MNCs in the News-2017-02-10
China’s current economic policy goal aims to reduce the country’s reliance on industry, exporting, and construction and shift more activity into consumption, services, and higher value added sectors. Progress towards this goal is showing at subnational data level with Shanghai attracting much more sales, marketing, and support activity and showing reduced inward foreign investment (FDI) in manufacturing and steady inward FDI (IFDI) in services and headquarters operations. Increases in R&D, headquarters, and education investment also were witnessed in Guangzhou, Suzhou, and Tianjin. Other than government policy, the shift in investment type likely has some links with China’s decreasing cost competitiveness (Cathy Mullan, “Shanghai Shows Changing Face of FDI in China,” Financial Times, February 4, 2017)
Reporting on Chinese outward FDI (COFDI) generally and regarding One Belt, One Road (OBOR), a Chinese Ministry of Commerce (MOFCOM) spokesman said COFDI “is stable and moving in a positive direction.” The same spokesman said “In 2017, China will encourage domestic firms that have the conditions and abilities [to go global] to conduct real and well regulated foreign investment activities, such as taking part in the joint construction of OBOR, starting international cooperation on production capacity and getting involved in the global industrial chain and value chain. He added economic and political factors will create challenges for COFDI in 2017 (Huang Ge, “China to Encourage Overseas Investment,” Global Times, February 9, 2017, http://www.globaltimes.cn/content/1032272.shtml)
According to Syngenta, it is making progress in winning approval for its USD $43 billion takeover by state-owned enterprise (SOE) ChemChina, though it now sees the deal closing in the second quarter of 2017. Outside analysts seem confident, too, that the deal, important for China which wants to acquire the Swiss giant’s technologies, chemical and seeds, and related intellectual property, will successfully close despite potential regulatory concerns about the antitrust implications of the deal and the fact an SOE is the acquirer. Brazil, the European Union (EU), and the United States (US), among others, still need to approve the deal (Ludwig Burger and Michael Shields, “ Syngenta Sees ChemChina Takeover Closing in the Second-Quarter,” Reuters, February 8, 2017, http://www.reuters.com/article/us-syngenta-results-idUSKBN15N0HQ)
In December last year, the Chinese government ordered Lotte Group to halt its USD $2.6 billion theme-park, office, and shopping project in Shenyang in northeastern China, about nine months after China ordered safety and tax inspections against Lotte’s stores in China. Despite these actions, which many associate with China’s displeasure with South Korea’s plans to deploy the THAAD missile shield, Lotte Group expects it will get China’s approval in March to restart construction. Aside from Lotte, China has taken adverse action against Korean imports, Korean artists, and Korean companies, without ever explicitly linking this to South Korea’s embrace of THAAD (Sohee Kim, “Lottee China Theme-Project Halted Amid Geopolitical Tensions,” Bloomberg, February 8, 2017, https://www.bloomberg.com/news/articles/2017-02-08/lotte-china-theme-par...)
A senior executive of Japan’s Sharp Corp. announced the firm is planning to build a liquid crystal display panel plant in the US. Sharp notified the Japanese government, which suggests that it might be discussed during the U.S. President Donald Trump and Japanese Prime Minister Abe’s meeting in early February. Sharp plans to start construction of the plant in the first half of this year. It recently said it moved back into the black since it restructured under Taiwan’s Hon Hai Precision Industry Co. Last month, Hon Hai also announced its plan to invest USD $7.14 billion in the US (“Sharp reveals massive U.S. investment plan prior to Abe-Trump summit,” Japan Times, February, 8, 2017, http://www.japantimes.co.jp/news/2017/02/08/business/corporate-business/...)
Softbank Group Corp. CEO Masayoshi Son announced on February 8 he has already created 8,000 of the 50,000 jobs in the US that he pledged US President Donald Trump (before the latter’s inauguration) that he would create. He said “‘Easing of regulations allows me to run businesses in the United States more easily.’” 3,000 of the jobs he has created are at U.S. satellite maker Oneweb Ltd., which Softbank invests in, and 5,000 jobs are at the call center of Sprint Corp., the American wireless company that Softbank owns. Son said this achievements prove that he is keeping his promise (“Softbank has already created 8,000 U.S. jobs, says CEO Son,” Asahi Shimbun, February 9, 2017, http://www.asahi.com/ajw/articles/AJ201702090062.html)
South Korean semiconductor and automobile makers will face more restrictions than before in China as a result of China’s response to Korea’s coming deployment of the US Terminal High Altitude Area Defense (THAAD) anti-missile system. According to the KOTRA Beijing Trade Center, China recently changed its existing anti-monopoly law by adding new regulations and amending old ones, which are targeting items including cars and chips, where Korea does substantial business with China. The government will soon explain the procedure for anti-monopoly investigations by introducing the 6th anti-monopoly guidelines. New Chinese policies have the potential to lessen Korean companies’ business activities (Jung Suk-yee, “China to Tighten Anti-Monopoly Law Targeting S. Korean Chip, Auto Makers,” Business Korea, February 6, 2017, http://www.businesskorea.co.kr/english/news/national/17215-targeting-s-k...)
South Korea’s Samsung Electronics has decided to build its first home appliance plant in the US. The plant will produce 2 million units annually, and Samsung is considering either Alabama or South Carolina for the site of the plant. After Reuters reported the decision, US president Donald Trump tweeted ‘“Thank you, Samsung. We would love to have you!” Since one-third of the sales of Samsung Electronics’ Consumer Electronics division come from North America, it empowered Trump more to put pressure on Samsung. However, Samsung Electronics is worried about remaining price competitive since US wages are higher than Mexico or Korea’s (Cho Jin-young, “Samsung Electronics to Build First Home Appliance Plant in US with Production Capacity of 2 Million Units,” Business Korea, February 6, 2017, http://www.businesskorea.co.kr/english/news/ict/17213-response-trump’s-twitter-samsung-electronics-build-first-home-appliance-plant-us)
Moody’s Investors Service recently upgraded its credit outlook for Indonesia from “stable” to “positive.” This upgrade was considered to constitute a recognition by international institutions that the Indonesian government has been making progress on economic and regulatory reform. Analysts said that this improvement might help to “boost foreign investors’ confidence in Indonesian investment, not only in the capital market but also in the real sector, which will support Indonesia's economic growth in the future.” In the final analysis, one would expect that Moody’s outlook upgrade will assist Indonesian policymakers in attracting and retaining more FDI (“Moody's upgrades Indonesia outlook to positive as finances improve,” Business Times, February 9, 2017, http://www.businesstimes.com.sg/government-economy/moodys-upgrades-indon... Tabita Diela, “Moody's Outlook Upgrade Promises Robust Future for Investors: Analysts,” Jakarta Globe, February 9, 2017, http://www.jakartaglobe.beritasatu.com/business/moodys-outlook-upgrade-p...)
Tigerair, an Australian airline company, announced it would permanently cease flights to Bali Island. This announcement was made shortly after the Indonesian government required it to provide “an alternative regulatory solution” of the current operating model. Tigerair claimed it would take them six months to meet the requirement and the cost would be prohibitively expensive. Therefore, as a budget airline, Tigerair has no other choice but to quit flying. This abrupt withdraw has highlighted Indonesia’s flight regulation uncertainties. A University of Sydney professor said: “What surprises me the most is the confusing and short notice decisions of the Indonesian authorities” (Jamie Freed, “Australia's Tigerair abruptly quits Bali flights after Indonesia ruling,” Reuters, February 3, 2017, http://www.reuters.com/article/us-australia-indonesia-tigerair-idUSKBN15... “Tigerair unable to meet Indonesia rules, ends Bali flights,” The Jakarta Post, February 3, 2017, http://www.thejakartapost.com/seasia/2017/02/03/tigerair-unable-to-meet-...)
“Thailand invests $7.7 billion in Vietnam,” Vietnam Net, February 8, 2017, http://english.vietnamnet.vn/fms/business/172281/thailand-invests--7-7-b...
Manik Mehta, “Malaysia banks on aerospace sector to attract foreign investments,” The Star, February 07, 2017, http://www.thestar.com.my/business/business-news/2017/02/07/malaysia-ban...
Robin Augustin, “Mideast investors getting wary of Malaysia, says Ideas,” Free Malaysia Times, February 11, 2017, http://www.freemalaysiatoday.com/category/nation/2017/02/11/mideast-inve...
“Chinese investment into Vietnam on the sharp rise,” Vietnam Net, February 10, 2017, http://english.vietnamnet.vn/fms/business/172454/chinese-investment-into...
“Vietnam’s government approves Samsung extra pouring,” Vietnam Net, February 7, 2017, http://english.vietnamnet.vn/fms/business/172241/vietnam-s-government-ap...