MNCs in the News-2019-08-01

In order to advance the China's ongoing reform of its energy systems and attract more overseas foreign direct investment (FDI) in the sector, on July 30, Beijing opened the upstream exploration of its oil and natural gas resources by scrapping joint venture (JV) restrictions. The move, part of China’s revised negative lists for FDI market access, “will boost the Chinese energy market, create a business environment with more fairness and openness, and further accelerate the technological upgrading of the country's oil and natural gas exploration” (“Economic Watch: China welcomes overseas participation in oil, gas exploration,” Xinhua, July 31, 2019, http://www.xinhuanet.com/english/2019-07/31/c_138272804.htm

In the first half of the year, the top destination for Chinese inward FDI (IFDI) continued to be the coastal province of Jiangsu, which attracted USD $15.25 billion in IDFI. In terms of sectors, IFDI surged, particularly in the emerging industries of bio-tech and new pharmacy, high-end software and information service, and energy-saving and environmental protection, with growth of, respectively, 132.1, 58.4, and 41.8 percent year-over-year. Turning to IFDI source countries, IFDI from Britain, South Korea, Japan and Germany increased 99.9, 63.5, 25.3, and 23.3 percent (“Jiangsu continues to be top foreign investment destination,” China Daily, July 29, 2019, http://www.chinadaily.com.cn/a/201907/29/WS5d3e998ea310d830564018d8.html)

According to a study by a consultancy and the National Committee on United States (US)-China Relations, cross-border investments between China and the United States (US) totaled $13 billion in the first half of 2019, dropping to a five-year low. The decline, “a sign of investor anxiety over stalled trade negotiations,” also reflects an increasingly hostile investment environment caused by the US government’s stricter deal reviews of foreign acquisitions. The study also reports that US investment into Chinese businesses has held steady in recent years (Katy Stech Ferek, “U.S.-China Investments Continue to Decline,” The Wall Street Journal, August 1, 2019, https://www.wsj.com/articles/u-s-china-investments-continue-to-decline-1...)

As a consequence of a more affordable labor market and fast economic growth, Indian start-ups attracted $2.5 billion in investment from China in 2018. An industry pundit said, “‘for many of these start-ups, the knowledge and technology of Chinese investors act as the backbone of their business, along with the operational expertise of Indians in the domestic market.’” Cooperation with Indian entrepreneurs also is advantageous because it give Chinese investors global scale and an opportunity to diversify their investments overseas (Vasudevan Sridharan, “How a wave of Chinese money is powering Indian start-ups,” South China Morning Post, July 29, 2019, https://www.scmp.com/week-asia/economics/article/3020311/how-wave-chines...)

Japan

Japan’s Cabinet “formally approved ejecting South Korea from the so-called white list of countries entitled to receive preferential treatment in trade.” Japan has moved South Korea from the A to the B list of countries regarding exports controls. In response, South Korea has promised to take countermeasures including raising the matter at the World Trade Organization (WTO) and removing Japanese companies from its white list. Japanese measures mean the review process for dual-use materials sent to Korea will take much longer (Satoshi Sugiyama, “Japan Officially Approves Scrubbing South Korea from ‘White List’ of Countries,” Japan Times, August 2, 2019, https://www.japantimes.co.jp/news/2019/08/02/business/japan-officially-a...)

Per analysts, “Hyundai Heavy Industries' [HHI] takeover of Daewoo Shipbuilding & Marine Engineering (DSME) will likely face a more stringent antitrust oversight by [Tokyo] amid the intensifying trade row between Seoul and Tokyo.” Consequently, HHI has decided to delay filing for an antitrust review. One thing favoring HHI’s may be the difference in the focus of each country’s shipbuilders, with Korean shipbuilders concentrating on LNG and container vessels and Chinese and Japanese players emphasizing bulk carriers. Concurrently, Japan is raising WTO challenges about Seoul’s subsidies to its shipbuilders (Nam Hyun-Woo, “HHI’s DSME Takeover Faces Hurdles in Japan,” Korea Times, http://www.koreatimes.co.kr/www/tech/2019/08/693_273234.html)

South Korea

Korea’s Ministry of Trade, Industry, and Energy has organized various information events for Korean companies—e.g., in semiconductors, shipbuilding, auto parts—that might be affected by Tokyo’s decision to remove Korea from its “whitelist” of countries receiving special trade treatment. However, Korean firms report that the government’s initiatives are “‘unhelpful and belated,’” providing little more than what already is available through media reports on top of some information about how to find other channels for obtaining restricted goods. Localization provides no short-term solution (Nam Hyun-Woo, “Moon administration fails to help companies on Japan row,” Korea Times, July 31, 2019, http://www.koreatimes.co.kr/www/tech/2019/08/693_273160.html)

South Korea’s SK Innovation produces Li-ion battery separators and ranks 2^nd globally in market share. It is contemplating providing “electric vehicle (EV) battery separators to its Korean competitors” because of the help this might provide Korean businesses facing Japanese export restrictions on EV battery separators. Per one SK Innovation official, “‘Although we are competing with domestic companies…we will consider supplying separators if we receive a request…Nothing is more important than the protection of the domestic industrial ecosystem and the national interest’" (Jung Min-Hee, “SK Innovation Willing to Supply EV Battery Separators to Domestic Competitors,” Business Korea, August 1, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=34504)