MNCs in the News-2017-01-20

In a document posted on its website, China’s State Council said the country would “lower restrictions on foreign investment in the banking, securities, investment management, futures, insurance, credit ratings, and accounting sectors,” building upon previously announced measures that provide incentives, lower registered capital restrictions, and revamp currency management practices. According to the State Council, the liberalization measures would “create a ‘fair and competitive’ environment putting ‘domestic and foreign companies on an equal footing.’” “The document…ordered ministries to draft detailed [implementation] rules without giving a deadline.” Of note, the statement came soon after Chinese President Xi Jinping championed globalization at Davos (Michael Martina et al., “China Unveils New Plan to Further Open Economy to Foreign Investment,” Reuters, January 17, 2017, http://www.reuters.com/article/us-china-economy-foreign-investment-idUSK... “China Charts Courses for Opening to More Foreign Investment,” Bloomberg News, January 18, 2017, https://www.bloomberg.com/news/articles/2017-01-18/china-charts-course-f...)

According to China’s Ministry of Commerce (MOFCOM), China’s non-financial outbound direct investment (ODI) totaled USD $170.11 billion in 2016. MOFCOM stated that China’s ODI in 2016 included 7961 firms investing in over 160 countries and regions. A MOFCOM spokesman stated that Chinese firms poured 18.3 percent of ODI in manufacturing and 12 percent into information transmission and software and information technology services. ODI started to exceed inward foreign direct investment (FDI) in 2014. Some see a decline this year in ODI as China tries to tighten controls over outward capital flows and sentiment against Chinese FDI grows in certain countries (“China’s ODI up 44.1 pct in 2016,” Xinhua, January 16, 2017, http://news.xinhuanet.com/english/2017-01/16/c_135987246.htm; Fran Wang and Song Shiqing, “Growth of Direct Overseas Investment in Nonfinancial Sectors Hits Eight-Year High,” Caixin, January 17, 2017, http://www.caixinglobal.com/2017-01-17/101044998.html)

Documents on the website of China’s State-owned Assets Supervision and Administration Commission (SASAC), which directs slightly more than 100 state-owned enterprises (SOEs), indicated that it would “release a negative list detailing two categories of investment projects—those that are off-limits for entry and those that demand special regulation.” “For projects that are not on the list, central SOEs may make investment decisions on their own.” SASAC’s new rules also stress that SOEs should invest in their main lines of business and improve risk management over/the safety of their overseas assets. The rules seemed designed to support China’s diminishing currency reserves (“China Tightens Regulation over Investment by State Firms,” Xinhua, January 18, 2017, http://news.xinhuanet.com/english/2017-01/18/c_135994054.htm; “China Steps up Capital Controls, Tightens Investment Rules for State Firms,” South China Morning Post, January 19, 2017, http://www.scmp.com/news/china/economy/article/2063320/chinastepscapital...)

Toyota Motor Corp. and Nissan Motor Co. decided to keep producing autos and/or auto parts in the United Kingdom (UK) despite Prime Minister Theresa May’s decision to leave the European Union (EU)’s single market. Even though her decision will make the UK less lucrative than before, Toyota’s chairman Takeshi Uchiyamada opined “‘We can survive this.”’ Nissan’s chairman Carlos Ghosn announced “‘Nissan will assess the plant’s overall competitiveness, rather than focus on tariffs,”’ adding that the plunge in the pound can help balance negatives such as Brexit. Nissan previously received unspecified assurances from the government, but may only last 5-7 years (“Nissan, Toyota back U.K. plants despite May’s Brexit plan,” Japan Times, January 19, 2017, http://www.japantimes.co.jp/news/2017/01/19/business/nissan-toyota-back-...)

Prior to completion, Samsung Engineering ended a USD $3 billion 3100-megawatt Saudi power plant construction project that started in 2012. Samsung Engineering said its Saudi client Saline Water Conversion Corporation canceled the power and desalination plant in Saudi Arabia due to “difference over the final construction terms.” The construction contract was part of a multistage project to supply freshwater and power to businesses and residents in Yanbu and surrounding areas. However, the contract termination will not be a huge disaster for Samsung Engineering because Saudi Arabia already has paid for the construction completed to date (Kim Dae-gi, “Samsung Eng’s Saudi power plant construction called off before completion,” Pulse News, January 16, 2017, http://pulsenews.co.kr/view.php?sc=30800020&year=2017&no=37088)

Hyundai Motor Co. and its affiliate Kia Motors Corp. will invest about US $3.1 billion in the United States (US) over the next 5 years. This amount is about $1 billion more than Hyundai’s last 5 years’ of investment. The company also is considering constructing a plant in the US and declared it will not transfer any jobs or investment from the US to Mexico. All of the company’s moves are assumed to be a response to the threat from US President Donald Trump to renegotiate the terms of the North American Free Trade Agreement (Jung Min-hee, “Hyundai Motor to Invest $3.1 Billion in US in Next 5 Years,” Business Korea, January 18, 2017, http://www.businesskorea.co.kr/english/news/industry/17071-investment-us...)

Asked why she fought back so hard against JP Morgan Chase & Co.’s downgrading of Indonesia’s investment rating, Finance Minister Sri Mulyani Indrawati explained, “‘If someone shouts fire, everyone runs and then there's a stampede.’” This is exactly what happened during the Asian financial crisis in 1987-88. Indrawati recently has issued new rules, requiring all primary bond dealers to observe the principles that come along with government’s interests. Some analysts considered her move alarming, reminding investors that “even the most reformist official in Indonesia is taking a political approach to policy and has no qualms about punishing negative opinion” (Eveline Danubrata & Gayatri Suroyo,“ Indonesia's worried about market 'psychology' with JPMorgan report,” Reuters, January 20, 2017, http://www.reuters.com/article/us-indonesia-bonds-jpmorgan-idUSKBN1540VS)

“Najib accuses Dr M of slander over criticism of Johor project,” Today, January 21, 2017, http://www.todayonline.com/world/asia/najib-accuses-mahathir-slandering-...

Alan Ting, “Should we be concerned over growing China investments?” Malaysia Kini, January 19, 2017, http://www.malaysiakini.com/news/369842

“VN expects Japan to become top investor,” Viet Nam News, January 18, 2017, http://vietnamnews.vn/economy/349877/vn-expects-japan-to-become-top-inve...

“Party chief urges Chinese firms to bring advanced technology to Vietnam,” Vietnam Net, January 15, 2017, http://english.vietnamnet.vn/fms/government/171224/party-chief-urges-chi...