MNCs in the News-2019-05-10

China

Threats of higher tariffs on Chinese goods made by United States (US) President Donald Trump during the latest trade war negotiations may drive many manufacturers to diversify their production activities beyond China to India and other countries in Southeast Asia. Other factors firms to consider shift their production away from China are rising labor costs in China, Beijing’s efforts to support domestic companies, and consumers’ concerns about the security of Chinese-made hardware, especially in networked and connected products (Cindy Wang and Debbie Wu, “China is losing its grip on companies due to Trump’s trade war,” Bloomberg, May 8, 2019, https://www.bloomberg.com/news/articles/2019-05-07/trump-versus-xi-battl...)

China is taking steps that acknowledge the importance of protecting Intellectual Property (IP) rights, not only to protect its own rapidly growing IP, but also to reassure foreign investors in the country. Chinese President Xi Jinping recently stated that his country “will work hard to create a business environment that respects the value of intellectual property, will improve the legal system for IP rights protection at all levels, […] will bar the forced transfer of technology, improve protection of trade secrets and crack down on infringement” (Hong Xiao, “Pledge on IP rights protection applauded,” China Daily, May 4, 2019, http://www.chinadaily.com.cn/a/201905/04/WS5cccc6b9a3104842260b9a25.html)

Despite tensions between Washington and Beijing, last year China poured record amounts of investment into US start-ups. According to a recent report, however, “increasingly hostile conditions will likely lead to a drop-off in Chinese funding for this year,” mainly due to the passage of the Foreign Investment Risk Review Modernization Act (FIRRMA) which empowered the Committee on Foreign Investment in the United States (CFIUS) to expand the types of deals (e.g., biotechnology) it reviews, including ones where foreign firms take only minority stakes (Heather Somerville, “Chinese investment in U.S. startups peaks but 'tremendous uncertainty' ahead,” Reuters, May 8, 2019, https://www.reuters.com/article/us-china-us-venture/chinese-investment-i...)

The US Federal Communications Commission (FCC) voted to block China Mobile from operating and offering service in the US due to security concerns. According to members of the FCC, the Chinese State-owned enterprise (SOE) would pose a major threat to US national security, law enforcement, and economic interests. The US is currently reviewing authorizations granted to other firms controlled by the Chinese government and is considering steps to block other Chinese telecom SOEs (Tony Romm, “U.S. blocks Chinese state-owned telecom giant out of security concerns, threatens more scrutiny,” The Washington Post, May 9, 2019, https://beta.washingtonpost.com/technology/2019/05/09/us-blocks-chinese-...)

US President Donald Trump’s campaign to ban Huawei from global networks seems to be failing. Despite the US warning its allies of Huawei’s potential threats to their national security, not a single European country has joined Washington’s call to boycott the Chinese tech giant. In the view of one expert, “the US doesn’t seem able to do anything that would fundamentally change things.” Meanwhile, Huawei is planning to rebuild its presence in the US after maintaining a low profile (Todd Shields and Bill Allison, “Trump Is Losing the Fight to Ban Huawei From Global Networks,” Bloomberg, May 9, 2019, https://www.bloomberg.com/news/articles/2019-05-09/trump-is-losing-the-f...)

Japan

In the fall, the Financial Action Task Force (FATF), an “international framework in which 36 countries and regions examine measures to forestall money laundering and terrorist financing.” will conduct a review of related Japanese banking practices. To set the stage for a positive review, Japanese banks are working to improve their policies. For example, MUFG Bank will eliminate “overseas remittances made at the counter of branch offices that bypass bank accounts.” About 10 years previously, the FATF opined Japan was not doing enough to fight problems (“Japanese banks to boost fight against money laundering,” Japan Times, May 5, 2019, https://www.japantimes.co.jp/news/2019/05/05/business/economy-business/j...)

Japanese firms have “ramped up US investment since President Donald Trump took office, especially in states favoring Trump’s Republican Party.” US Department of Commerce data show Japanese foreign direct investment (FDI) in the US jumped by more than $50 billion from 2017 to 2018. For some, this has to do with Tokyo trying to improve relations with Washington before they start difficult trade negotiations. Nevertheless, left leaning states garnered much Japanese FDI and non-political factors explain Japanese FDI patterns, too (Masaya Kato and Saki Hayashi, “Trump Country Wins Big in Japanese Investment Drive,” Nikkei Asian Review, May 4, 2019, https://asia.nikkei.com/Business/Business-trends/Trump-country-wins-big-...)

South Korea

Seoul Police summoned BMW Korea Chairman Kim Hyo-joon for questioning Friday over charges his firm covered up manufacturing defects that sparked dozens of engine fires in 2018. Kim, who is suspected of being complicit in violations of the Automobile Management Act, would not say whether or not BMW intentionally hid defects. In 2018, following an investigation, Korea’s Ministry of Land, Infrastructure, and Transport concluded BMW had known about defects since 2015, but that the company had continued to sell faulty vehicles in Korea (Kim Jae-heun, “BMW Korea chairman questioned over alleged defect cover-up,” The Korea Times, May 10, 2019, http://www.koreatimes.co.kr/www/nation/2019/05/251_268643.html)

Lotte Chemical launched a USD $3.1 billion ethylene cracker complex in Louisiana. Lotte represents the “‘first Korean petrochemical firm to build and operate the first world-class petrochemical facility in the US.’” Lotte plans to use locally produced shale gas to diversify its input sources for its petrochemical products. Trump was not able to attend the opening ceremony, which was attended by high-level official from Korea, the US, and Louisiana, but said the complex was evidence of “‘solidity in the US-South Korea alliance’” (Jung Min-Kyung, “Lotte Chemical’s US ethylene plant to start operations this month,” Korea Herald, May 10, 2019, http://www.koreaherald.com/view.php?ud=20190510000544)

*The information compiled in the MNCs in the News digest is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content of the MNCs in the News digest does not necessarily represent the view of the Wong MNC Center, its Board of Directors, or its Advisory Board, but is intended for the non-commercial use of readers in order to foster debate and discussion and to facilitate and stimulate research.