MNCs in the News-2018-04-13

China

At the Boao Forum for Asia, Chinese President Xi Jinping promised “to grant foreign companies greater access to the country’s financial sector and further reduce restrictions on foreign ownership in the industry.” The Governor of the People’s Bank of China (PBoC) followed this with “a string of detailed opening-up measures covering China’s banking, insurance, and securities sectors.” Observers said such moves would draw in international institutional investors, facilitate the internationalization of the renminbi, and have beneficial effects for China and its Belt and Road Initiative (BRI) (Li Xiang, “Further Opening-Up to Attract More Investment,” China Daily, April 12, 2018, http://www.chinadaily.com.cn/a/201804/12/WS5aceb38da3105cdcf6517be3.html)

Regarding the insurance sector is concerned, China’s PBoC said it would “lift foreign ownership restrictions in the life insurance sector in three years and raise foreign ownership limits to 51 percent in joint venture [JV] life insurance firms by the end of June.” It is believed such measures will advance the development of the sector by injecting competition into the sector, increasing efficiency, and giving customers more options. Pursuant to reforms, foreign brokers are to be given the same opportunities as domestic firms (Hu Yuanyuan, “Caps on Foreign Ownership Eased in Life Insurance JVs,” China Daily, April 12, 2018, http://www.chinadaily.com.cn/a/201804/12/WS5acebc4ca3105cdcf6517c94.html)

China’s Ministry of Commerce (MOFCOM) reported China’s outward foreign direct investment (FDI) saw decent growth during the 1st quarter of 2018. Based on four consecutive months of outward FDI (OFDI) increases, MOFCOM believes Chinese OFDI (COFDI) for the 1st quarter will show good growth as Chinese companies seek to upgrade. BRI OFDI should be strong because of the need of host countries for infrastructure and associated goods like equipment, technology, and services. While China’s eastern regions dominate COFDI, western regions should become more important (Ren Xiaojin and Zhong Nan, “Investment Growth to See Momentum,” China Daily, April 10, 2018, http://www.chinadaily.com.cn/a/201804/10/WS5acc4d21a3105cdcf65173ac.html)

COFDI in the United States (US) in 2017 plummeted by more than 90 percent year-over-year (YOY). The collapse in deals, mostly by private companies, from USD $46 to $29 billion had do with Chinese limits on COFDI allegedly because of worries about debts as well as capital outflows. It also had something to do with American restrictions on COFDI in the US in areas like semiconductors and the financial sector for national security and other reasons. The environment seems like it could become more challenging (“Chinese Investment in the US Falls Sharply in 2017,” BBC News, April 10, 2018, http://www.bbc.com/news/business-43706310)

Chinese mergers and acquisitions (M&A) related to the BRI hit USD $48.2 billion in 2017, an increase of 81 percent YOY. Nonfinancial COFDI totaled $14.4 billion, representing 12 percent of total non-financial COFDI. One area getting a lot of COFDI is the Association of Southeast Asian Nation (ASEAN) because of its location, natural resources, rich labor forces, and need for infrastructure. Evidencing this, Chinese M&A in ASEAN hit $34.1 billion in 2017. ASEAN is a BRI trade hub and has other lures (Jiang Xueqing, “M&A Deals in Belt & Road Economies Increase by 81%,” China Daily, April 12, 2018, http://www.chinadaily.com.cn/a/201804/12/WS5acebb7ca3105cdcf6517c7d.html)

Japan

Troubled Japanese air bag maker Takata Corp., involved in a massive global recall related to at least 22 deaths, says its acquisition by US firm Key Safety Systems has been completed and that its president has resigned. Approximately 50 million Takata air bag inflators have been recalled in the US alone along with millions more worldwide. However many repairs “still remain undone.” The takeover of Takata has received antitrust clearance as well as bankruptcy court approvals in several countries (“Takata chief quits as Key Safety Systems completes acquisition of beleaguered air bag maker,” The Japan Times, April 12, 2018, https://www.japantimes.co.jp/news/2018/04/12/business/corporate-business...)

During his visit to Tokyo the Ghanaian Finance Minister said many African countries are looking to Asia, seeking the development of stronger economic ties and tap into its abundant investment resources to fund Africa’s development needs. There is a need for African states to diversify trade and investment relationships within Asia and Japan offers “a solid alternative to a multipolar global diplomacy.” He added “Ghana’s development needs are huge, which leaves space for co-existence between countries investing in our country” (“During Tokyo visit, Ghana’s finance minister upbeat on future funding opportunities in Asia,” The Japan Times, April 11, 2018, https://www.japantimes.co.jp/news/2018/04/11/business/tokyo-visit-ghanas...)

South Korea

The Chinese government’s latest list of subsidy eligible electric vehicles (EV) continued to exclude South Korean battery firms. Beijing’s subsidy program is so influential that EVs without the government’s support are unsellable. South Korean firms LG Chem and Samsung SDI have revised their EV production strategies to focus on alternative uses like energy storage systems to prevent their Chinese factories from losing productivity. Korean firms will await the end of the Beijing’s EV subsidy program in 2020 before entering the Chinese EV market (Michael Herh, “Korean Companies Preparing for New Landscape in China Battery Market,” BusinessKorea, April 9, 2018, http://www.businesskorea.co.kr/english/news/industry/21529-enduring-beij...)

General Motors (GM) Korea has a deadline of April 20 to submit restructuring plans for its Korean operations to Korean government authorities. Aside from requesting tax concessions and support from Seoul, GM Korea has been pressing its labor union to agree to its cost reduction plans. Mounting tension with its union caused GM to threaten filing for bankruptcy to secure worker compliance. GM Korea’s Chief Executive Officer reported the possibility of terminating the company’s South Korean operations altogether if a profitable solution could not be reached (Sohee Kim, “GM Korea’s Future Hangs by a Thread,” Bloomberg, April 12, 2018, https://www.bloomberg.com/news/articles/2018-04-12/gm-korea-future-hangs...)

Malaysia

Malaysia’s Digital Free Trade Zone (DFTZ) is forecasted to attract over USD $200 million through investments on infrastructure, systems, and equipment over the next three years. The DFTZ is a collaboration between the Malaysian government and Chinese tech giant Alibaba to support Malaysia’s digital and physical commerce. Investments are expected to come from Malaysia Airports Holdings Bhd joint venture partners and Chinese companies. Malaysia Airports Holdings and Alibaba are also working together to develop a Kuala Lumpur International Airport Aeropolis Park within the DFTZ (Mohd Zaky Zainuddin, “DFTZ expects to attract RM800m investments,” New Straits Times, April 9, 2018, https://www.nst.com.my/business/2018/04/355224/dftz-expects-attract-rm80...)

Malaysian hospital operator IHH Healthcare Bhd suggested it would spend up to USD $1.3 billion to acquire India’s Fortis Healthcare Ltd starting a bidding war for the company. Fortis recently suffered from a scandal in which its founders took funds from the company, attracting the attention of India’s fraud commission and stock regulators. Some of Fortis’ shareholders are concerned the investigations are creating liabilities, but IHH still plans to proceed with a cash offer for shares in the Indian company (“IHH said to propose up to $1.3 billion Fortis bid to top TPG,” The Malaysian Reserve, April 12, 2018, https://themalaysianreserve.com/2018/04/12/ihh-said-to-propose-up-to-1-3...)

*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.