MNCs in the News-2019-03-15

China

Partly to address American government complaints about China’s unfriendly investment environment, China’s National People’s Congress recently approved a new foreign investment law obliging officials to protect commercially confidential information obtained from foreign companies. The law, which makes it illegal for officials to misuse critical information or to provide it to local Chinese firms, becomes effective on January 1, 2020. It has received a lukewarm response because of concerns about insufficient attention to enforcement and implementation (Zhou Xin, “China approves new foreign investment law designed to level domestic playing field for overseas investors,” South China Morning Post, March 15, 2019, https://www.scmp.com/economy/china-economy/article/3001780/china-approve...)

Following some European countries asking for a more balanced and reciprocal economic relationship between the European Union (EU) and China, the European Commission and the EU’s diplomatic unit released a policy paper in which the EU threatens to tighten rules on Chinese investment in Europe, calling China a “systemic rival.” Brussels also asked Beijing “to stop unfair treatment of European companies and investment practices that threaten the rule of law in recipient countries and risk plunging them into debt” (Michael Peel and Jim Brunsden, “Brussels ramps up criticism of China’s investment strategy in EU,” Financial Times, March 13, 2019, https://www.ft.com/content/0693f57c-44d3-11e9-b168-96a37d002cd3)

The United States (US)’s top general Joseph Dunford expressed his concern that Google’s work in China is directly benefiting the Chinese military. In response, Google Chief Executive Sundar Pichai said that Google has been investing in China for years and plans to continue do so while it also will continue doing business with the US government. Several other American companies have been recently criticized by members of the US congress about their willingness to work with geopolitical competitors such as China (Idrees Ali and Patricia Zengerle, “Google’s work in China benefiting China’s military: U.S. general,” Reuters, March 14, 2019, https://www.reuters.com/article/us-usa-china-google/googles-work-in-chin...)

Reacting to increasing global criticism of China’s Belt and Road Initiative (BRI), Beijing is calling for American and European firms to join President Xi Jinping’s signature initiative. At a recent event aimed at softening the image of China’s foreign policy program, a Chinese official reiterated the BRI does not aim to project China’s influence at the expenses of the host countries, but it is an opportunity for cooperation that could benefit both sides (Dandan Li and Miao Han, “China calls for U.S. and European companies to joint Belt and Road,” Bloomberg, March 14, 2019, https://www.bloomberg.com/news/articles/2019-03-14/china-calls-for-u-s-e...)

Japan

Toyota Motor now plans to invest about USD $13 billion in the US over the next five years, $3 billion more than originally planned, in line with Donald Trump’s push to boost American manufacturing. Specifically, to avoid tariffs of up to 25 percent under the revised North American Free Trade Agreement, Toyota will add two hybrids to its production lineup and increase output capacity for engines and other auto parts, helping create nearly 600 new jobs. Trump congratulated Toyota on the move (Masaaki Kudo, “Toyota raises US investment by $3bn as tariffs loom,” Nikkei Asian Review, March 15, 2019, https://asia.nikkei.com/Business/Companies/Toyota-raises-US-investment-b...)

Dealing a second blow to Britain’s largest car plant, Nissan Motor Co. Ltd. announced last week it will officially cease production of two more models at its Sunderland plant, citing uncertainty over Brexit as a factor. More generally, the announcement fits with Nissan’s move to withdraw the brand from Western Europe and focus on North America and China. It, like other car companies, is streamlining its portfolios and production sites to withstand growing global pressures including trade wars (“Nissan deals fresh blow to U.K. by stopping Infiniti production at Sunderland plant amid Brexit,” The Japan Times, March 13, 2019, https://www.japantimes.co.jp/news/2019/03/13/business/corporate-business...)

South Korea

Despite investing $7.2 billion in the Chinese market since 2004, Lotte Group will leave China after failing to recover from the boycotts caused by Beijing’s diplomatic bickering with Seoul after the latter agreed to deploy the Terminal High Altitude Area Defense (THAAD) anti-missile system in 2017. Lotte was the main target of Beijing’s wrath. Despite some signs of a thaw, Lotte’s business in Chinas failed to recover because of worsened public sentiments, the increased competitiveness of Chinese brands, and the popularity of e-commerce (Kim Da-sol, “Lotte seeks to exit China after investing $7.2b,” The Korea Herald, March 13, 2019, http://www.koreaherald.com/view.php?ud=20190313000654)

Seoul and Tokyo sought to resolve the legal dispute over wartime labor compensation in another round of working-level consultations, only to confirm their contradictory views. While Seoul stressed that Tokyo should separate the issue from its diplomatic relations, Tokyo demanded a formal “’diplomatic forum’” to address the matter in accordance with the 1965 agreement. Tokyo made clear that if Seoul goes ahead with the seizures of Japanese company assets, it will consider economic retaliation including a ban on visa issuances and money transfers (“S. Korea, Japan still differ over wartime forced labor reparations,” Yonhap News Agency, March 14, 2019, https://en.yna.co.kr/view/AEN20190314003151315)

*The information used herein is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content in this section does not necessarily represent the official view of the Wong MNC Center, its Board of Directors, or its Advisory Board.