MNCs in the News-2019-07-05

China

At the World Economic Forum in Dalian, Chinese Premier Li Keqiang spoke to many United States (US) complaints about the unfair treatment it accuses China of giving to foreign firms in China. Li announced Beijing will create an equal playing field for all companies, and listed some ways in which China plans to open its economy to more foreign participation, including lifting restrictions on foreign ownership of securities, futures and life insurance firms by next year, a year earlier than previously planned (Evelyn Cheng, “China’s second-in-command: We’re building an even playing field for foreign firms,” CNBC, July 2, 2019, https://www.cnbc.com/2019/07/02/li-keqiang-china-will-become-an-even-pla...)

With Beijing looking to attract investors to become more involved in its financial sector, US investment banks Morgan Stanley and JPMorgan Chase & Co. are moving closer to taking controlling shares in their China joint ventures (JVs). The Chinese partner of Morgan Stanley’s securities JV is selling its two percent stake for at least 375 million yuan (USD $55 million) while JPMorgan’s local partner will cede control in its asset-management venture for 241 million yuan (Jun Luo and Dingmin Zhang, “Morgan Stanley, JPMorgan Move Closer to Control of China Ventures,” Bloomberg, July 2, 2019, https://www.bloomberg.com/news/articles/2019-07-02/morgan-stanley-jpmorg...)

Bloomberg data shows that at $35 billion, China outbound mergers and acquisition (M&A) volume in the first six months of the year is the lowest since 2013. It has dropped 75 percent compared to its peak in 2016. In recent years, the volume of Chinese cross-border deals has been steadily declining, and dealmakers say that closing Chinese outbound M&As is even more difficult now because of growing global trade tensions. Deal volumes across the Asia-Pacific region have also declined (Manuel Baigorri and Vinicy Chan, “Chinese Outbound M&A Plummets as Trade War Keeps Companies at Home,” Bloomberg, July 5, 2019, https://www.bloomberg.com/news/articles/2019-07-04/china-outbound-m-a-pl...)

Turkish leader Recep Tayyip Erdogan visited Chinese president Xi Jinping to show Turkey's eagerness to bolster economic ties with China amid tensions with Europe and the US. Despite Turkey’s general opposition to Beijing’s way of handling the Chinese Uighur population in Northwest China, Erdogan turned to China hoping to integrate Turkey's infrastructure with China's Belt and Road Initiative (BRI) and attract more Chinese investment. Turkey is negotiating with Beijing regarding the construction of a high-speed railway and a nuclear power plant in Turkey. (Sinan Tavsan, “Erdogan courts Chinese investment on visit to Beijing,” Nikkei Asian Review, July 3, 2019, https://asia.nikkei.com/Politics/International-relations/Erdogan-courts-...)

Japan

The Japan unit of American social networking giant Facebook, which was established in 2008, recently joined Keidanren (aka the Japan Business Federation). Two factors seem to have driven Facebook Japan’s membership. First, Japan is paying increased attention to the activities and behaviors of information technology (IT) companies due to market dominance, privacy, tax, and other concerns. Second, Keidanren is dominated by manufacturers and Facebook’s membership may give it a role in influencing the association’s IT related proposals. Amazon Japan became a member of Keidanren last year (“Facebook joins Keidanren, Japan's powerful business lobby,” The Japan Times, July 1, 2019, https://www.japantimes.co.jp/news/2019/07/01/business/corporate-business...)

Some expect Japan’s export curbs on semiconductor materials bound for South Korea could intensify the woes of Samsung Electronics’, which already is facing chip and smartphone market pressures and trade war stresses. This is because Japan’s restrictions on three key chemicals will hit certain Samsung chip manufacturing processes and products. If Samsung’s chip production is hit, this will hurt South Korea’s economy more broadly give the heavy percentage of Korean exports that are represented by semiconductors (Kenichi Yamada, “Samsung faces growing headwinds as Japan's export controls kick in,” Nikkei Asian Review, July 5, 2019, https://asia.nikkei.com/Business/Companies/Samsung-faces-growing-headwin...)

South Korea

Eight months after Korea’s Supreme Court ruled that Japanese businesses had to provide compensation to Koreans forced to work in their factories before and during the Second World War, Japan initiated sanctions on high-tech materials and chemicals used in South Korean semiconductor and smartphone manufacturing. The export controls will put pressure on Korean companies like Samsung that already are feeling pressures from waning global demand, price declines, and the China-US trade war. Korea plans to file a World Trade Organization complaint in response to Japan’s action (Jun Ji-Hye, “Korea, Japan heading toward trade war,” Korea Times, July 1, 2019, http://www.koreatimes.co.kr/www/tech/2019/07/133_271562.html)

Following a meeting between US President Donald Trump and the leaders of major business groups in South Korea, some large Korean firms announced they would boost their investments in the US. For instance, CJ Group stated it would pour $1 billion into food and logistics activities on the east and west coasts of the US. The group has already invested $3 billion in the US. SPC Group also stated an interest in expanding the presence of its Paris Baguette bakeries in the US (Jung Min-Hee, “Major Korean Business Groups Accelerating Investments in the U.S.,” Business Korea, July 1, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=33402)