MNCs in the News-2017-08-25

China

China’s State Council “has told ministries to open up more sections of the economy to foreign investors” and to adopt liberal/better policies towards inward foreign direct investment (FDI) in regards to profit remittances, market access, entry and work visas, intellectual property rights (IPR) protections, and tax and land incentives for inward FDI (IFDI). One report implies this has something to do with the Trump administration’s increasing criticisms of China’s market access restrictions and policies towards IFDI and trade (Wendy Wu, “China Orders Ministries to Open Up More of Economy to Foreign Investors,” South China Morning Post, August 17, 2017, http://www.scmp.com/news/china/economy/article/2107190/china-orders-mini...)

Foreign firms in China are required to have a (Chinese Communist) party (CCP) organization internally. Many have not seen this as a significant issue, but concerns are rising because some companies have come under “‘political pressure’ to revise the terms of their joint ventures…to allow the party final say over business operations and investment decisions.” Moreover, foreign firms are being asked to include CCP overhead expenses in their budgets and make the post of chairman and party secretary the same (Michael Martina, “Exclusive: In China, the Party’s Push for Influence inside Foreign Firms Stirs Fears,” Reuters, August 24, 2017, https://www.reuters.com/article/us-china-congress-companies-idUSKCN1B40JU)

China’s Ministry of Commerce issued a guideline limiting investment in speculative transactions, deals in “undesirable” sectors like real estate, entertainment, and sports, and sensitive sectors and regions like the national defense sector and “businesses in war-torn or politically unstable areas.” The goal is to reduce investment risks, prevent crimes, ensure greater fund flows to the “real economy,” and “reduce investment in sectors in which Chinese companies are not proficient at managing.” However, outward FDI (OFDI) in high-tech and Belt and Road Initiative projects remains encouraged (Zhong Nan, “Guideline Tightens Control of Outbound Direct Investment,” China Daily, August 19, 2017, http://www.chinadaily.com.cn/business/2017-08/19/content_30810493.htm)

Chinese OFDI (COFDI) in real estate had been growing rapidly but has dropped dramatically over the first six months of 2017 year over year. This partly has to do with Chinese government restrictions on the sectoral destination of COFDI to control risks and to ensure moneys go to areas seen to help the “‘country’s economic transition.’” However, real estate firms still have powerful rationales to consider OFDI given their need to diversify away from the China market and the government’s efforts to cool the domestic property sector (Xie Jun, “‘Restricted’ List Narrows Investment Scope,” Global Times, August 21, 2017, http://www.globaltimes.cn/content/1062449.shtml)

Japan

Talks between Japan’s Toshiba Corp. and a government-led consortium of American, South Korean, and Japanese investment entities over the former’s USD $18 billion chip division broke down after Japan’s Innovation Network Corp (INCJ) grew concerned over prolonged legal battles with Toshiba’s US partner, Western Digital. After abandoning its preferred bidder, Toshiba initiated talks with a new consortium led by Western Digital and containing INCJ and Japan’s state-owned Development Bank. Toshiba is now seeking approval from antitrust authorities for the sale (“Toshiba gives chip bid dibs to Western Digital after INCJ gets cold feet,” The Japan Times, August 24, 2017, https://www.japantimes.co.jp/news/2017/08/24/business/corporate-business...)

Russian Prime Minister Dmitry Medvedev recently signed an order that would create the Kurils advanced development territory on the island of Shikotan, angering Japan. Shikotan, one of the disputed Kuril Islands [which Japan labels the Northern Territories], is to be designated “a special fish-processing zone” and will receive tax benefits to attract investment. Earlier this year Russia and Japan tried to lay a foundation for progress on their long time dispute by announcing joint economic projects. However, tensions recently reemerged (Elizabeth Shim, “Russia investment decision on Kuril Islands angers Japan,” UPI, August 24, 2017, https://www.upi.com/Russia-investment-decision-on-Kuril-Islands-angers-J...)

South Korea

China sales by South Korea’s Hyundai Group and Kia Motor Corp. are down for the sixth month straight. The carmakers cite consumer resentment over South Korea’s adoption of the THAAD missile system and changing Chinese tastes which value foreign, luxury brands, or cheaper, well serviced Chinese models. While the two carmakers plan to introduce smart-cars, government quotas, new rules regarding electric vehicles (EVs), and Chinese officials refusal to certify Korea’s LG Chem Ltd. as an EV battery maker hinder progress (Huang Rong and Zheng Lichun, “Are South Korean Carmakers in China Running on Empty?” Caixin Global, August 23, 2017, http://www.caixinglobal.com/2017-08-23/101134507.html)

China’s feud with South Korea over its THAAD missile installation is harming its own workers. Chinese employees of Korean carmaker Kia Motor Corp. complain that “anti-Korean sentiment doesn’t do us any good” as they accept half pay or forced unpaid leave in lieu of factory closure. Hyundai, another Korean carmaker, is also doing poorly and its Chinese state-owned joint venture partners, Beijing Motor Corp. and Dongfeng Motor Corp., are equally suffering due to politically incited aversion to Korean products (Trefor Moss, “Beijing’s Campaign Against South Korean Goods Leaves Chinese Looking for Work,” The Wall Street Journal, August 23, 2017, https://www.wsj.com/articles/beijings-campaign-against-south-korean-good...)

South Korea’s LG Electronics Inc. began construction of a USD $250 million home appliance manufacturing plant in the United States (US) state of Tennessee in a move that was praised by US Commence Secretary Wilbur Ross as bringing “family-sustaining jobs to Tennessee.” LG credited the Trump administration with fostering a positive investment climate in the US, which contributed to LG’s decision to build the Tennessee appliance plant, expand its New Jersey headquarters, and announce two new Michigan facilities (Erik Schelzig, “LG breaks ground on $250M appliance plant in Tennessee,” The Washington Post, August 24, 2017, https://www.washingtonpost.com/business/lg-breaks-ground-on-250m-applian...)

China’s Anbang Insurance Group is drifting aimlessly in the South Korean market after spending USD $1 billion acquiring insurance agencies and asset-management groups there. The disappearance of Anbang’s Chairman Wu Xiaohui after he ran afoul Chinese authorities has caused confidence in the insurance giant to wane and South Korea’s Financial Services Commission to monitor closely Anbang’s operations. No “fit and proper test” has been administered, though local regulators are strongly considering such an investigation (James Areddy, “China’s Anbang Hits a Wall in South Korea,” Fox Business, August 18, 2017, http://www.foxbusiness.com/features/2017/08/18/chinas-anbang-hits-wall-i...)

Indonesia

Indonesia’s PT Intra Asia has signed a memorandum of understanding (MoU) with Vietnam’s state-owned Coal and Resources department for a USD $1 billion coal port in Vietnam to facilitate trade between the two countries. Indonesia aims to diminish its trade deficit with Vietnam by building coal receiving stations that will allow for increased coal exports to Vietnamese power plants. The new port will primarily serve the coal industry, but also will be a logistics and cargo hub for the region (“Indonesian firm to construct coal port in Vietnam,” The Jakarta Post, August 23, 2017, http://www.thejakartapost.com/news/2017/08/23/indonesian-firm-to-constru...)

A trade delegation from the United Kingdom (UK) reached out to the Indonesian government to develop a basis for a post-Brexit trade agreement. The UK trade envoy requested Indonesia to create a better investment climate by making it easier to obtain foreign work permits and reducing industry restrictions on investment. Britain cited the potential for UK businesses to create high value jobs. Indonesia and Britain cannot make any agreements until Britain formally leaves the European Union (EU), but Indonesia’s Investment Coordinating Board is interested in further dialogue (“UK Envoy Talks Indonesia-UK Bilateral Trade Post-Brexit,” Jakarta Globe, August 23, 2017, http://jakartaglobe.id/business/uk-envoy-talks-indonesia-uk-bilateral-tr...)

Malaysia

Malaysia’s Prime Minister Datuk Seri Najib Razak recently stated that both the International Monetary Fund (IMF) and the World Bank had raised “positive predictions” for the country’s economic growth to nearly five percent this year and in 2018. The growth in the construction sector is partially boosted by the infrastructure projects that the Malaysian government is implementing across the country. These projects stimulate investment, boost commercial activities and will create jobs, generating benefits for both local and foreign firms (Syed Umar Ariff, “Malaysia Experiencing Strong Economic Growth – PM,” New Straits Times, August 18, 2017, https://www.nst.com.my/news/nation/2017/08/269550/malaysia-experiencing-...)

Vietnam

Vietnam’s state-owned PetroVietnam signed a MoU with Thailand’s Siam Cement Group’s chemical subsidiary to jointly build a USD $5.4 billion petrochemical complex in Vietnam’s Ba Ria-Vung Tau province to produce polypropylene and polyethylene. The plant will be built according to Vietnamese environmental regulations and feature advanced technology and manufacturing techniques aimed at improving Vietnam’s industrial development. The complex is expected to employ 1,000 workers once it begins operation and will create over 15,000 jobs during the construction process (“SCG reaffirms determination to develop $5.4 billion Long Son petrochemical complex,” Vietnamnet, August 20, 2017, http://english.vietnamnet.vn/fms/business/185038/scg-reaffirms-determina...)

Vietnam’s Ministry of Planning and Investment (MPI) has clarified details surrounding the country’s three new special economic zones (SEZs). The MPI proposes five years of income tax exemption for specialized workers in the zones and then a 50 percent income tax reduction until 2030. These initiatives, coupled with more lenient residency requirements, aim to boost foreign investment and attract skilled labor to Vietnam’s SEZs. The three zones will be assigned to handle service industries, ecotourism, or logistics to align with government directives and specific regional advantages (“MPI proposes big breaks for special economic zones,” Vietnam News, August 22, 2017, http://bizhub.vn/news/mpi-proposes-big-breaks-for-special-economic-zones...)

*The information compiled in the MNCs in the News digest is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content of the MNCs in the News digest does not necessarily represent the view of the Wong MNC Center, its Board of Directors, or its Advisory Board, but is intended for the non-commercial use of readers in order to foster debate and discussion and to facilitate and stimulate research.