MNCs in the News-2019-02-15

China

In January, China’s inward foreign direct investment (FDI) saw 4.8 percent growth versus the same period in 2018. According to data recently released by China’s Ministry of Commerce (MOFCOM), in the first month of the year, China attracted a total of 84.18 billion yuan (USD $12.41 billion) in inward FDI (IFDI). IFDI notably increased in the high-tech service industry, which in January received 15.77 billion yuan, almost double the amount compared to the same period in the prior year (Ren Xiaojin and Jing Shuiyu, “China’s FDI up 4.8% in January,” China Daily, February 14, 2019, http://www.chinadaily.com.cn/a/201902/14/WS5c652188a3106c65c34e95c4.html)

Despite the trade dispute between the United States (US) and China, in January, China’s IFDI from the US increased 126.8 percent compared to the same period in 2018. Frances Cheung, head of macro strategy Asia at Westpac, cautioned we should wait until first quarter IFDI data is released in the spring for a clearer picture of underlying trends, as monthly figures can be volatile because of “one-off, big ticket items” (Karen Yeung, “US investment in China more than doubles in January despite trade-war, high-tech industry grows significantly,” South China Morning Post, February 14, 2019, https://www.scmp.com/economy/china-economy/article/2186185/us-investment...)

European Union (EU) lawmakers overwhelmingly backed a new EU system to coordinate IFDI reviews. Under the plan, which came into being in tandem with a sharp increase in Chinese IFDI in Europe, the European Commission will investigate FDI in critical sectors and opine whether it threatens European interests. When proposed, the system initially faced opposition, but now the mood has shifted. The new law will become effective in October 2020 and leaves the ultimate power to accept or block investments to individual EU countries (Philip Blenkinsop, “With eyes on China, EU lawmakers back investment screening,” Reuters, February 14, 2019, https://www.reuters.com/article/us-eu-china-investment/with-eyes-on-chin...)

Through foreign investment in US companies, partnerships with American universities, and recruitment of US-trained researchers, Chinese Biotech firms have access to technology and data regarding US residents that may reveal health conditions exploitable in a targeted attack. For this reason, a report for the U.S.-China Economic and Security Review Commission stated that Chinese investment in the US biotechnology industry presents a risk to national security, as it potentially gives the Chinese government access to patient data that could be used to blackmail Americans (Bruce Einhorn, “China could use medical data to blackmail Americans, report says,” Bloomberg, February 15, 2019, https://www.bloomberg.com/news/articles/2019-02-15/china-could-use-medic...)

Chinese investment is raising security fears in Israel, where the government will create an interagency body to oversee sensitive commercial deals that involve foreign firms. The authorities are particularly concerned about Chinese investment in Israeli companies whose products—examples include drones and artificial intelligence (AI)—have both a military and commercial use because the Chinese government may gain access to sensitive information through them, possibly hindering Israel’s intelligence ties with its longtime ally, the US (Felicia Schwartz and Dov Lieber, “Chinese Investment in Israel Raises Security Fears,” The Wall Street Journal, February 11, 2019, https://www.wsj.com/articles/chinese-investment-in-israel-raises-securit...)

Japan

Japanese and South Korean businesses are worried about the impact of heightened tensions between the two governments over past Japanese colonialism and recent naval encounters. The recent remarks by a Korean lawmaker calling on Emperor Akihito to apologize personally for Japan’s colonial rule has pushed Tokyo to take a tougher response. While many businesses have yet to see an impact on sales or profits, the Japan Research Institute said that businesses are “likely to reconsider or delay their expansion plans if the tensions continued” (Mitsuru Obe, “Businesses fret about Japan-South Korea diplomatic spat,” Nikkei Asian Review, February 13, 2019, https://asia.nikkei.com/Business/Business-Trends/Businesses-fret-about-J...)

Major Japanese companies have invested hundreds of millions of yen in Malaysia following Prime Minister Dr. Mahathir Mohamed’s visit to Tokyo last year. Several chairmen of established Japanese companies in Malaysia have promised to increase their existing investments in Malaysia due to their trust in the current government led by Dr. Mahathir. On top of this, the Japan Bank Investment Cooperation will be issuing Malaysia’s first $1.8 billion 10-year Samurai bond, guaranteed by the Japanese government, next month. (Hashini Kavishtri Kannan, “Msia receives new investments from Japanese companies,” New Straits Times, February 14, 2019, https://www.nst.com.my/news/nation/2019/02/460214/msia-receives-new-inve...)

South Korea

Russia’s deputy prime minister, Yuri Trutnev pledged to take more steps to support Koreans firms doing business in Russia’s Far East. In addition to tax benefits and eased regulations for Korean businesses, Trutnev said that Moscow plans to build a special economic zone for international hospitals in the Far East and hoped that Korean hospitals will make inroads into the region. As they seek to bolster economic ties, Seoul and Moscow will also launch negotiations for their first free trade agreement (“Russia’s deputy PM vows more support for Korean firms in Far East,” The Korea Times, February 12, 2019, http://www.koreatimes.co.kr/www/biz/2019/02/367263504.html)

Last week, Korean Prime Minister Lee Nak-yon and Austrian Chancellor Sebastian Kurz signed a memorandum of understanding on science and technology cooperation and vowed to expand human resource exchange. While pledging to “‘work harder to have a ‘win-win’ economic partnership and help Austria to expand its investment South Korea,’” Lee also thanked Austria for supporting the peace process on the Korea Peninsula. Kurtz responded by saying that by working with Korea, Austria hopes to become a 5G industry leader in Europe (“S. Korean PM thanks Austria for supporting peace process on Korean Peninsula,” The Korea Herald, February 14, 2019, http://www.koreaherald.com/view.php?ud=20190214000857)