MNCs in the News-2018-12-14

China

According to China’s Ministry of Commerce (MOFCOM), China’s inward foreign direct investment (FDI) flows were “basically stable” for the first 11 months of 2018, though inward FDI (IFDI) in November dropped 27.6 percent year over year (YOY). In dollar terms, IFDI increased 1.1 percent YOY with almost 55,000 new foreign-funded firms created during the period. High-tech manufacturing IFDI showed growth of 30.2 percent for the first 11 months YOY while investment from the United Kingdom (UK) jumped substantially YOY, registering a 198.9 percent growth rate (“China Sees Stable FDI Inflows in first 11 Months,” China Daily, December 13, 2018, http://www.chinadaily.com.cn/a/201812/13/WS5c1230daa310eff303290e2b.html)

A recent directive indicates Beijing is no longer requiring local governments to implement the “Made in China 2025 strategy.” Two years before Beijing’s special fund for Made in China 2025 “clearly stated local government should offer financing support to project.” Moreover, in 2017 and 2018, Beijing formally lauded local governments that strongly supported the policy. Some view Beijing’s move as an effort to appease the United States (US) which has criticized the policy (Orange Wang, “Beijing No Longer Requires Local Governments to Work on ‘Made in China 2025,’ But High-Tech Ambitions Remain,” South China Morning Post, December 13, 2018, https://www.scmp.com/economy/china-economy/article/2177856/beijing-no-lo...)

The European Union Ambassador to China stated that China needs to stop forcing European companies to transfer technology and know-how in order to obtain access to the Chinese market, though he had no problem with companies sharing their technology voluntarily. Beijing affirmed it will increase the protection of intellectual property (IP) rights, but experts remains skeptical about these claims. Chapuis is hopeful that China will enforce IPR regulations since, in his view, reform is necessary for China’s future development (Huileng Tan, “'Forced tech transfer' has to stop or be regulated, says EU ambassador to China,” CNBC, December 12, 2018, https://www.cnbc.com/2018/12/12/forced-tech-transfers-must-stop-or-be-re...)

As the trade war between Washington and Beijing still seems far from ending, American multinational Apple is considering moving its production out of China if the United States (US) increases tariffs on smartphones and laptops from the current 10 to 25 percent. Apple’s supply chain spans hundreds of companies in China, which would suffer great harm if the US tech giant moved its output out of the Asian country. Apple, however, is said to be in no rush to take a decision (Debby Wu, “Apple suppliers are considering moving iPhone output if tariffs hit 25%,” Bloomberg, December 12, 2018, https://www.bloomberg.com/news/articles/2018-12-12/apple-is-said-to-mull...)

This year Chinese oil companies signed 14 overseas oil and gas acquisition deals worth $2.36 billion. If there are no other agreements before the end of December, 2018 will rank as the year with the lowest number of deals and the smallest by value in the last decade. Volatile oil prices and geopolitical tensions have hindered Chinese outward investment in the sector, but China’s state-owned enterprises (SOEs) remain resolute in their plans (Eric Ng, “Chinese oil firm hunts for overseas assets even as deal making falls to 10-year low amid stricter scrutiny,” South China Morning Post, December 10, 2018, https://www.scmp.com/business/china-business/article/2177298/chinese-oil...)

According to reports, Huawei has agreed to accept various UK’s National Cyber Security Centre’s (NCSC) technical requirements “to address risks in its equipment and software.” The NCSC said “‘we have a regular dialogue with Huawei about the criteria expected of their products.’” Huawei has been facing challenges in a number of places including Australia and New Zealand as well as with a number of telecommunications firms even though it is not certain there are backdoors or malicious intervention with Huawei telecommunications (“Huawei Agrees to UK Security Steps to Avoid 5G Ban: Report,” South China Morning Post, December 7, 2018, https://www.scmp.com/tech/gear/article/2176968/huawei-agrees-uk-security...)

Japan

Following a Japanese government decision that excluded China’s Huawei Technologies Co. and ZTE Corp. from public procurement, Japan’s three major mobile phone carriers Softbank Corp., NTT Docomo Inc., and KDDI Corp. plan to stop using these companies’ products in their current mobile base stations as well as their next generation 5G communications networks. Tokyo’s decision reflects its concerns over security issues that have promoted some countries including the US, Japan’s close ally, to ban the two Chinese companies from supplying products for their telecommunications infrastructure (“Japan decides to exclude Huawei, ZTE from gov’t procurement,” Kyodo News, December 10, 2018, https://english.kyodonews.net/news/2018/12/3ca01a054307-update1-japan-de...)

To “promote healthy competition and ensure that consumers and small businesses are not harmed by excessive concentration of information,” the Japanese government plans to set up a watchdog for foreign companies that work with big data. An expert panel’s report stresses the need to take a hard line against not only American tech giants like Google and Amazon, but also against Chinese companies like Alibaba. Any increased oversight also aims to restrict alleged data collection by Chinese tech companies at Beijing's bidding (Takashi Tsuji, “Japan to step up oversight of foreign tech giants,” Nikkei Asian Review, December 12, 2018, https://asia.nikkei.com/Economy/Japan-to-step-up-oversight-of-foreign-te...)

South Korea

A feasibility report submitted to parliament by the state-run Korea Electric Power Corp. estimated that the Northeast Asia super grid, which would connect South Korea with China, Russia and Japan, would cost around USD $6.2 billion to build. The grid is expected to provide stable power supply to complement the intermittent energy grid system under the energy transformation policy. However, the plan faces many challenges including the heavy international sanctions on Pyongyang, which prevents the route from including North Korea, and hinders investment (“’Northeast Asia super grid’ costs at least $6.2 billion: KEPCO,” The Korea Times, December 11, 2018, http://www.koreatimes.co.kr/www/tech/2018/12/325_260204.html)

Korea will impose a value-added tax on a wider range of services provided by global technology giants like Google, Amazon and Facebook starting in July 2019. In line with global efforts to push for higher digital taxes on big tech companies, Korea’s move aims to subject major digital businesses in Korea to the same tax policies applied to Korean firms. However, the bill is being labeled as a mere “‘symbolic gesture’” due to its exclusion of B2B sales (Sohn Ji-young, “Korea to impose expanded digital VAT on global tech giants from July 2019,” The Korea Herald, December 12, 2018, http://www.koreaherald.com/view.php?ud=20181212000598)