MNCs in the News-2018-06-22

China

A top official with China’s Ministry of Commerce (MOFCOM) stated at a recent news conference that China planned to “release and implement two updated foreign investment negative lists…one for nationwide implementation and one for pilot free trade zones.” Not only would the lists feature the opening of more sectors than anticipated but “provincial level governments will be given the right to set up or alter the businesses of foreign invested enterprises with total investment of $1 billion or less which are mentioned in the upcoming lists” (Jing Shuiyu, “Investment Negative Lists on the Way,” China Daily, June 20, 2018, http://www.chinadaily.com.cn/a/201806/20/WS5b29a46fa3103349141dd311.html)

In response to Australian government comments about it and possible ban on it bidding in a 5G mobile auction, Huawei issued a public letter that “denied allegations it was under the control of the Chinese government.” Moreover, it emphasized it offered to “build an ‘evaluation and testing’ centre in which its 5G equipment could be evaluated by the Australian government.” In 2012, Huawei was not allowed to supply equipment for Australia’ National Broadband network and in May it was prevented from involvement in a cable linking Australia with the Solomon Islands (“Huawei Reject Australia,” BBC News, June 18, 2018, https://www.bbc.com/news/technology-44519495)

This past weekend, the British government asked its Competition and Markets Authority to investigate a planned purchase of Northern Aerospace, a “minor airplane parts maker,” by Gardner Aerospace, a larger parts maker, owned by Shaanxi Ligeance Mineral Resources, a Chinese conglomerate. This may be a sign of a new stance on the part of the United Kingdom (UK). Indeed, UK officials “appear worried that even a small supplier to Airbus and Boeing” has important salience for national security (Michael J. de La Merced, “Britain Holds Up China Aerospace Deal over National Security,” The New York Times, June 20, 2018, https://www.nytimes.com/2018/06/20/business/dealbook/britain-china-aeros...)

Chinese investment in Indian technology start-ups in areas like accommodation, digital payments, and e-commerce, is increasing. One of the largest was Alibaba’s USD $300 million investment in Indian online grocer BigBasket in February. The warming political environment between the two countries is expected to boost investing in the future. An official responsible for China at the Federation of Indian Chambers of Commerce and Industry said “‘we warmly welcome Chinese investment in Indian start-ups,’” noting India has fast growth and a large population (Ma Jingjing, “Chinese Firms to Replicate Success in India amid Warming Ties,” Global Times, June 21, 2018, http://www.globaltimes.cn/content/1107910.shtml)

Japan

To counter criticism from American President Donald Trump who said he wants Japan to open its market, the Japan Automobile Manufacturers Association recently highlighted Japanese carmakers’ contribution to the United States (US) in terms of FDI and employment. The Association said total FDI amounted to $48.3 billion in 2017, up from $6.2 billion in 1990, and that Japanese firms directly employed more than 97,000 employees. The first round of a new US-Japan official bilateral dialogue on trade and investment starts next month (“Japanese auto industry highlights its U.S. investments as Trump trade fears grow,” Japan Times, June 20, 2018, https://www.japantimes.co.jp/news/2018/06/20/business/japanese-auto-indu...)

Japan’s financial regulator told Japanese banks to report any suspicious money transfers involving ten Japan-North Korea joint ventures. After the United Nations Security Council’s passage last year of a resolution to ban new joint ventures involving individuals or groups from North Korea and investments in existing enterprises, the Financial Services Agency is concerned Japan is failing to stop money laundering and other illicit finance. In 2019, the Financial Action Task Force will conduct a peer review of Japan, which could result in sanctions (“Japan banks to report suspicious money transfers with N. Korea,” The Asahi Shinbun, June 22, 2018, http://www.asahi.com/ajw/articles/AJ201806220023.html)

South Korea

LG Display, a South Korean producer of organic light-emitting diode (OLED) screens, will soon receive approval from the Chinese government to launch its $6.7 billion OLED plant in Guangzhou, China. LG is working with Chinese officials to reach a deal allowing the OLED facility to gain Beijing’s approval and that would assist local Chinese competitors through partnerships. Chinese authorities did not require LG to reveal its advanced technology when making the investment which has led to “procedural issues” according to LG’s spokesman (Kim Yoo-chul, “China expected to approve LGD’s $6.7 bil. OLED plant,” The Korea Times, June 19, 2018, https://www.koreatimes.co.kr/www/tech/2018/06/133_250916.html)

South Korean construction company SK Engineering & Construction announced a $2 billion investment plan for an environmentally friendly coal-fired power plants in the Philippines. The firm recently signed a letter of intent with Manila for the project, following up on a proposal submitted to Philippines’ President Rodrigo Duterte during his state visit to Seoul. Manila will recognize the South Korean builder for using “ultra-supercritical technology” and exempt it from corporate income tax for up to six years (Jung Min-hee, “SK E&C Inks LOI with the Philippines on Coal-fired Power Plants,” BusinessKorea, June 18, 2018, http://www.businesskorea.co.kr/news/articleView.html)

Malaysia

Prime Minister Mahathir Mohamad announced that Malaysia could extend new tax incentives for foreign investment in areas like technology and research and development if investing companies committed to creating better-paid jobs for Malaysian skilled workers. Mahathir stressed that his government would welcome investment from China or any other country by extending tax breaks beyond 10 years. He also stressed his government’s return to the Look East policy to strengthen ties with East Asia and expressed his confidence especially in Japanese investors (“RPT-Malaysia could extend tax breaks for key foreign investors-Mahathir,” Reuters, June 20, 2018, https://www.reuters.com/article/malaysia-politics-mahathir-investment/rp...)

Malaysia will seek to recoup $4.5 billion of funding that was potentially lost through 1Malaysia Development Berhad (1MDB) by potentially pursing legal action against Goldman Sachs over the large $593 million commission it made on the transaction. While Goldman Sachs has denied relevance between the transaction fees it earned in its dealings with 1MDB and the Malaysian government’s investigation into corruption and embezzlement, Malaysia’s Finance Minister already announced last week that he would “seek restitution from the bank” (“Mahathir seeks to recover USD $4.5 billion 1MDB funds, Goldman fees,” The Star, June 22, 2018, https://www.thestar.com.my/business/business-news/2018/06/22/mahathir-se...)

*The information used herein is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content in this section does not necessarily represent the official view of the Wong MNC Center, its Board of Directors, or its Advisory Board.