MNCs in the News-2017-01-06

Chinese authorities requested Apple to withdraw the New York Times English- and Chinese-language apps from its China App store, an order with which Apple complied. “Apple said it had been informed the app violated Chinese regulations but did not say what rules had been broken.” The New York Times, which has been blocked in China since 2012, “asked Apple to reconsider the decision,” albeit to no avail. The action does not affect those who use App Stores other than the Chinese one. Many other foreign media apps still may be accessed, even though there are limits on accessing their websites (“Apple Pulls New York Times App from China App Store,” BBC News, January 5, 2017, http://www.bbc.com/news/business-38514903)

During a visit to Seoul, Chen Hai, the Deputy Director-General of the Department of Asian Affairs at the Ministry of Foreign Affairs, warned leading Korean firms that “their Chinese business could suffer because of” Korea’s decision to deploy the Terminal High Altitude Area Defense (THAAD) missile defense system. South Korean officials called Chen’s visit “‘highly irregular’” and said he ignored their requests to visit early this year. One Chinese commentator said China would intensify its economic punishment of Korea if it did not change course. China has already been limiting trade, tourism, and the activities of Korean firms in China (Charles Clover, “China Turns Screw on Corporate South Korea over US Missile Shield,” Financial Times, January 5, 2017).

At the end of this month, the Barack Obama administration should release a report on the protection of the U.S. semiconductor industry that may call for stricter review standards by the Committee on Foreign Investment in the US (CFIUS). According to one story, “the report will give guidance to CFIUS on China’s strategic efforts to dominate the semiconductor market and could lead to new export controls and restrictions on joint-ventures with Chinese firms.” Intensified CFIUS scrutiny may be bad for future Chinese investments in the sector given CFIUS’s recent rejection of the sale of Aixtron to a Chinese investment group (Ian Talley, “Chinese Access to the U.S. Semiconductor Industry May Be Curbed,” Wall Street Journal, January 2, 2017, http://www.wsj.com/articles/chineseaccesstoussemiconductorindustrymaybec...)

Chinese outward foreign direct investment (OFDI) in the US hit new levels in 2016 that substantially boosted the amount of Chinese OFDI (COFDI) in the US to a reported total stock of US $109 billion. However, some analysts feel that uncertainty about the policies of the Trump administration and the preferences of his economic/trade team mean COFDI likely will not hit similar levels in 2017, overriding the incentives emerging from slower growth in China and an improving economic situation in the US. As noted above, some Chinese investors potentially may face tighter restrictions in some sectors, further dampening investment levels (Shawn Donnan, “Surge in Chinese Corporate Investment into the US,” Financial Times, January 1, 2017)

Sri Lanka said this week it will sign a lease, joint venture, and concessionary agreement with a Chinese firm to move the Hambantota Port project (in Sri Lanka’s south) forward and denied the country was selling massive amounts of land. Dampening the atmosphere, there was a large protest around the area where thousands of people will be evicted to prepare the area for the port development and industrial zone. Some argue China’s investments in Sri Lanka are not only driven by economics, but the goals of expanding its influence in South Asia and supporting its Maritime Silk Road Initiative plan (“Sri Lanka, Chinese Company to Go Ahead with Southern Port Deal,” China Daily, January 6, 2017, http://europe.chinadaily.com.cn/business/2017-01/06/content_27880877.htm; “Sri Lanka Protest over Chinese Investment Turns Ugly,” BBC News, January 7, 2017, http://www.bbc.com/news/world-asia-38541673)

Donald Trump tweeted late last week “‘Toyota Motor will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax.’” Toyota replied its new plant would not cost any US jobs while its President Akio Toyoda said Toyota would wait to see what policies Trump adopted before making further decisions, adding “maintaining a good relationship with Donald Trump is critical.” Tokyo touted Japanese firms’ contributions to the US, noting that it would “do its part to explain…the contribution of the country’s car industry to the American economy” (Peter Campbell, “Trump Turns His Ire on Toyota’s Mexico Car Plant Plans,” Financial Times, January 5, 2017; Adrienne Roberts, Chester Dawson and Chieko Tsuneoka, “Toyota President Strikes Friendly Tone on Trump,” Wall Street Journal, January 5, 2017, http://www.wsj.com/articles/toyota-president-strikes-friendly-tone-on-tr... Kana Inagaki, “Japan Rallies to Defend Toyota after Trump Warning,” Financial Times, January 6, 2017; “‘Trump Shock’ after Toyota Tweet Reverberates as Japan Community Reacts with Concern,” Japan Times, January 7, 2017, http://www.japantimes.co.jp/news/2017/01/07/business/trump-shock-toyota-...)

According to South Korea’s Ministry of Trade, Industry and Energy, although the country’s inward FDI (IFDI) only increased 1.9 percent from 2015 to 2016, it hit a new high of US $21.30 billion in 2016. The European Union (EU) was responsible for a noteworthy share of this growth, pouring US $7.4 billion into South Korea largely because of the China-Korea Free Trade Agreement which became effective in 2015. Investors did deals in Korea so as to easily enter China. Last year, China also put more money into Korea, investing US $2.05 billion. In contrast, IFDI from US and Japan decreased (Jung Suk-yee, “FDI in South Korea Hit All-time High Last Year,” Business Korea, January 4, 2017, http://www.businesskorea.co.kr/english/news/money/16928-mainly-eu-fdi-so...)

Even though the partnership between the Indonesian government and JP Morgan Chase Bank has been terminated as a result of the latter’s publication of a negative report on Indonesia, Indonesia’s Investment Coordinating Board (BKPM) remains optimistic about the country’s ability to attract greater volumes of FDI. In the aforementioned research note, which was published after Donald Trump’s presidential election victory, JP Morgan downgraded Indonesia from “overweight” to “underweight” position, which purportedly created negative sentiment toward Indonesia. However, BKPM chief Thomas Lembong contends FDI will still pour into Indonesia due to the government’s economic reform efforts (Grace D. Amianti, “Investment not Affected by JPMorgan issue: Top official,” Jakarta Post, January 5, 2017, http://www.thejakartapost.com/news/2017/01/05/investment-not-affected-by...)

In 2017, the Thai government plans to adopt stronger investment promotion measures including legal amendments and new regulations. All of this is designed to attract greater IFDI so as to realize the Thai Deputy Prime Minister 2016 IFDI target, which has been boosted from 450 to 550 billion baht. To achieve this goal, Thailand’s Board of Investment (BoI) will have to work harder and hold more overseas roadshows. Thailand’s Prime Minister noted the BoI needs to revise its IFDI promotion strategies and focus more on FDI matching Thailand’s 4.0 concept (Lamonphet Apisitniran,“Push for Foreign Investment,” Bangkok Post, December 30, 2016, http://www.bangkokpost.com/business/news/1171317/push-for-foreign-invest...)