MNCs in the News-2018-10-26

China

At a recent news conference, the Chinese Ministry of Commerce (MOFCOM) announced that to boost investment liberalization China will speed up the passage of its new foreign direct investment (FDI) law that will “combine the country’s three foreign investment laws to promote and protect foreign investment.” Furthermore, China will work to ensure its policies are “‘stable, fair, transparent, and predictable.’” The new law will facilitate trade and investment, easing market access for foreign companies. Aside from stimulating FDI, the new law aims at protecting foreign investors (“China to accelerate legislation of new foreign investment law,” Xinhua, October 25, 2018, http://www.xinhuanet.com/english/2018-10/25/c_137558359.htm)

The President of China’s Supreme People’s Court (SPC) said China will establish a new judicial body to deal with intellectual property (IP) rights disputes that “involve ‘highly technical expertise,’ particularly patents on inventions and innovations.” The SPC also is pondering a national appeals system for IP disputes. A driver of these developments, other than the quest for standardization, may be pressure from other countries like the United States (US) which are complaining about Chinese IP theft (Laura Zhou, “China Tags Top Court to Tackle Intellectual Property Rights as US Trade War Rages,” South China Morning Post, October 23, 2018, https://www.scmp.com/news/china/diplomacy/article/2169880/china-tags-top...)

Not so long ago, Bloomberg released a report alleging Chinese intelligence agents had successful implanted chips on hardware produced by Super Micro which eventually made it on to servers used by Amazon and Apple and even US government destinations. The miniature chips were significant because they permitted infiltration. Apple’s CEO Tim Cook has rejected the story and called for its retraction. More recently, Amazon and Super Micro Computer executives have echoed his call (Gareth Nicholson, “Amazon and Super Micro Back Tim Cook and Call for Bloomberg to Withdraw China Chip Hack Story,” South China Morning Post, October 23, 2018, https://www.scmp.com/tech/article/2169758/amazon-and-super-micro-back-ti...)

American asset sellers are turning to domestic buyers rather than the Chinese investors they once sought so as to avoid delays caused by long Committee on Foreign Investment in the United States reviews and the possibilities of the deals failing. Both have become genuine worries because the US government under President Donald Trump believes Chinese firms are using FDI to obtain control of critical technologies and infrastructure (Jody Xu Klein, “US deal makers back away from deep-pocketed Chinese investors as Washington brands Beijing a national security threat,” South China Moring Post, October 23, 2018, https://www.scmp.com/business/china-business/article/2169882/us-deal-mak...)

Following US President Trump’s imposition of a 10 percent tariff on USD $200 billion worth of imports from China in September, a number of multinational corporations (MNCs) are preparing to move their supply chains out of the country in the event that importing Chinese goods becomes too costly. MNCs executives also are evaluating what other actions to take in order to mitigate the long-term effects of tariffs caused by the escalating trade war between the U.S. and China (Matthew Boesler, “Companies Say They're Ready to Move Supply Chains from China,” Bloomberg, October 23, 2018, https://www.bloomberg.com/news/articles/2018-10-23/companies-say-they-re...)

Japan

The chairman of Japan’s Softbank, Masayoshi Son, cancelled his speech for the Future Investment Initiative after Saudi Arabia acknowledged the killing of journalist Jamal Khashoggi in Turkey. Son joined a group of top government officials and heads of leading corporations in skipping the Saudi-led international economic forum, a brainchild of Saudi Crown Prince Mohammad bin Salman. Nevertheless, given his 10-trillion-yen “Softbank Vision Fund” receives investment from a Saudi governmental-linked fund, it remains possible Son will attend the Riyadh conference (“Softbank chief Son skips speech at Riyadh forum after killing of Saudi writer in Turkey,” The Mainichi, October 24, 2018, https://mainichi.jp/english/articles/20181024/p2a/00m/0na/003000c)

Top Japanese building supplies maker Lixil Group’s $535 million sale of an Italian subsidiary, architectural firm Permasteelisa, to a Chinese company was blocked by a US government panel, demonstrating how trade war tensions increasingly pose a risk to international FDI transactions. CFIUS, an interagency body led by the US Treasury Department, can block acquisitions by foreign companies on the grounds of national security. However, Lixil Group's Italian unit, which focuses on exterior building products, appears to have little to do with national security (“US blocks Japan’s Lixil from selling building unit to China,” Nikkei Asian Review, October 23, 2018, https://asia.nikkei.com/Economy/Trade-War/US-blocks-Japan-s-Lixil-from-s...)

Korea

Korea announced it will provide more financial assistance and tax incentives to “boost sluggish facility investment, accelerate deregulation, stimulate innovation-led growth and create jobs.” Fears of the longer-term implications of the intensifying US-China trade war, US rate hikes, and rising oil prices seem to be behind the government’s new action plan. Beyond the aforementioned measures, the government will lower fuel taxes by 15 percent for six months as well as offer $13.13 billion in financial help to spur companies to increase investment (“Financial support, tailored measures eyed to boost investment, create more jobs,” Yonhap News Agency, October 24, 2018, http://english.yonhapnews.co.kr/news/2018/10/23/0200000000AEN20181023010...)

Korean builder Dealim Industrial just won a new ammonia plant project worth $892 million from Saudi Arabia. Daelim Industrial signed the construction contract with Saudi Arabia’s state-run mineral company Ma’aden. Daelim Industrial will implement the project on an engineering, procurement and construction (EPC) basis, taking on responsibility for all the activities from design to supply procurement to construction. Using natural gas as raw material, the new plant located in eastern Saudi Arabia will be able to produce 3,300 tons of ammonia per day (Michael Herh, “Saudi Arabia Places US$892 Mil. Plant Order from Daelim Industrial,” BusinessKorea, October 24, 2018, http://www.businesskorea.co.kr/news/articleView.html?idxno=25950)

*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.