MNCs in the News-2017-03-10
China’s 2025 Plan, labeled “China Manufacturing 2025,” envisions creating national champions in 10 high-tech manufacturing sectors. The European Union Chamber of Commerce (EU Chamber) in Beijing recently released a report criticizing the sundry policies that China is adopting to implement the plan. The EU Chamber said China’s policies might violate WTO rules. The Chinese government seemed sensitive to such worries, saying at the 2017 National People’s Congress (NPC) that it would treat foreign firms like domestic ones regarding licensing, standard-setting, and government procurement. Foreign businesses are less willing to tolerate such policies in an environment of slowing Chinese economic growth (Charles Clover, “European Businesses Attack China High-Tech Push,” Financial Times, March 7, 2017)
At the 2017 NPC meeting, many delegates were consumed with the issue of China’s re-imposition of capital controls even though the official NPC work report failed to mention this policy. Those who felt the controls were undesirable noted, among other things, that “‘strict controls on foreign exchange…[were] the biggest bottleneck enterprises encounter” and were causing them to “‘lose out on opportunities for international mergers and acquisitions.’” Some attributed the work report’s failure to mention capital controls as an effort to avoid contradictory messages at a time when China also was proclaiming itself as a champion of globalization (Emily Feng and Tom Mitchell, “Capital Controls the Talk of China Parliamentarians,” Financial Times, March 9, 2017)
Chinese companies have become increasingly vocal about the impact that recent capital controls are having on their ability to use yuan to invest overseas. At least on the surface, statistics seem to show that the controls have led to a plunge in deals to date which are about 75 percent less than the same period a year ago. On the positive side, the controls seem to have stemmed the massive decline in China’s foreign currency reserves. Even so, the controls seem to have caused the collapse of Wanda’s deal for Dick Clark Productions and a separate Australian gold mine deal (“China’s Capital Controls Trigger a Backlash after Scrapped Deals,” Bloomberg, March 7, 2017, https://www.bloomberg.com/news/articles/2017-03-07/china-s-capital-contr...)
Great Wall Motor Co., a Chinese auto company in Hebei, had been considering building a factory in Mexico that would produce its best-selling Haval SUV for sale into the United States (US). However, US President Donald Trump’s threat to impose taxes on such imports as well as to renegotiate the North American Free Trade Agreement (NAFTA) has led the company to contemplate building a plant in the US, where it already has a research center. For some time, Chinese auto makers like Great Wall, Guangzhou Automobile Group, and Zhejiang Geely already have been pondering how to access the US market (“Trump Threats Push China’s Top SUV Maker to Review Mexico Plant,” Bloomberg, March 9, 2017, https://www.bloomberg.com/politics/articles/2017-03-09/trump-threats-pus...)
Wanfeng Auto Holding Group, a Chinese company that is a big maker of aluminum wheel hubs is contemplating additional purchases in the US, including a machinery company and financial services business, in order to increase its ability to avoid any potential tariff or tax barriers that might be instituted by the Trump administration. Wanfeng already owns an American robotic assembly-line maker Paslin and a Canadian magnesium die-castings firm, putatively in an effort to support China’s One Belt, One Road scheme. The Chair of Wanfeng stressed that the company’s past acquisitions had secured jobs, generated tax revenues, and provided other benefits (“China’s Wanfeng Eyes U.S. Acquisitions Amid Trade Tensions,” Bloomberg, March 9, 2017, https://www.bloomberg.com/news/articles/2017-03-08/china-s-wanfeng-eyes-...)
Toyota Motor Corp. may delay its decision on producing the next-generation Auris model at its British car plant until the fallout of Brexit becomes clearer. Ever since United Kingdom (U.K.) Prime Minister Theresa May declared the U.K. would leave the EU’s single market and could quit the customs union, car manufacturers in the U.K. have been concerned about the possible imposition of export tariffs. Toyota’s decision on whether to build the new Auris in the UK is due next year (“Toyota may delay U.K. investment decision on Auris until Brexit terms clear,” Japan Times, March 9, 2017, http://www.japantimes.co.jp/news/2017/03/09/business/corporate-business/...)
Last week, Honda announced its plan to invest USD $100 million in its transmission factory in Georgia in the US. At this plant the company produces 10-speed automatic transmissions and employs about 475 employees. However, unless the new transmission line does very well and overall production increases, the investment will not mean additional hiring. Aside from the planned Georgia investment, the company announced it would invest USD $49 million in its transmission facility in Russells Point, Ohio (“Honda to invest $100 million in Georgia plant; no more hiring (yet),” http://www.ajc.com/business/honda-invest-100-million-georgia-plant-more-...)
Korean companies are suffering from the tensions between South Korea and China flowing from the former’s deployment of the Terminal High Altitude Area Defense (THAAD) system. Lotte said China has not permitted its 39 outlets in China to operate since last week, following its decision to let the Korean government use its land for the THAAD deployment. Asiana Airlines said flight bookings from China decreased by 9.4 percent since Beijing’s ban of group tours to Korea. Analysts expect Chinese restrictions to expand to online games (Kim Jaewon, “THAAD tensions squeeze South Korean companies,” Nikkei Asian Review, March 8, 2017, http://asia.nikkei.com/Politics-Economy/International-Relations/THAAD-te...)
Amid the increasing concerns over the Trump administration’s “America First” policy, South Korea’s trade minister Joo Hyung-hwan recently met with his US counterpart Wilbur Ross to seek ways to boost economic cooperation. They agreed on implementing the Korea-US free trade agreement faithfully, widening investment in the manufacturing sector and strengthening cooperation in the energy industry. Joo said “It is necessary for the two nations to make joint entrances into third countries by combining US’s cutting-edge basic technologies and South Korea’s manufacturing techs” (Jung Suk-yee, “S. Korea Establishes Cooperative Channel in Trade, Investment with US,” Business Korea, March 10, 2017, http://www.businesskorea.co.kr/english/news/national/17482-trade-ministe...)
During his visit to Indonesia, Japan's deputy foreign affairs minister, Nobuo Kishi, said that Japan and Indonesia could benefit from strengthening ties. Japan is currently Indonesia’s second-largest source of foreign investment, with investment reaching USD $5.4 billion in 2016. The Indonesian government is trying to persuade Japan to further support various strategic projects, including the Patimban Port and the semi high-speed railway connecting Jakarta and Surabaya. The total investment value of the two projects is $3 billion and $7.5 billion respectively (Viriya P. Singgih, “Indonesia-Japan partnership expected to grow,” Jakarta Post, March 8, 2017, http://www.thejakartapost.com/news/2017/03/08/indonesia-japan-partnershi...)
The historic visit of King Salman to Indonesia yielded 11 memorandums of understanding between the two countries. The monarch promised to provide USD $1 billion to finance a development project and the Saudi government also reaffirmed the agreement for a USD $5 billion Indonesian oil refinery expansion. The Indonesian government previously had anticipated at least USD $25 billion in investment from Saudi Arabia. Saudi Arabia’s foreign direct investment in Indonesia traditionally has been low, largely because Indonesia lacks technological capacity, especially in manufacturing (Hendarsyah Tarmizi,“ COMMENTARY: Saudi investment: Not big but not too small,” Jakarta Post, March 09, 2017, http://www.thejakartapost.com/academia/2017/03/09/commentary-saudi-inves...)
Achara Deboonme, “Exim Thailand to boost role in Myanmar through local presence,” The Nation, March 10, 2017, http://www.nationmultimedia.com/news/business/EconomyAndTourism/30308495
Wichit Chaitrong, “Election delay is a key concern for foreign investors,” The Nation, March 9, 2017, http://www.nationmultimedia.com/news/national/30308456
“Malaysia’s edge in drawing investments from China,” Free Malaysia Today, March 7, 2017, http://www.freemalaysiatoday.com/category/opinion/2017/03/07/malaysias-e...
Kua Kia Soong, “Najib merely modeling Mahathir on foreign investments,” Free Malaysia Today, March 5, 2017, http://www.freemalaysiatoday.com/category/opinion/2017/03/05/najib-merel...
“EuroCham vows to boost European investment in Vietnam,” Vietnam Net, March 4, 2017, http://english.vietnamnet.vn/fms/business/173810/eurocham-vows-to-boost-...
“SOEs seek foreign capital for shares,” Vietnam Net, March 6, 2017, http://english.vietnamnet.vn/fms/business/173908/soes-seek-foreign-capit...