MNCs in the News-2017-01-13

China’s Ministry of Commerce (MOFCOM) reported China’s inward foreign direct investment (FDI) reached USD $118 billion in 2016, an increase of 4.1 percent year over year (YOY). This compared to 6.4 percent growth YOY in 2015. Inward FDI (IFDI) in the service industry was particularly noteworthy, growing 8.3 percent to hit more than USD $83 billion. Indeed, it accounted for 70.3 percent of all IFDI. FDI in high-tech services showed particularly strong growth, jumping 86.1 percent YOY. MOFCOM “attributed the steady momentum to government action such as easing restrictions in free trade zones (FTZs) and simplified procedures for investment entry” (“China’s FDI Inflows Rise 4.1 pct in 2016,” Xinhua, January 13, 2017, http://news.xinhuanet.com/english/2017-01/13/c_135980877.htm)

A recent study reported that Chinese outward FDI (OFDI) in 2016 hit a record USD $189 billion, a 40 percent increase YOY. The Mercatur Institute for China Studies (MERICS) and Rhodium Group study stated that Chinese OFDI (COFDI) in Europe hit almost USD $36.75 billion, with COFDI in Germany representing 31 percent of this total. Per the report, “Chinese investors were particularly interested in acquiring technology and advanced manufacturing assets.” Many European elites worry about the economic and security implications of COFDI in key industrial technologies. European investment in China was not strong and dropped for the 4th straight year (Andres Rinke and Andrea Shalal, “Chinese Foreign Investments up 40 percent to Record in 2016: Study,” Reuters, January 11, 2017, http://www.reuters.com/article/us-china-investment-europe-idUSKBN14V28P)

Last week, Jack Ma, the head of Alibaba, met with United States (US) President-elect Donald Trump. Ma told Trump Alibaba would work to get one million small US businesses, especially farmers and small clothing makers, to use Alibaba’s website to sell goods to Chinese consumers. Job creation would occur because each firm would, in theory, add people to work with Alibaba. Observers feel Alibaba was trying to buffer itself from Trump’s anti-China stances and gain space at a time Alibaba was put on the USTR notorious markets list due to the number of counterfeit and pirated goods on its website (“Donald Trump has ‘Great Meeting’ with Alibaba Boss Jack Ma,” BBC News, January 9, 2017, http://www.bbc.com/news/world-us-canada-38564679; Peter Henderson, David Alexander, Doina Chiacu, Laila Kearney, and Cate Cadell, “Alibaba’s Ma meets Trump, Promises to Bring One Million Jobs to U.S.,” Reuters, January 10, 2017, http://www.reuters.com/article/us-usa-trump-alibaba-idUSKBN14T1ZA; April Ma, “Jack Ma’s Million-Job Pledge to Trump Looks ‘Extravagant,’” Caixin, January 10, 2017, http://www.caixinglobal.com/2017-01-10/101042300.html)

Takata’s decade long falsification of test data about the safety of its products, specifically, faulty airbags finally came to roost. It agreed with the US Department of Justice to plead guilty to a criminal charge and will pay USD $1 billion in penalties including $25 million in fines, $125 million in compensation to people who suffered injury from its airbags, and $850 million in compensation to carmakers that used its products. Takata’s products have been linked to “at least a dozen deaths and more than 100 injuries worldwide.” US authorities also charged three former executives in connection with the case (“Takata Fined $1bn in US Over Exploding Airbag Scandal,” BBC News, January 13, 2017, http://www.bbc.com/news/business-38613030)

Honda will invest USD $372 million in its plant north of Toronto with financial support from the federal government and Ontario province. According to a Canadian official, the investment will “‘help save 4,000 jobs at Honda’s facilities and further anchor Honda’s presence in Canada.”’ They made this announcement at a time when US President-elect Trump has been threatening automakers that relocate production to Mexico. Trump, though, has not yet slammed investments in Canada. Some feel Trump would not oppose FDI in Canada given the links between factories in Ontario and Michigan and Ohio which were important for his electoral victory (“Honda to invest more than $370 million in Canadian plant,” Japan Times, January 10, 2017, http://www.japantimes.co.jp/news/2017/01/10/business/corporate-business/...)

Japanese energy producer JX Nippon Oil & Gas and US power generator NRG Energy Inc. and Exploration Corp. have completed the Petra Nova system, the world’s biggest system to capture carbon dioxide a coal power plant. The $1 billion project, which will send carbon dioxide from an existing power plant via pipeline to an oilfield where it will be used to facilitate crude oil extraction, started to operate in late December. The aforementioned companies invested $300 million for this project and US Energy Department provided a $190 million grant as part of its efforts to encourage lower power plant emissions (“NRG, JX Nippon open $1 billion clean coal power project in Texas,” Japan Times, January 11, 2017, http://www.japantimes.co.jp/news/2017/01/11/business/corporate-business/...)

Samsung Electronics Co. has decided to build its first home appliance plant in the US, a key market for the firm. In the background was US president-elect Trump’s verbal promise to provide benefits to corporations embracing his slogan of “‘Buy America and Hire America”’ while imposing high tariffs on corporations that do not cooperate. Trump also has declared his intent to renegotiate the North American Free Trade Agreement (NAFTA) which enables companies to ship their products tariff-free from their plants in Mexico to the US. Last month, Samsung pledged to invest USD $1 billion for expand its facility in Texas (Song Sung-hoon and Kim Dong-eun, “Samsung Elec readying to build its first U.S. home appliance factory in U.S.,” Pulse News, January 9, 2017, http://pulsenews.co.kr/view.php?sc=30800021&year=2017&no=19288)

In 2014, Indonesia banned the export of some mineral ores and required domestic processing as part of its effort to capture more of the value added of its resources. Indonesia’s policy led to investment in smelters and billions of dollars of investment promises in smelters and related activities. Indonesia’s challenging contemporary economic situation, though, has led it to eliminate the ban on the export of nickel and bauxite and to extend a suspension of the ban on copper concentrate exports. The decision irritates those who have been adhering to the law and could result in a backlash from domestic groups (Ben Bland, “Indonesia Eases Ban on Mineral Exports,” Financial Times, January 12, 2017)

During Japanese Prime Minister Shinzo Abe’s upcoming visit to Indonesia, the two sides plan to discuss business cooperation between two nations, including potential Japanese investment in the country. According to Indonesia’s Coordinating Maritime Affairs Minister, prospective investment opportunities to be raised with Japan include the deep-sea Patimban port, the Jakarta-Surabaya railway, as well as other petrochemical and fertilizer projects. In the wake of Abe’s visit, Indonesian president Joko Widodo will meet with the CEOs of 30 major Japanese companies. The meeting is expected to elevate the economic relationship between the two countries to new heights (Anton Hermansyah,“ Indonesia to talk business during Japan PM's visit,” The Jakarta Post, January 9, 2017, http://www.thejakartapost.com/news/2017/01/11/indonesia-to-talk-business...)

New and noteworthy regarding Thailand, Malaysia, and Vietnam*****

Lamonphet Apisitniran, “Japanese SMEs head to Thailand under joint initiative,” Bangkok Post, January 11, 2017, http://www.bangkokpost.com/business/news/1177873/japanese-smes-head-to-t...

Leslie Andres,“ Foreign investments will spur economic growth, not rob locals of business prospects, Zahid tells Muhyiddin,” New Straits Times, January 12, 2017, http://www.nst.com.my/news/2017/01/203778/foreign-investments-will-spur-...

Martin Carvalho, “Seeking foreign investments is not something new,” The Star Online, January 13, 2017, http://www.thestar.com.my/news/nation/2017/01/13/seeking-foreign-investm...

Liew Chin Tong, “5 areas for caution in accepting investments from China,” Free Malaysia Today, January 13, 2017, http://www.freemalaysiatoday.com/category/opinion/2017/01/13/5-areas-for...

“AIIB eyes infrastructure development in Viet Nam,” Viet Nam News, January 13, 2017, http://vietnamnews.vn/economy/349672/aiib-eyes-infrastructure-developmen...

“Vietnam vows to facilitate Indian businesses,” The Nation, January 14, 2017, http://www.nationmultimedia.com/news/business/aec/30304054