MNCs in the News-2019-08-09

China

To avoid United States (US) tariffs on Chinese goods, several Japanese companies operating in China including Sony, Ricoh, and Asics are planning to relocate some of their production to other Asian countries. Japanese companies “have been seeking lower labor costs and supply-chain diversification by moving some output out of China for years as wages rose and infrastructure in countries like Vietnam and Bangladesh improved.” Even so, China has remained the most important production hub for many Japanese manufacturers. (Kantaro Komiya, Pavel Alpeyev, and Yuki Furukawa, “Japan Firms Join Exodus from China’s Factories as Tariffs Bite,” Bloomberg, August 5, 2019, https://www.bloomberg.com/news/articles/2019-08-05/japan-inc-joins-exodu...)

To further open up the country, China’s State Council announced the expansion of the Shanghai Free Trade Zone (FTZ). In order to promote the free flow of overseas investment and capital, the new Lingang area of the Shanghai FTZ aims to become a business cluster for international businesses and cross-border financial services. The government will establish an institutional system focused on investment and trade liberalization in the FTZ, which will lead “more reforms and the opening-up of the Yangtze River Delta” (“Another move for opening-up: China issues overall plan for new Shanghai FTZ area ,” Xinhua, August 6, 2019, http://www.xinhuanet.com/english/2019-08/06/c_138288107.htm)

Two large Chinese consumer health care firms hit by the China-US trade war are in talks with Malaysia’s largest generic drug maker, Duopharma Biotech, over the expansion of their production base in Malaysia and a potential investment stake. China’s interest in Malaysia is rising: After the recent re-launch of the East Coast Rail Link (ECRL), a railroad project part of China’s Belt and Road Initiative (BRI) in northern Malaysia, more and more Chinese companies are expected to invest in the country (Malaysian drug maker Duopharma courts Chinese companies hit by trade war,” South China Morning Post, August 6, 2019, https://www.scmp.com/news/asia/southeast-asia/article/3021623/malaysian-...)

China’s Zhong Ji Mining suspended operations at its gold mine in Kyrgyzstan after 20 people were hurt in clashes between Chinese workers and local protesters worried about toxic spills. Following this, China asked for a thorough investigation as well as for more protection for Chinese firms and workers in Kyrgyzstan. Chinese companies working overseas must respect local laws, but Kyrgyz villagers have frequently raised environmental concerns over Zhong Ji’s activities. Still, tests at the Chinese-operated mine did not show any spillage of harmful substances. (Umberto Bacchi, “Kyrgyzstan halts work at Chinese gold mine after clashes,” Reuters, August 7, 2019, https://www.reuters.com/article/us-kyrgyzstan-protests-mining/kyrgyzstan...)

Japan

Japan announced it had approved the export of a sensitive chemical to Korea, the first since it intensified export controls on three chemicals in July. Tokyo made the unusual announcement because of sensitivities that had arisen in the wake of its decision to tighten the export of materials to Korea. Concurrently, Tokyo said that there was no export ban, rejected claims global supply chains would be affected by its policy, and emphasized its policy would not be arbitrary (Satoshi Sugiyama, “Japan Oks First Shipment of High-Tech Chemical to South Korea Under Tightened Controls,” The Japan Times, August 8, 2019, https://www.japantimes.co.jp/news/2019/08/08/business/japan-oks-key-chem...)

An official with Malaysia’s International Trade and Industry Ministry stated Japan’s Daihastu Motor “would provide ‘advanced technological support’” for Malaysia’s third national car project, a privately funded venture, in cooperation with DreamEdge, a local firm. Daihatsu already is a participant in Malaysia’s second national car project called Perusahaan Otomobil Kedua, with an equity share of 35 percent. Many in Malaysia reportedly are not excited about the venture given the billions of dollars lost bailing out Malaysia’s 1^st national car project, Proton (P Prem Kumar, “Daihatsu Named Technology Partner for Malaysia’s Next National Car,” Nikkei Asian Review, August 9, 2019, https://asia.nikkei.com/Business/Automobile/Daihatsu-named-technology-pa...)

South Korea

Korea’s National Labor Relations Commission recently decided to freeze the ongoing arbitration between GM Korea and its labor union over wages and production plans because the arbitration was not progressing after seven meetings between labor union representatives and GM Korea management. This means the labor union now has the legal right to strike. Given union members widely support a strike, many expect that they now will do so. The union is seeking higher salaries and bonuses for its members and sustainable production commitments (Jung Min-hee, “GM Koreaʼs Labor Union Secures Legal Right to Strike,” Business Korea, August 9, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=34778)

As a result of Seoul’s decision in 2018 to have all public enterprises “engaged in natural resources development stop every overseas development project and sell their overseas assets” to fight corruption, Korea Resources Corp. had to sell it stake in the Cobre Panama copper mine. Chinese, Japanese, and Canadian firms bid too low for Cobre Panama, mostly likely because they knew Korea Resources had to sell. Some suggested the disposition of resource assets was foolish given the adverse effect on Korea’s resource security (Michael Herh, “Korea Resources Corp. Fails in Copper Mine Share Sale,” Business Korea, August 9, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=34779)