MNCs in the News-2019-03-08

China

National People’s Congress (NPC) spokesman announces NPC will consider new draft law on foreign investment next week. By providing stronger legal guarantees for overseas investors, the new law will create a more transparent and predictable environment for foreign companies in China. The draft states foreign investors looking to create a business in China will be treated the same way as domestic investors, subject only to a negative list banning investment in certain sectors. There will be uniform standards and the case-by-case approval model will be abolished (Liu Zhihua, “Foreign investment draft levels the field,” China Daily, March 6, 2019, https://www.chinadaily.com.cn/a/201903/05/WS5c7db882a3106c65c34ecb69.html)

About a third of North American-based corporations on the CNBC Global CFO Council say Chinese companies have stolen their intellectual property (IP) at some point in the past ten years. China’s disregard of IP rights remains a major point of contention between the Trump administration and the Chinese government. “‘We must have rule, enforced rules, that make sure market outcomes and not state capitalism and technology theft determine winners,’” said United States Trade Representative Robert Lighthizer (Eric Rosenbaum, “1 in 5 corporations say China has stolen their IP within the last year: CNBC CFO survey,” CNBC, March 1, 2019, https://www.cnbc.com/2019/02/28/1-in-5-companies-say-china-stole-their-i...)

Chinese foreign direct investment (FDI) in Europe fell drastically in 2018 and a recent survey suggests that the European Union (EU)’s new investment screening framework likely will curb Chinese mergers and acquisitions (M&A) in the EU even more. The decrease of Chinese outward FDI (OFDI) is in line with the global decline of Chinese OFDI (COFDI), “‘a trend that can be attributed to continued capital controls and tightening of liquidity in China as well as growing regulatory scrutiny in host economies’” (Michael Nienaber, “Chinese FDI in Europe drops, investment screening will cut it more –survey,” Reuters, March 6, 2019, https://www.reuters.com/article/us-eu-china-fdi/chinese-fdi-in-europe-dr...)

Michele Geraci, undersecretary in the Italian economic development ministry, announced Italy is planning to join China's Belt and Road Initiative (BRI). If Italy signs the agreement with China, the country will be the largest economy and first G7 member to officially back the initiative. Geraci stated, “‘We want to make sure that 'Made in Italy' products can have more success in terms of export volume to China, which is the fastest-growing market in the world’” (Ben Wescott, “Italy may become largest economy yet to back China's Belt and Road: reports,” CNN, March 6, 2019, https://edition.cnn.com/2019/03/06/europe/china-italy-belt-and-road-intl...)

Japan

Faced with Mitsubishi Heavy Industries Ltd.’s refusal to engage in discussions about compensation, the plaintiffs who won a wartime forced labor case against the company filed a request with a South Korean court to seize the company’s assets. Tokyo has asked Mitsubishi Heavy Industries to avoid paying compensation while requesting “Seoul come up with measures to protect the business activities of Japanese companies in South Korea and agree to engage in intergovernmental consultations to resolve the issue” (“Mitsubishi Heavy asset seizure sought in South Korea over war labor,” Nikkei Asian Review, March 7, 2019, https://asia.nikkei.com/Politics/International-relations/Mitsubishi-Heav...)

Toyota Motor Corp. announced last week that it “may pull out of production in Britain around 2023” due to the likely increase of tariffs in the case of a no-deal Brexit. Other Japanese car manufactures such as Honda Motor Co. and Nissan Motor Co. already have announced plans to either close plants or cancel their production plans in Britain due to uncertainties flowing from Britain’s departure from the EU which is scheduled for March 29. Toyota currently operates two plants in Britain (“Toyota may pull out of UK production in 2023 if no-deal Brexit,” The Mainichi, March 7, 2019, https://mainichi.jp/english/articles/20190307/p2g/00m/0bu/002000c)

South Korea

Hyundai Motor is considering suspending operations at its Beijing manufacturing plant due to plummeting sales, which began dropping in 2017 as Beijing started to penalize Seoul over its decision to deploy the US THAAD anti-missile system. Hyundai’s sales dropped by 20 percent in 2017 and continued to decline amid a slowing Chinese economy and lower consumption. In light of increasing production in India and inroads into Vietnam and Indonesia, some market observers think Hyundai has decided to abandon China to pursue emerging markets elsewhere (Cho Chung-un, “Hyundai Motor Scaling back operations in China,” The Korea Herald, March 7, 2019, http://www.koreaherald.com/view.php?ud=20190307000583)

According to South Korea’s Ministry of Economy and Finance, Korea’s OFDI reached a record high in 2018 partly due to Korean companies going abroad to enjoy a better manufacturing environment. SK Hynix Inc.’s investment in a Korea-US-Japan consortium that acquired Toshiba Corp.’s memory business was one reason Korean OFDI hit new highs. Of the USD $49.78 billion Korean companies invested abroad, FDI in manufacturing accounted for the largest share, at 32.9 percent. About a third of Korea’s OFDI went to countries in Asia (Lim Sung-hyfun and Choi Mira, “Korea’s foreign direct investment reached record high in 2018,” Pulse, March 8, 2019, https://pulsenews.co.kr/view.php?year=2019&no=140565)