MNCs in the News-2018-07-13

China

China’s Ministry of Commerce (MOFCOM) reported inward foreign direct investment (FDI) into the mainland rose 1.1 percent year-over-year (YOY) over the first six months of 2018. June inward FDI (IFDI) flows rose 0.3 percent YOY. Highlights were a dramatic increase in new overseas-funded companies, strength in IFDI flowing into high-tech manufacturing and the instrument and apparatus sector, and strong inflows into China’s pilot free trade zones (FTZs). Chinese media implied the positive data on IFDI related to Chinese reform measures such as a revised negative list (“FDI into Chinese Mainland Grows Steadily in H1,” China Daily, July 12, 2018, http://usa.chinadaily.com.cn/a/201807/12/WS5b4737bea310796df4df61aa.html)

China’s opening to Germany’s BASF, which was granted permission to set up the first wholly-owned petrochemicals project in China, and approvals of, respectively, United-States (US) firm Tesla and LG Korea’s LG Display setting up a wholly-owned plants in China were seen as efforts by China to counter American government and business pressures as well as demonstrate its openness to/fair treatment of IFDI at a time of slowing FDI. Others saw it as validation of their charges of pervasive Chinese FDI barriers (Michael Martina, “As Trump Amps Up Trade War, China Plays Nice with Foreign Investors,” Reuters, July 12, 2018, https://www.reuters.com/article/us-usa-trade-china-investment-analysis/a...)

Following a meeting with Chinese Prime Minister Li Keqiang, German Chancellor Angela Merkel “praised China for opening up to foreign investment.” Commenting on an accord between China and Germany’s BASF that gave the firm a 100 percent owned factory in Guangdong (a first), Merkel opined “‘this shows that china’s market opening in these areas isn’t just talk, but action.’” Merkel, though, emphasized Germany wanted a level playing field in China and still reserved the right to block Chinese investment inflows (Patrick Donahue and Birgit Jennen, “Merkel Lauds China’s Market Opening in Trade Rebuff to Trump,” Bloomberg, July 9, 2018, https://www.bloomberg.com/news/articles/2018-07-09/merkel-lauds-china-s-...)

Shaanxi Ligeance Mineral Resources Co., a Chinese firm, was working through its British unit Gardner Aerospace to buy British airplane parts maker Northern Aerospace, which has some United Kingdom (UK) defense contracts. However, the UK Secretary of State for Business, Energy, and Industrial Strategy called the Competitions & Market Authority to review the deal on national security ground. The CMA did not give approval before the deadline for closing the deal and it collapsed. In recent times, the UK has become more sensitive about Chinese IFDI (“Quick Take: Chinese Purchase of British Airplane-Parts Maker Crashes,” Caixin, July 11, 2018, https://www.caixinglobal.com/2018-07-11/quick-take-chinese-purchase-of-b...)

Japan

Japanese regulators said Apple may have breached antitrust rules. Specifically, it allegedly denied consumers a fair choice by forcing mobile service providers to sell its iPhones at a low price with high monthly fees, giving Apple an advantage over rivals like Samsung. The Fair Trade Commission began investigating Apple’s sales practices in 2016 but did not punish Apple because it agreed to revise its contracts with carriers to allow carriers to offer customers the option of buying iPhones at higher prices but lower monthly charges (“Japan watchdog: Apple may have breached antitrust rules with iPhone,” Reuters, July 11, 2018, https://www.reuters.com/article/us-apple-japan-antitrust/japan-watchdog-...)

A recent US Commerce Department report revealed that in 2017 Japan ranked third in terms of FDI in the US with a value of USD $34 billion, moving up from eight rank the previous year. However, overall Japanese FDI in the US in 2017 dropped 31.6 percent and is expected to decrease further due to the US government plans to toughen regulations aiming to prevent China from “acquiring cutting-edge technologies” held by US entities (“Japan moves up to 3rd in direct U.S. investment,” The Japan News, July 12, 2018, http://www.the-japan-news.com/news/article/0004579230)

Taisho Pharmaceutical Holdings is moving to raise its stake in top Vietnamese drugmaker DHG Pharmaceutical to 32 percent. The deal followed Vietnamese authorities’ approval of the removal of a 49 percent foreign ownership stake at DHG. To support domestic production and manufacturing and consequently reduce dependence on imports, Vietnamese law forbids foreign investors from retailing or distributing medicine in the domestic market. In order to remove its foreign ownership limit, DHG had to give up distribution activities with foreign partners (“Top Vietnamese drugmaker DHG draws fresh Japanese investment,” Nikkei Asian Review, July 10, 2018, https://asia.nikkei.com/Business/Business-Deals/Top-Vietnamese-drugmaker...

South Korea

LG Display has received approval from the Chinese government to build an organic light-emitting diode (OLED) display production facility in Guangzhou. The Guangzhou plant will be a joint venture with 70 percent owned by LG Display and 30 percent owned by the Guangzhou Development District. With a combined investment of about USD $4.48 billion, the new facility will have a production capacity of 130,000 sheets a month by the latter half of 2019. The Guangzhou facility will help accelerate LG Display’s transition to OLED displays (Baek Byung-yeul, “China approves LG Display’s OLED plant,” The Korean Times, July 10, 2018, https://www.koreatimes.co.kr/www/common/printpreview.asp?categoryCode=13...)

South Korea and Singapore signed two agreements aimed at strengthening bilateral investments and trade by promoting collaboration between companies. They agreed to establish “landing pads” in both countries to provide small and medium-sized enterprises and startups from the other country the infrastructure and network to establish themselves. The other agreement aims to boost market access and investment opportunities for companies in the two countries focusing on smart city, infrastructure development, lifestyle and consumer, e-commerce and liquefied natural gas sectors (Yunita Ong, “Singapore, South Korea ink pacts to help SMEs, start-ups collaborate and internationalise,” The Strait Times, July 12, 2018, https://www.straitstimes.com/business/companies-markets/singapore-south-...)