MNCs in the News-2017-07-28

China

The China Banking Regulatory Commission (CBRC) issued a statement saying “‘wholly-owned foreign lenders and Chinese and foreign joint ventures will be subject to the same regulations as overseas financial institutions’ when it comes to investing in Chinese bank.” More concretely, foreign banks will be able to purchase a domestic lender through a locally incorporated subsidiary. Foreign banks, though, still will be limited to a 20 percent stake. One analyst opined the CBRC statement meant the Chinese government was moving to open its banking sector (Li Xiang and Luo Weiteng, “Foreign Banks Get Investment Boost,” China Daily, July 27, 2017, http://www.chinadaily.com.cn/business/2017-07/27/content_30262437.htm)

Per one analysis, China is cracking down on the companies like Anbang, Fosun, HNA Group, and Dalian Wanda because of the potential risks these firms pose to the Chinese economy. These entities, using moneys from state-owned banks, political connections, and aggressive behaviors, grew into huge, complex, overleveraged beasts and were major overseas investors, with the aforementioned entities having made USD $41 billion of foreign direct investment (FDI) over the past five years in real estate, entertainment, and sports clubs (Keith Bradsher and Sui-Lee Wee, “In China, Herd of ‘Grey Rhinos’ Threatens Economy,” The New York Times, July 23, 2017, https://www.nytimes.com/2017/07/23/business/china-economy-gray-rhinos.html)

As part of its manifesto for the June 8 election the British Conservative (Tory) Party promised to “ensure foreign ownership of companies controlling ‘important infrastructure’ would not undermine British security.” In recent years, Chinese firms have made many investments in the United Kingdom (UK) including in sensitive areas like nuclear power. The golden era may be ending as the UK moves to tighten its FDI regime and create a vetting body like the United States (US) Committee on Foreign Investment in the US (CFIUS) (Charles Clover and Jim Pickard, “UK to Tighten Foreign Investment Reviews,” Financial Times, July 23, 2017)

Japan

Thailand’s Federal Board of Investment (BoI) is set to hear a plant proposal from Japan’s Toyota Motor Corporation for a new hybrid vehicle production facility worth nearly USD $570 million. Thailand’s BoI recently approved a new round of corporate tax breaks and tariff exemptions for the local production of electric vehicles, leading Toyota to make a bid for the factory. Toyota also has plans for waste management initiatives to support its hybrid vehicle production and pave the way for future vehicle development (Piyachart Maikaew, “Toyota to produce local EVs,” Bangkok Post, July 27, 2017, http://www.bangkokpost.com/auto/news/1294639/toyota-to-produce-local-evs)

Japan’s government sponsored investment arm, the Innovation Network Corp. of Japan (INCJ), announced a final bid for Toshiba's flash memory division following a series of legal disputes with Toshiba’s US partner, Western Digital. INCJ leads a consortium, which includes a US investment firm and a South Korean semiconductor producer, that is bidding for the memory technology division. The latest offer hopes to resolve the ongoing legal battle, allowing Toshiba to sell the firm and offset the debt caused by its failed US nuclear business (“INCJ-led consortium makes final bid for Toshiba memory unit,” The Japan Times, July 27, 2017, http://www.japantimes.co.jp/news/2017/07/27/business/corporate-business/...)

South Korea

South Korea’s Ministry of Strategy and Finance is following up on a USD $10 billion infrastructure development deal with India’s Ministry of Finance. The two countries have created a working consultation body to oversee investment projects flowing from the development deal. South Korea’s proposed projects will involve Korean companies which will lend expertise and development assistance to India. The two countries are also looking to develop private-public cooperation and utilize India’s human resource development policy for future joint research and development projects (Michael Herh, “Korea, India Start Talks on $10B Worth Financial Support for India,” BusinessKorea, July 27, 2017, http://www.businesskorea.co.kr/english/news/national/18785-infrastructur...)

Recent data from the US Senate Lobbying Disclosure Database has revealed Korea’s leading exporters have increased their US lobbying activities since the inauguration of US President Donald Trump. Major lobbying targets include foreign investment in the US as well as a slew of trade issues. Compared to the same period last year, Samsung Electronics tripled its spending on lobbying activities in the first half of 2017 while Posco resumed its US lobbying activities for the first time in 14 years, following Washington’s import measures on steel (“Korean firms increase spending on US lobbying,” The Korea Herald, July 25, 2017, http://www.koreaherald.com/view.php?ud=20170725000718)

Indonesia

An official of the Indonesian Investment Coordinating Board (BKPM) recently announced that in the first half of 2017 Singapore was the largest investor in Indonesian economy, with Japan, China, Hong Kong and South Korea completing the top five. BKPM chairman Thomas Lembong stressed that “growing negative sentiments” against China did “not significantly impact” Chinese investment in Indonesia. In addition, he mentioned that Indonesia’s participation in the Belt and Road summit in Beijing in May of this year has helped to increase Chinese investment “in both quantity and quality” (“Singapore Remains Largest Investor in Indonesia: BKPM,” Tempo.com, 26 July, 2017, https://en.tempo.co/read/news/2017/07/26/056894568/Singapore-Remains-Lar...)

Thailand

Thailand’s BoI is confident overall applications for “investment privileges” will reach the country’s targeted USD $18 billion for 2017. According to the Board’s secretary-general, in the first half of this year the BoI had received applications for 612 projects with a combined investment value of over USD $8 billion, with 60 percent of the applicants being foreign investors. Japan was the main foreign investor with 117 projects with a total value of USD $1.9 billion, followed by Singapore and China (“BoI: Investment applications to reach B600bn target,” Bangkok Post, July 27, 2017, http://www.bangkokpost.com/business/news/1295102/boi-investment-applicat...)

Malaysia

During an Investment Malaysia 2017 panel discussion, Malaysia’s Second Finance Minister Datuk Seri Johari Abdul Ghani stated that the issues surrounding 1Malaysia Development Bhd (1MDB) “are not an accurate representation” of how the government or government-linked firms are run. Johari also touched upon concerns about the large influx of Chinese investment into Malaysia, stating people should understand it is “the only country that is in investment mode,” and that the Chinese are “investing in something that we want but cannot afford to do” (Daniel Khoo and Cecilia Kok, “Malaysia Has Some Well-Run GLCs,” The Star Online, July 26, 2017, http://www.thestar.com.my/business/business-news/2017/07/26/johari-we-ha...)

Nine companies, including two Japanese firms and seven Chinese state-owned enterprises (SOEs), submitted a bid for the Bandar Malaysia project. Dalian Wanda Group, whose potential investment in the project would be over USD $10 billion, was missing from the list because of capital restrictions on Wanda’s foreign acquisitions imposed by the Chinese government. Malaysian Prime Minister Najib Razak previously wooed Wanda. The Bandar Malaysia project is attractive because it will house the terminus for the high-speed rail project connecting Kuala Lumpur with Singapore (“2 Japanese, 7 Chinese firms bid for Bandar Malaysia project,” Free Malaysia Today, July 25, 2017, http://www.freemalaysiatoday.com/category/nation/2017/07/25/2-japanese-7...)

Vietnam

The Vietnam Steel Association (VSA) has called upon the government to limit FDI investment in steel projects. It supports attracting FDI only for the production of steel that cannot be produced locally, including high quality alloy steel for machinery production. Acknowledging Vietnam is an excellent destination for stainless steel, many Chinese investors are interested in establishing steel mills in the country. VSA feels the government should “consider the right time to attract foreign investment” and consider project scale and technology in order to ensure competitiveness and control pollution (“Limits proposed on foreign steel investment,” Vietnam Net, July 27, 2017, http://english.vietnamnet.vn/fms/business/182777/limits-proposed-on-fore...)