MNCs in the News-2019-05-31

China

The trade war with the United States (US) may not necessarily affect China that badly. First, China’s stimulus measures may help to attract foreign direct investment (FDI). Second, domestic economic uncertainty may push Chinese companies to focus on mergers and acquisitions (M&As) that boost their domestic business. Regarding M&A, “the trade war effects might depress valuations, or prompt those who already planned to exit China to expedite their exit, thereby presenting buying opportunities” (Simone McCarthy, “China consumer market ‘too big to ignore’, to attract domestic and foreign M&A activity amid trade war,” South China Morning Post, May 29, 2019, https://www.scmp.com/business/china-business/article/3012156/china-consu...)

With increasingly strained diplomatic and economic relations between the US and China, one of China’s most acquisitive companies, Fosun, is restricting its investments in the US. Fosun International Ltd. is looking to “limit its investments in US biotech companies to mostly small stake holdings” to avoid growing American regulatory scrutiny, but also shifting its focus to emerging markets. Although investment in the US now seems particularly challenging for Chinese companies such as Fosun, Fosun said that it will not completely stop making deals in the US (“Trade Tensions Have a Chinese Giant Rethinking U.S. Deals,” Bloomberg, May 31, 2019, https://www.bloomberg.com/news/articles/2019-05-30/trade-tensions-mean-c...)

Rio Tinto is selling its 69 percent stake in the world’s longest-running open pit uranium mine in Namibia to China. Namibia’s mines and energy minister said he has no objection to the deal as long as China respects Namibian laws. Namibians are afraid that China will bring in foreign workers to replace local employees, but China National Uranium Corporation confirmed that the company has no intention of doing so and that it plans to maintain the current level of local employees (Nyasha Nyaungwa, “Namibia says China can buy Rio's uranium stake if it respects laws,” Reuters, May 29, 2019, https://www.reuters.com/article/us-rio-tinto-namibia-china/namibia-says-...)

Japan

Tokyo will add “15 industry sectors, including mobile phone and computer manufacturers,” to its list of areas where foreign investors are limited in making stock investments. Per the new policy, foreign investors must inform the government in advance when they attempt to obtain more than a 10 percent stake in listed firms or buy share in unlisted companies. Following the notification, Tokyo will assess if the stock acquisition would “damage the country's safety.” Japan wants to limit outflows of “sensitive information and technologies to others” (“Japan to Restrict Foreign Investment in IT Firms,” Nikkei Asian Review, May 28, 2019, https://asia.nikkei.com/Politics/Japan-to-restrict-foreign-investment-in...)

After 20 years of negotiation, Indonesia has struck a deal with Inpex Corp., Japan’s biggest oil and gas developer, on the framework for a USD $20 billion plan to develop an onshore liquefied natural gas facility. Indonesia touted both sides achieved a win-win outcome pursuant to which it will get a 50 percent share in production from the Masela gas block in its eastern province of Maluku. It is estimated the block will be able to yield 1.200 billion standard cubic feet per day of gas (“Indonesia and Inpex Reach Deal on Masela Gas Block’s Development,” The Japan Times, https://www.japantimes.co.jp/news/2019/05/28/business/corporate-business...)

South Korea

In the wake of the Donald Trump administration’s action to limit the supply of parts to China’s Huawei, major Korean companies such as LG Innotek, SK Hynix, and Samsung Electronics are staying on the sidelines. Specifically, they have opted not to terminate sales to Huawei yet. One Korean corporate executive commented that participation in the anti‑Huawei campaign was not a corporate affair, but rather an interstate matter. Korean firms seem worried severing business links with Huawei could produce a massive boycott of Korean products in China (Jung Min-Hee, “Korean Companies Prudent about Joining Anti-Huawei Campaign,” BusinessKorea, May 29, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=32322)

To protect their interests in China, SK Group and other Korean firms like Hyundai Motor Group are meeting with top Chinese party leaders at the provincial level, forming joint ventures with Chinese companies, and investing billions of dollars in high-tech areas of interest to China such as semiconductor and electric vehicle battery manufacturing plants. As for SK, it is localizing by “strengthening the portion and roles of business units in China.” It also is touting publicly its interest in sharing its assets and talents with diverse Chinese stakeholders (Kwak Yeon-Soo, “SK Chief Busy Protecting Interests in China,” Korea Times, www.koreatimes.co.kr/www/tech/2019/06/515_269565.html)