MNCs in the News-2019-06-07

China

According to China’s Ministry of Commerce (MOFCOM) China’s inward foreign direct investment (FDI) has not been significantly affected by tariffs imposed by the United States (US) on Chinese products. US investment in China only makes up 4.2 percent of China’s total Inward FDI (IFDI) and while some US firms are moving out of China, companies from other nations are putting money into China. Also auguring well for China, the country is expanding its market access and improving its business environment, and welcomes foreign investors (“US tariff impact on China's foreign investment inflow controllable: MOC,” China Daily, June 2, 2019, http://www.chinadaily.com.cn/a/201906/02/WS5cf30fd9a3104842260bf07b.html)

After the US government blacklisted some Chinese tech companies, MOFCOM announced that China will blacklist “unreliable” foreign businesses that violate market rules, take discriminatory measures to harm Chinese business rights and interests, or threaten China’s national security. Blacklisted companies will be restricted in terms of sales, investments and business licenses. This has the potential to hurt thousands of foreign companies that have invested in China, which business groups have stated would be at great risk. (Sarah Zheng and Wendy Zhu, “Beijing to blacklist ‘unreliable’ foreign entities that ‘hurt interests of Chinese firms,’” South China Morning Post, May 31, 2019, https://www.scmp.com/news/china/diplomacy/article/3012675/beijing-blackl...)

China’s plan to build a $1.9 billion light-railway system as part of the Belt and Road Initiative (BRI) in Kazakhstan has stalled. China Development Bank lent money to Kazakhstan’s state-owned TOO Astana LRT to hire a consortium of Chinese companies to carry out the project, but after learning that over two-thirds of the money was not used for the railway link it suspended its lending. An analyst noted how the project costed so much but would be of little relevance to the Kazakh people (Nariman Gizitdimov, “China’s $1.9 Billion Belt-and-Road Rail Project Goes Off Track,” Bloomberg, June 3, 2019, https://www.bloomberg.com/news/articles/2019-06-03/china-s-1-9-billion-s...)

Despite not being able to make a profit on the Vietnam-China Economic and Trade Cooperation Park (VCEP), China decided to keep its state-owned free trade zone (FTZ) in Vietnam open as a showcase for the BRI. It is commonly assumed China is moving its low-end, high-polluting industries to Southeast Asia in order to upgrade its domestic manufacturing profile. However, the VCEP only welcomes high-tech companies which should paint a better image of Chinese investment in foreign countries (Cissy Zhou, “Inside China’s state-owned industrial park in Vietnam, Beijing’s image trumps trade war profits,” South China Morning Post, June 3, 2019, https://www.scmp.com/economy/global-economy/article/3012633/inside-china...)

Japan

In a joint statement, Japanese firms like Toyota Motor, Nippon Telegraph and Telephone, and NEC plus many other multinational corporations (MNCs) like Cisco, IBM, and Airbus have “called for free and secure data flows across borders.” “The companies are pushing for the protection of critical corporate data…which could cause significant damage to their competitiveness if leaked.” The MNCs also expressed their opposition to laws “forcing them to store and process data on servers” locally because of the inefficiencies caused (Takashi Tsuji, “Toyota, IBM and more push for global data security ahead of G-20,” Nikkei Asian Review, June 7, 2019, https://asia.nikkei.com/Business/Technology/Toyota-IBM-and-more-push-for...)

In June 2018, Japan established short-term lodging regulations requiring Airbnb hosts to register and those that had failed to register to cancel reservations. This led to a massive drop in listings. Airbnb Inc. now states, “it is back in business in Japan” (with listings, excluding ryokan, now running around 50,000) and argues the Japan case demonstrates its ability to thrive in strict regulatory environments. Of course, the legalization of short-term lodging also means rising competition from others like SoftBank and FamilyMart that are entering the market (“Airbnb listings in Japan Rebound after Regulatory Freeze,” Japan Times, June 6, 2019, https://www.japantimes.co.jp/news/2019/06/06/business/airbnb-listings-ja...)

South Korea

South Korean prosecutors recently have arrested a number of Samsung Electronics senior executives for their involvement in a reported accounting fraud which has entailed actions such as burying computer servers and laptops under a factory floor. Of note, three arrested executives are “among the 14 or so senior executives who worked closely with vice chairman Lee Jae-yong to manage Samsung Electronics’ key businesses and affiliates.” Some believe the arrests will hinder the ability of Samsung to take advantage of Huawei’s recent troubles (Kim Jaewon, “Samsung Leadership in Turmoil as Prosecutors Target Inner Circle,” Nikkei Asian Review, June 8, 2019, https://asia.nikkei.com/Business/Companies/Samsung-leadership-in-turmoil...)

Early this spring, Korea National Oil Corp. (KNOC) announced it planned to sell many of its profitable overseas ventures because of the extremely high debt-to-equity ratio following in the wake of its rapid development abroad and massive losses in 2018. Thus, KNOC’s recent announcement it planned to invest 300 million won (USD $253 million) in the UAE in an oil development project joint venture (JV) with GS Energy, has caused controversy even though the JV would help to ensure Korea’s oil supply (Jung Min-Hee, “KNOC’s Plan to Invest in Oil Development in UAE Causing Controversy,” BusinessKorea, June 5, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=32581)