MNCs in the News-2019-01-04

China

The China-United States (US) trade war has intensified foreign companies’ anxieties about investing in China, with 31.1 percent of those replying to an AmCham survey saying they were “considering delaying or cancelling investments in China as a result of the ongoing trade tensions.” China recently took measures to open up the economy and improve the business environment for foreign businesses, but many remain cautious given the potential for future trade war escalation (Chad Bray, “US trade war forces businesses to rethink Chinese investments amid fears dispute will drag on into new year,” South China Morning Post, December 30, 2018, https://www.scmp.com/business/china-business/article/2180014/us-trade-wa...)

The recent economic slowdown in China has affected many multinationals in China, rendering the prospects for 2019 relatively unpromising as illustrated by American tech giant Apple recently lowering its quarterly sales estimates. In addition to potentially slumping sales, US manufacturers in China are worried about the prospect of having to move their plants to other Asian countries if US President Donald Trump and Chinese President Xi Jinping cannot settle the bilateral trade conflict by the agreed March deadline (Gerry Shih, Jeanne Whalen and Danielle Paquette, “Apple’s stark warning may be ominous news for China,” Washington Post, January 3, 2019, https://www.washingtonpost.com/world/asia_pacific/apples-stark-warning-m...)

China’s National People’s Congress has started to review a draft law that would “prohibit local governments from forcing foreign businesses to transfer technology and illegally restrict their market access.” The law also will provide foreign investors with “equal treatment and market access” except in areas from which foreign investors are excluded by China’s “‘negative list.’” The draft represents a more aggressive effort to protect FDI than a draft released in 2015. Analysts view the draft as China “sending a strong signal” that it will protect FDI (Wu Gang, “Update: China Proposes Prohibiting Forced Technology Transfers,” Caixin, December 24, 2018, https://www.caixinglobal.com/2018-12-24/china-proposes-ending-forced-tec...)

A recent survey by the US-China Business Council revealed that “more than one in four businesses that responded…had been subject to increased scrutiny from Chinese regulators as a result of the increasing trade tensions.” This scrutiny included inspections that resulted in damaging delays of agricultural shipments, slower license approvals, and more severe regulatory hurdles. While this red tape is burdensome, China’s retaliatory tariffs have hit some harder (Chad Bray, Finbarr, and Megan Cassella, “How China is Finding New Ways to Use Red Tape to Tie up US Firms During the Trade War,” South China Morning Post, December 27, 2018, https://www.scmp.com/economy/china-economy/article/2179601/how-china-fin...)

China’s State-owned Assets Supervision and Administration Commission and the Chinese Academy of Social Science have produced a report that central State-owned enterprises (SOEs) are delivering benefits in line with the principles outlined in China’s Belt and Road Initiative. Based on 72 reports from 96 SOEs, the report concludes SOEs are doing well with respect to overseas corporate social responsibility activities by “creating increased, equal employment opportunities in several countries” (meaning they are creating job and promotion opportunities for local staff) and equal welfare opportunities (Yukun Liu, “Central SOEs creating employment opportunities in overseas markets,” China Daily, December 29, 2018, http://www.chinadaily.com.cn/a/201812/29/WS5c26cbeba310d912140519ad.html)

Japan

Attorneys representing former South Korean forced laborers for Nippon Steel & Sumitomo Metal during World War II have filed for the seizure of Nippon Steel assets in Korea after the Japanese firm failed to engage in talks over court-ordered compensation. The petition specifically targets 2.34 million shares Nippon Steel owns of a recycling joint venture with Korean steelmaker Posco. Nippon Steel responded the filing would be “‘extremely regrettable’” and that it will discuss the matter with the Japanese government and respond appropriately (Yosuku Onichi, “Wartime laborers file for asset seizure against Nippon Steel,” Nikkei Asian Review, January 2, 2019, https://asia.nikkei.com/Politics/International-Relations/Wartime-laborer...)

South Korea

Influenced by the US, South Korean government will tighten rules on the acquisition of Korean companies by foreign firms in order to prevent technology leaks. Specifically, Seoul will introduce an approval system and increase fines up to three times the actual damages suffered for those who leak core national technologies. The new system will allow the Korean government to ban mergers and acquisition deals if it determines there will be any adverse effect on national security and the national economy (Jung Suk-yee, “S. Korea to Toughen Rules on Foreign Firms’ Acquisition of Korea Companies,” Business Korea, January 4, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=27984)

As a follow-up measure to prevent any recurrence of technology leaks through equipment companies after Toptec Co. was accused of selling Samsung’s latest OLED display technology to China’s BOE Technology Group, Seoul will restrict the export of OLED production equipment. Seoul plans to designate OLED equipment as “national core technology” which would make government approval compulsory for its exportation. Seoul also plans to designate the chemical sector as a national core technology after a similar controversy with China’s Doublestar Co. (Kim Eun-jin, “S. Korea Gov’t Plans to Restrict Exports of OLED Equipment to China,” Business Korea, December 31, 2018, http://www.businesskorea.co.kr/news/articleView.html?idxno=27872)