MNCs in the News-2018-11-16

China

China’s Ministry of Commerce (MOFCOM) reported USD $9.7 billion in foreign direct investment (FDI) inflows in October, a 7.3 percent rise compared to the previous year. The sharpest rise in investments came from the United Kingdom, South Korea, and Japan, while FDI from the United States (US) did not increase significantly due to trade tensions. This confirms an improvement in China’s business environment, though some investors remain doubtful about its pledges to boost market openness (Frank Tang, “Foreign investment in China stable in October, but US investment weak due to trade war,” South China Morning Post, November 15, 2018, https://www.scmp.com/economy/china-economy/article/2173459/foreign-inves...)

MOFCOM’s head stated in a People’s Daily interview that his ministry “will support private companies in their efforts to expand overseas.” He added the ministry would guide them “‘abroad in an orderly manner, to take part in the Belt and Road Initiative’” and that Beijing would try to direct OFDI to China-developed ““economic and trade development zones” in foreign countries.” MOFCOM hopes major Chinese companies such as Geely, Huawei, and Sany become leading global brands (Zhou Xin, “China Pledges More Support for Private Firms Investing Abroad, 12 Months after Clipping their Wings,” South China Morning Post, November 15, 2018, https://www.scmp.com/economy/china-economy/article/2173469/china-pledges...)

German officials are pressing their government to prevent Chinese firms from participating in the country's 5G spectrum auction that will occur in early 2019. The push comes in the wake of decisions by Australia and the US to ban Chinese firms from involvement in their next generation mobile networks. German officials are concerned about various national security and cybersecurity risks, but blocking competitive Chinese tech giants like Huawei and ZTE is not easy and it could have negative consequences for Germany’s relations with China (Noah Barkin, “Exclusive: German officials sound China alarm as 5G auctions loom,” Reuters, November 13, 2018,https://uk.reuters.com/article/uk-germany-china-5g-exclusive/exclusive-g...)

The Washington-based American Enterprise Institute (AEI) released a report showing the number of Chinese private companies investing in China’s Belt and Road Initiative (BRI) in the first half of 2018 decreased by 12 percent compared to the year before. Li Wei, a professor at Peking University, has cautioned Beijing, under trade pressure from the US, “should make fuller assessments of each kind of risk, to ensure that the BRI won’t become a diplomatic and economic burden” on China (Laura Zhou, “Chinese private investment in belt and road projects may be losing steam,” South China Morning Post, November 15, 2018, https://www.scmp.com/news/china/diplomacy/article/2173467/chinese-privat...)

Japan

Tokyo assured Japanese businesses in South Korea of its opposition to a recent Seoul court ruling requiring compensation to victims of forced labor during World War II. According to a minister at the Japanese Embassy, “‘the Japanese government’s consistent position, as stated in various opportunities, is that (the matter) was completely and finally settled in the 1965 accord.’” The court’s ruling that Nippon Steel and Sumitomo Metal Corp. were obligated to pay reparations opened Japanese businesses to the possibility of similar suits by other Koreans (“Japan’s embassy meets businesses over WWII forced labor ruling,” Yonhap News, November 15, 2018, http://english.yonhapnews.co.kr/news/2018/11/15/0200000000AEN20181115006...)

Japan won consent from China as well as other member countries of the Asia-Pacific Economic Cooperation (APEC) forum for the adoption of new guidelines relating to the quality of infrastructure development and investment. In contrast to China’s BRI which has burdened countries like Sri Lanka and Pakistan with massive debts, the new guidelines call for “openness, transparency, cost-effectiveness and fiscal soundness of recipients as international standards for quality infrastructure financing.” On a separate note, APEC ministers also agreed to strengthen the role of the World Trade Organization (“APEC adopts guidelines on infrastructure investment,” The Japan Times, November 15, 2018, https://www.japantimes.co.jp/news/2018/11/15/national/politics-diplomacy...)

South Korea

Korean firms SK Energy, GS Caltex, and Hanjin Transportation will plead guilty to conspiring to rig fuel prices at US military bases in Korea and as a result pay more than $200 million in criminal and civil penalties. According to Makan Delrahim, the head of the US Department of Justice’s Antitrust Division, “’as a result of the anti-competitive agreement, the US Department of Defense paid substantially more for fuel supply services than it would have absent the collusion’” (Jung Min-ho, “Korean companies to plead guilty to rigging fuel prices at US military bases,” The Korea Times, November 15, 2018, http://www.koreatimes.co.kr/www/tech/2018/11/693_258726.html)

South Korean lawmakers have proposed a bill requiring global information and communication technology (ICT) companies such as Google, Facebook and Amazon to pay value-added tax on a broader range of their earnings. The bill aims to ensure that global ICT giants are held to the same tax policies affecting Korean firms and establish a “’level playing ground.’” Bill advocates feel that this bill “’can become the starting point for a more comprehensive tax system governing digital companies’” (Sohn Ji-young, “Lawmakers propose bill on taxing Google, Amazon on ad, cloud service earnings in Korea,” The Korea Herald, November 11, 2018, http://www.koreaherald.com/view.php?ud=20181111000170)