect; and
4. CMs should take precautions to protect confidential information of OEMs (including, without limitation, entering into confidentiality and non-compete agreements with employees).
For OEMs, one major risk is that CMs may over-manufacture the designated products without OEMs’ authorization, and re-sell such products to third parties or directly to end users, which may dilute OEMs’ market. Another risk is that CMs may use, disclose or disseminate OEMs’ confidential information, without due authorization. Such act may be intentionally taken by CMs for profit-making, or due to negligence in restricting their employees in complying with their confidentiality obligations. Whatever the reason, such undue disclosure of confidential information exposes OEMs to business risks and harm.
For CMs, the primary risk is their inadvertent infringement of third party intellectual property rights due to OEMs’ lack of relevant rights. In this scenario, third party right holders may directly sue CMs for infringement, and if CMs are not properly protected under OEM contracts, CMs’ losses can hardly be indemnified by OEMs.
Awareness of risks leads to design of precautions. Suggested steps for OEMs and CMs include:
1. CMs should conduct intellectual property due diligence of OEMs, making sure that OEMs are legitimate holders of relevant intellectual property rights;
2. OEMs and CMs should specify detailed rights, obligations and remedies under their contracts, especially with respect to potential intellectual property disputes;
3. OEMs may require CMs to keep detailed records of how the designated products are manufactured, and entitle themselves to review and inspect; and
4. CMs should take precautions to protect confidential information of OEMs (including, without limitation, entering into confidentiality and non-compete agreements with employees).
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