MNCs in the News-2019-07-26

China

Despite some foreign companies’ recent decision to relocate their manufacturing out of China because of uncertainties caused by the US-China trade dispute, China’s Vice Minister of Industry and Information Technology said the impact of the exodus is limited and under control. He noted, “China remains the market darling for global investment;” it has been the top foreign direct investment (FDI) destination among all developing countries for 25 consecutive years, and in 2018 FDI in its manufacturing sector grew by 23 percent compared to 2017 (Daye Chu, “Manufacturing posts stable growth, exodus impact limited: ministry,” Global Times, July 23, 2019, http://www.globaltimes.cn/content/1158897.shtml)

China is opening its financial sector to welcome more overseas competition while taking actions to cope with risks facing the industry. Foreign investors can now take a stake in or control entities such as pension fund managers, currency brokers, and wealth management units of commercial lenders. Foreign insurers can hold more than 25 percent stake in Chinese insurance asset management companies and no longer need 30 years of operating experience to enter the Chinese market (“Miao Han, Jun Luo, Yinan Zhao, Lucille Liu, and Yan Zhang, “China opens up financial sector to more foreign investment,” Bloomberg, July 20, 2019, https://www.bloomberg.com/news/articles/2019-07-20/china-vows-targeted-m...)

United States (US) Senator Joe Manchin is raising the alarm about a USD $83.7 billion dollar, 20-year investment deal in West Virginia pledged by China’s state-owned energy giant in 2017. So far, no money has materialized, and Manchin is concerned about “the proposed size of the investment relative to the state’s small output, as well as the opaque nature of the deal.” US officials have already blocked some proposed investments citing national security concerns (Tucker Higgins and Kayla Tausche, “Joe Manchin questions China’s promised $84 billion investment in West Virginia: ‘Something doesn’t make sense here,’” CNBC, July 25, 2019, https://www.cnbc.com/2019/07/25/joe-manchin-questions-chinas-84-billion-...)

Following an agreement to cut the cost of the East Coast Rail Link (ECRL) by about a third to $10.7 billion, China and Malaysia resumed construction on this large Belt and Road (BRI) project in northern Malaysia. Malaysian Prime Minister Mahathir Mohamad, who promised to renegotiate or cancel “unfair” Chinese large-scale projects approved by his predecessor, suspended the ECRL over a year ago. China’s Ambassador recently opined, “the agreement to resume work on the project immediately boosted confidence in Malaysia among foreign investors” (Joseph Sipalan, “China, Malaysia restart massive 'Belt and Road' project after hiccups,” Reuters, July 25, 2019, https://www.reuters.com/article/us-china-silkroad-malaysia/china-malaysi...)

Japan

In mid-July, CEOs, chairs, and other top executives of major Japanese firms such as Ajinomoto, Daiwa Securities, and Hitachi signed on to a global initiative called the 30% Club which aims to have businesses put more women in top leadership positions. While the Japanese companies did not embrace any kind of quota system, they said they would seek to achieve 10 percent female representation on boards by 2020 and 30 percent by 2030 and building the infrastructure that allows for this (“14 Top Japanese Firms Join Drive to Appoint More Women to Boards,” The Asahi Shimbun, July 23, 2019, http://www.asahi.com/ajw/articles/AJ201907230043.html)

During a meeting with Japanese Foreign Minister Taro Kono, U.S National Security Adviser John Bolton said the U.S. did not “intend to mediate in a dispute between Tokyo and Seoul over wartime labor and trade policy.” Reportedly, Kono told Bolton South Korea was to blame for the dispute because it had not honored the 1965 treaty that, in Japan’s view, settled all wartime compensation issues. Bolton voiced concerns about the stresses that the dispute was placing on the security alliance (“Bolton Says U.S. Will Not Mediate in Row between Japan and South Korea,” The Japan Times, July 24, 2019, https://www.japantimes.co.jp/news/2019/07/24/business/bolton-says-u-s-wi...)

South Korea

Local Korean distribution companies are suffering from the boycott of Japanese goods that has followed in the wake of Japanese economic sanctions against Korea. For example, “Lotte Group has been hit the hardest by the boycott as it has many joint ventures with Japanese companies.” Furthermore, “large retail stores such as E-Mart and Homeplus are not able to place new orders due to the decline in the sale of Japanese goods.” Some firms like Coupang have suffered because of rumors that they are Japanese companies (Choi Moon-Hee, “Boycott of Japanese Products Causes Woes for Distributors,” BusinessKorea, July 26, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=34341)

Trade conflicts are driving South Korean chaebol to the US as they try to avoid the fallout of China-US trade frictions, Japan-South Korea trade and political tensions (which have effects on inputs and exports), and also rising labor costs and troubles with domestic labor unions. For instance, Samsung Electronics is investing $1.5 billion in Texas while Hyundai Motors, SK Innovation, and LG Chem are looking at expanding their manufacturing footprint in the US in areas like electric vehicle batteries and automobiles (Nam Hyun-Woo, “Chaebol expands US investment to minimize fallout from Seoul-Tokyo conflict,” The Korea Times, July 23, 2019, http://www.koreatimes.co.kr/www/tech/2019/07/693_272736.html)