MNCs in the News-2019-07-12

China

Official data on foreign direct investment (FDI) in China shows that in the first half of 2019 Chinese inward FDI totaled 478.33 billion yuan (roughly USD $69.546 billion), up 7.2 percent compared to the same period year-over-year (YOY). From January to June, 20,131 new foreign-funded companies were established in the country. Investment in China’s western regions rose 21.2 percent YOY, and the sector that registered the highest expansion was the high-tech industry, with FDI surging 44.3 percent YOY. Statistics do not include the banking, securities and insurance sectors (“China reports steady FDI growth in H1,” Xinhua, July 11, 2019, http://www.xinhuanet.com/english/2019-07/11/c_138218324.htm)

Contrary to media reports that many foreign companies are looking to move their production out of China because of the impact of the trade dispute with the United States (US), a Chinese Ministry of Commerce (MOFCOM) spokesman said that there is no large-scale withdrawal of foreign companies from China. In fact, official data shows that China remains the second-largest FDI recipient in the world. Beijing assures foreign investors that it will protect the legitimate rights and interests of foreign investors in the country (Nan Zhong and Shuiyu Jing, “China assures foreign firms amid tensions,” China Daily, July 12, 2019, http://www.chinadaily.com.cn/a/201907/12/WS5d27984fa3105895c2e7d03a.html)

In the first six months of 2019, Chinese outward FDI (OFDI) to Europe and North America totaled $12.3 billion ($3.3 billion to Europe and $9 billion to North America). Down 20 percent from 2018, this is the lowest value of Chinese OFDI (COFDI) to these advanced economies since 2014. The decrease flows from COFDI facing “tighter capital controls at home and tougher scrutiny from foreign governments and regulators” (Xie Yu, “Chinese companies’ cash heading for Europe, North America drops to five-year low as capital controls, scrutiny abroad puts the brakes on investment,” South China Morning Post, July 11, 2019, https://www.scmp.com/business/companies/article/3018232/chinese-companie...)

After a Chinese former Huawei executive was arrested in Poland in January on spying allegations, relations between Warsaw and Beijing became strained. Polish President Andrzej Duda had recently announced that he was opposed to COFDI in his country’s strategic infrastructure. During a visit to Warsaw by China’s State Councilor Wang Yi last week, Polish Foreign Minister Jacek Czaputowicz said, though, that Poland is open to Chinese investment. COFDI, especially greenfield investment, particularly is welcome in the manufacturing and innovative sectors (Joanna Plucinska, "Poland open to investment from China: foreign minister,” Reuters, July 8, 2019, https://www.reuters.com/article/us-poland-china/poland-open-to-investmen...)

Japan

Japanese media recently quoted an “unidentified senior member of Prime Minister Abe Shinzo’s ruling Liberal Democratic Party as saying some hydrogen fluoride [which can be used in chemical weapons] exported…to South Korea had ultimately been shipped to North Korea.” South Korea reacted harshly, not only denying it, but urging Japan to “‘stop making groundless claims immediately.’” In early July, Japan announced it would institute a more restrictive export regime for three chemicals partly because of possible leakage to North Korea (“Japan stands firm on export curbs as South Korea denies passing chemical to North,” Japan Times, July 9, 2019, https://www.japantimes.co.jp/news/2019/07/09/business/japan-pushes-back-...)

Tokyo was surprised at Seoul’s strong response to the former subjecting the export of certain chemicals to South Korea to a stricter regime. A Japanese Foreign Ministry official observed “‘these kinds of changes in export controls happen often.’” Also, the official said Japan did not really understand South Korea’s effort to make the tighter export controls a World Trade Organization (WTO) issue as the WTO does not deal with national security issues (Satoshi Sugiyama, “Japan, ‘surprised’ by South Korean response to export control, accuses Seoul of trying to make the issue about free trade,” Japan Times, July 10, 2019, https://www.japantimes.co.jp/news/2019/07/10/business/japan-surprised-so...)

South Korea

In June, Japan’s Ministry of Economy, Trade, and Industry (METI) pushed a report entitled “2019 Report on Compliance by Major Trading Partners with Trade Agreements.” The report identified Seoul’s subsidies—e.g., grants from the Korea Development Bank to Daewoo Shipbuilding and Marine Engineering—to Korea’s shipbuilding sector as an unfair trade practice. Japan and Korea had discussions following Japan starting the WTO dispute settlement process in 2018, but there was no resolution and now Japan is moving towards a WTO case (Jung Min-Hee, “China and Japan Stepping Up Efforts to Keep Korean Shipbuilders in Check,” BusinessKorea, July 5, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=33601)

On July 8, Hyundai Engineering and Construction (E&C) signed a $2.7 billion contract with Saudi Aramco for two projects relating to a massive oil and gas refining complex in eastern Saudi Arabia. The projects entail the expansion of existing oil and gas separation facilities as well as the construction of the power and water supply facilities for a plant that processes gas. Hyundai E&C also is responsible for a number of other major projects, worth around $1.4 billion, elsewhere in Saudi Arabia (Jung Min-Hee, “Hyundai E&C Lands US2.7 Bil. Plant Construction Order from Saudi Arabia,” BusinessKorea, July 11, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=33801)

*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.