MNCs in the News-2018-08-24

China

Previously China could rely on the United States (US) business community in China to press its agenda in Washington. However, China’s US business “friends” are no longer as willing to speak on behalf of Beijing, in this instance regarding the US-China trade war. The reason seems to be that they do not see China undertaking the kinds of reforms they desire and feel Washington’s pressure actually may help them achieve their goals (Wendy Wu, “US Business ‘Friends’ Staying Out of Trade War as They Try to Push China to Act, Sources Say,” South China Morning Post, August 18, 2018, https://www.scmp.com/news/china/diplomacy-defence/article/2160264/us-bus...)

Beijing’s decision to allow foreign companies to take up to 51 percent takes in securities trading and financial management companies in China has led to a flood of companies applying to do so because of the full management control it would provide. However, the US-China trade war may impede the plans of US firms because Beijing may delay or block increased foreign stakes as a way to retaliate against Washington’s tariffs against China. Some European companies hope they may profit from US-China tensions (Martin Arnold and Gabriel Wildau, “Trade War Imperils Foreign Banks’ China Plans,” Financial Times, August 19, 2018)

Rising costs, tighter regulations, limited access to labor, and China’s new sectoral priorities have put pressure on foreign firms at the lower-end of the value added chain in China. The US-China trade war has only intensified the strain. In response, some American companies are moving elsewhere to Southeast Asian countries like Cambodia, Malaysia, and Thailand. Companies are revisiting their sourcing strategies, too. However, China’s infrastructure, supply chain networks, engineering talent, scale, and large market make it difficult for many firms to leave (Samantha Vadas, “Trade War Puts New Strains on America Inc’s Factories in China,” Reuters, August 20, 2018, https://www.reuters.com/article/us-usa-trade-china-workshop-insight/trad...)

China’s Ministry of Commerce (MOFCOM) reported that China’s non-financial outward foreign direct investment (FDI) rose 14.1 percent in dollar terms for the first seven months of 2018 year-over-year (YOY). This increase entailed outward FDI (OFDI) of USD $65.27 billion which mainly went to “leasing and business services, retail and wholesale, manufacturing, and mining.” “No new projects were reported in sectors such as property development, sports, and entertainment.” As far as Belt and Road FDI is concerned it rose by 11.8 percent YOY to $8.55 billion (“China’s Outbound Investment Sees Steady Growth in Jan-July Period,” China Daily, August 18, 2018, http://usa.chinadaily.com.cn/a/201808/18/WS5b77b8aba310add14f3867e3.html)

Japan

Japanese automaker Nissan Motor will increase its dependence on Chinese market by spending approximately $904 million to build a new assembly plant in Hebei and expand production lines at two existing plants. This is because the US market shows signs of shrinking and the European economic outlook remains uncertain ahead of Brexit. Nissan, in alliance with Renault and Mitsubishi, operates in China through a joint venture (JV) with state-owned enterprise (SOE) Dongfeng Motor Group. Rivals like Honda also plan to expand their China production (“Nissan deepens China dependence with 30% boost in production,” Nikkei Asian Review, August 20, 2018, https://asia.nikkei.com/Business/Companies/Nissan-deepens-China-dependen...)

Japan’s Daiwa Securities Group Inc. plans to set up a JV brokerage in China with a local firm following Beijing’s decision to allow foreign financial institutions to hold majority stakes in security firms in China. Previously, Daiwa faced difficulty in running a JV brokerage, that it was obligated to have, with a Chinese firm in Shanghai due to foreign ownership limits. Attracted by the size of the Chinese economy and Beijing’s ownership stake reform, Daiwa will return to China by the end of 2018 (“Daiwa Securities plans return to China via joint brokerage,” The Japan Times, August 24, 2018, https://www.japantimes.co.jp/news/2018/08/24/business/corporate-business...)

South Korea

South Korea began investigating foreign companies over their customer data security pratices. According to Korea’s Ministry of Interior and Safety, the primary target is 20 Korean offices of international companies offering products or services “closely related to people’s daily life.” The Ministry suspects customers’ data might be poorly managed and foreign companies’ practices might breach the country’s Private Information Act. The investigation will continue until the end of August and companies caught breaking the law will face administrative penalties or punitive fines (Park Si-soo, “South Korea to scrutinize foreign companies over data security,” The Korea Times, August 19, 2018, http://www.koreatimes.co.kr/www/tech/2018/08/133_254085.html)

South Korea Innovation has started construction of an electric vehicle battery factory with two JVs, automaker BAIC, an SOE, and Beijing Electronics Holding, at the Changzhou Jintan Economic Development Zone in Jiangsu. The electric vehicle battery factory will be the first to be jointly operated by a Chinese automaker and a foreign battery maker. The Korean firm has invested about $145 million into the factory with an aim to “achieve mutual growth with effective cooperation with China” (Kim Bo-gyung, “SK Innovation constructs EV battery plant with Chinese partners,” The Korea Herald, August 24, 2018, http://www.koreaherald.com/view.php?ud=20180824000469)