MNCs in the News-2020-01-10

China

The China Banking and Insurance Regulatory Commission (CBIRC) has “unveiled revised management regulations for foreign banks.” Among other things, they would allow foreign banks to “establish branches and wholly foreign-owned banks at the same time.” Prior requirements relating to total assets, Chinese majority shareholder options, and the qualifications of directors and senior managers have been modified. All these changes are geared towards enhancing the development of the banking industry. In tandem, the CBIRC also promulgated new rules relating to, among other things, anti-money laundering and anti-terrorist financing (“China Unveils Revised Regulations for Foreign Banks,” Global Times, January 4, 2020, https://www.globaltimes.cn/content/1175674.shtml)

Per China’s Ministry of Natural Resources, foreign firms no longer need to partner with a Chinese firm (read: State-owned enterprise/SOE) to prospect for and extract oil and gas. If they have sufficient assets and can meet other criteria pertaining to environment protection and technology, then they can apply for prospect and mining permits. The government’s goal is to promote competition and, relatedly, increase oil and gas production, important given that exploiting China’s energy resources is proving increasingly challenging (Liu Zhihua and Yang Wanli, “Foreign, Private Firms to Gain Wider Access to Oil, Gas Sectors,” China Daily, January 10, 2020, www.chinadaily.com.cn/a/202001/10/WS5e17ad9ba310cf3e3558396c.html)

A recent report revealed Chinese foreign direct investment (FDI) in North America and Europe plummeted in 2019, with Chinese outward FDI (OFDI) in the latter falling much more than in the former. Chinese OFDI (COFDI) in North America was the lowest since 2009 while COFDI in Europe was the lowest since 2013. Key causes include government limits on COFDI, a more hostile environment overseas, China’s slower economic growth, and the international environment. Reduced Sino-US tensions and better Chinese growth should propel future COFDI (“Chinese Investments in North America, Europe Hit 9-Year Low in 2019: Report,” Xinhua, January 9, 2020, www.xinhuanet.com/english/2020-01/09/c_138690620.htm)

In 2019, China was, by far, Cambodia’s largest source of FDI (43 percent of the overall amount), with South Korea a distant second. Vietnam, Singapore, and Japan rounded out the top five sources of Cambodian inward FDI. Strength was seen across a wide number of sectors as a result of new investment laws, new rules relating to special economic zones, and efforts to reduce red tape and bureaucracy. Cambodian tensions with the European Union and Brexit constitute some of the background environment shaping FDI patterns (“Cambodia Attracts 3.6-Bln-USD FDI in 2019, 43 pct from China,” Xinhua, January 10, 2020, www.xinhuanet.com/english/2020-01/10/c_138694282.htm)

Japan

In order to stimulate investment and strengthen Tokyo’s status as a global financial center, Japan’s Financial Service Agency (FSA) is preparing a guidebook on the registration process for investment management, investment advisory, and other related businesses. In the past, prospective applicants suffered from a lack information and a lengthy review process, especially for foreign investors. The FSA hopes the guidebook will help attract foreign and Japanese hedge funds and investment firms amid concerns that new foreign investment rules regarding sensitive industries might drive away investors (“Japan looks to spur investment with step-by-step registration guide,” Nikkei Asian Review, January 6, https://asia.nikkei.com/Business/Markets/Japan-looks-to-spur-investment-...)

In the wake of Iranian missile attacks against United States (US) bases in Iraq following the US assassination of an Iranian general, Japanese firms such as MUFG Bank, Sumitomo Mitsui, and Mizuho Bank moved staff out of Iran. Some of these firms and others like Toyota Tsusho also have restricted staff travel to Iran and Iraq. Data from the end of October 2018 indicates Japanese companies in finance, trading, and engineering have “30 operational bases in Iran” (Masumi Koizumi, “Japan Firms Pull Staff Out of Iran and Limit Iraq Travel Amid High Tensions,” The Japan Times, January 9, 2020, https://www.japantimes.co.jp/news/2020/01/09/business/japan-firms-pull-s...)

South Korea

The Ministry of Trade, Industry, and Energy reported that inward FDI in 2019 reached USD $23.33 billion, a 13 percent drop compared to last year’s record-breaking number of $26.9 billion. The abolition of corporate tax breaks for foreign enterprises, pro-labor management conditions, and regulations drove decreased FDI in the first six months of 2019. However, FDI started to recover in the second half of the year due to increased cash support for foreign businesses and the large-scale acquisitions of domestic companies by foreign investors (Jung Suk-yee, “Inbound Foreign Direct Investment Drops 13 Percent in 2019,” Business Korea, January 7, http://www.businesskorea.co.kr/news/articleView.html?idxno=39869)

Iran’s missile attacks on US military bases in Iraq put Korean construction firms operating in the Middle East on high alert. Fourteen Korean construction companies including Hyundai Engineering & Construction and Hanwha Engineering & Construction are operating in Iraq. Korea’s Ministry of Land, Infrastructure and Transport is working with the Ministry of Foreign Affairs to monitor the situation and create emergency contacts. Besides security concerns, tensions in the Middle East might affect other Korean companies looking for opportunities in the region (Jo He-rim, “Korean construction firms on alert following Iran's missile attack against U.S.,” The Korea Herald, January 8, http://www.koreaherald.com/view.php?ud=20200108000609)