MNCs in the News-2018-05-25

China

China’s State Council recently issued a circular “asking local authorities to adopt 27 practices that are now applied in [China’s] current 11 Free Trade Zones (FTZs).” These practices include “expanding the transport area of international ships, offering online registration for general taxpayers, and facilitating inspection and quarantine for empty cargo containers shipped by sea.” The State Council further “ordered three practices to be replicated in particular sectors like regulation innovation for customs.” Per the State Council, more than 150 “practices piloted in the FTZs have been replicated” elsewhere (“China to Replicate FTZ Practices Nationwide,” China Daily, May 23, 2018, http://www.chinadaily.com.cn/a/201805/23/WS5b057a55a3103f6866eea2f6.html)

It was recently revealed Shanghai’s Administration for Industry and Commerce had fined Muji more than USD $31,000 for listing Taiwan as a “country of origin” on some of its packaging for goods brought into mainland China. Reportedly, Muji “made corrections and changed the packaging.” This is the second time in a relatively recent period Muji has drawn fire for its treatment of Taiwan. Previously the issue related to a Muji catalog which did not shown Taiwan or the Diaoyu/Senkaku Islands as belonging to China (“China Fines Retailer Muji for Listing Taiwan as a Country,” BBC News, May 24, 2018, http://www.bbc.com/news/world-asia-china-44234270)

Speaking to reporters alongside Chinese Premier Li Keqiang, German Chancellor Angela Merkel, who was in Beijing for a Germany-China Business Forum, stated “China risks facing investment ‘constraints’ [“‘too many constraints..which wouldn’t be good’”] in Europe unless it further opens its home market.” Moreover, even though Merkel pledged to work with China to defend global institutions, expressed a commitment to “‘free and fair trade,’” and expressed many concerns about American policies, she shared with “the US concerns about market access to China and Beijing’s investment abroad” (“Merkel Tells China it Risks European Backlash over Investments,” Bloomberg News, May 27, 2018, https://www.bloomberg.com/news/articles/2018-05-24/merkel-china-s-li-ple...)

The Governor of Pakistan’s Central Bank Tariq Bajwa revealed his country had borrowed about $1 billion from Chinese banks in April to avoid a foreign currency crisis. A foreign currency crisis might require Pakistan to take loans from the International Monetary Fund (IMF). Despite the risks, Chinese banks were willing to lend the money because they did not want details about their loans for the China-Pakistan Economic Corridor (CPEC) made public, which would be necessary if Pakistan needed an IMF bailout (Farhan Bokhari and Kiran Stacey, “Pakistan Turns to China to Avoid Foreign Currency Crisis,” Financial Times, May 23, 2018)

Japan

Japan’s Mitsui Sumitomo Insurance Co. announced that it will buy a 37.5 percent stake in China state-backed Bank of Communications Co.’s subsidiary BoCommLife Insurance Co. from a unit of Commonwealth Bank of Australia for $675 million. While the acquisition is pending regulatory approval, it comes as a result of the People’s Bank of China’s announcement in April that China will raise foreign ownership limits in life insurance companies to 51 percent this year and get rid of all remaining restriction within three years (“Mitsui Sumitomo to buy 37.5% stake in Chinese life insurer,” The Japan Times, May 23, 2018, https://www.japantimes.co.jp/news/2018/05/23/business/corporate-business...)

Prompted by the French government, which owns 15.01 percent of Renault and has indicated its desire for greater influence over Japanese carmaker Nissan, the two companies are starting to review their affiliation, including the capital relationship. In addition, Renault, Nissan Motor and Mitsubishi Motors will jointly develop a shared platform for electric vehicles by 2020, which will boost the Franco-Japanese alliance’s competitiveness by cutting costs. By working together, each member of the alliance is expected to reduce development costs by 20 to 30 percent (“Nissan’s triple alliance to share platform for midsize electrics,” Nikkei Asian Review, May 25, 2018, https://asia.nikkei.com/Business/Companies/Nissan-s-triple-alliance-to-s...)

South Korea

United States (US) President Donald Trump’s cancellation of the US-North Korea summit dashed hopes of lifting international sanctions against North Korea and jumpstarting inter-Korean projects. South Korea’s Hyundai Group recently formed a task force focused on resuming operations at a joint factory park in North Korea’s city of Kaesong and restarting a joint tour to Mount Kumgang. The task force, representing over 120 South Korean firms invested in Kaesong, hoped the summit would rekindle business operations suspended after the North Korea’s 2016 nuclear tests (“S. Korean firms hold out hope for inter-Korean projects,” Yonhap News Agency, May 25, 2018, http://english.yonhapnews.co.kr/business/2018/05/25/0501000000AEN2018052...)

Following the China Association of Automobile Manufacturers’ publication of a whitelist highlighting the advantages of South Korean batteries, hope has been rekindled among South Korean electric battery firms. More positive steps were taken after Seoul’s Trade Minister met with Beijing’s Minister of Industry, Information, and Technology where he pushed for a level playing field for Korean firms. South Korea’s LG Chem and Samsung SDI reported they used only 10 percent of their China-based plants last year while BESK Technology totally ceased producing batteries (Baek Byung-yeul, “China moving to go easy on Korean batteries,” The Korea Times, May 24, 2018, http://www.koreatimes.co.kr/www/tech/2018/05/419_249542.html)

Malaysia

Chinese investors pledge to continue investing in Malaysia as the government transition was done peacefully, encouraging more China investors “to look for more conducive business environment.” The Malaysia-China Chamber of Commerce president Tan Yew Sing cited Malaysia’s anti-corruption initiative and its multiculturalism as part of the country’s investment appeal. However, Tan also stressed the need to review Chinese investment in Malaysia like the East Coast Rail Link and China’s property investments in order to ensure benefits are shared equally between the two countries (Ayisy Yusof, “Chinese investors pledge to continue investing in Malaysia,” New Strait Times, May 24, 2018, https://www.nst.com.my/business/2018/05/372913/chinese-investors-pledge-...)

Foreign investors are increasingly concerned about Malaysia’s fiscal health as the new Finance Minister recently announced that “the national debt is far higher than figures published by the previous government, topping USD $250 billion.” Coupled with US interest rate hikes and Prime Minister Mahathir Mohamad’s campaign promise to scrap the goods and services tax and revive fuel subsidies, the net outflow of foreign funds from the Malaysian equity market reached approximately USD $623 million—marking the largest sell-off in nearly five years (Kentaro Iwamoto “Malaysia’s hidden debt and ‘insolvent’ state fund raise alarm,” Nikkei Asian Review, May 24, 2018, https://asia.nikkei.com/Politics/Malaysia-in-transition/Malaysia-s-hidde...)

*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.