MNCs in the News-2019-08-30

China

China will implement fully its social-credit system in 2020. The system, already in place for individuals, will soon be applied to companies. Foreign firms fear China will use it abusively against them, with them possibly losing access to privileges, receiving punishments, or facing stricter supervision. Foreign corporate fears are exacerbated by the fact China also is creating a list of foreign unreliable entities and that “a company’s social credit could affect the individual credit score of the company’s key personnel and vice versa” (Yoko Kubota, “China’s Potential New Trade Weapon: Corporate Social Credits,” Wall Street Journal, August 27, 2019, https://www.wsj.com/articles/chinas-potential-new-trade-weapon-corporate...)

China’s State Council announced it would establish six pilot free trade zones (FTZs) in six different provinces: Shandong, Jiangsu, Guangxi Zhuang, Yunnan, Hebei, and Heilongjiang. The purpose of the FTZs would be to create “‘high-standard, high-quality’” FTZs that would provide a way to test reforms in sectors like finance, healthcare, and technology as well as opening up measures and attract foreign direct investment (FDI) in the aforementioned and other areas. These FTZs have the special role of “boosting trade with neighboring countries and regions” (“Six New Pilot FTZs will Test Further Reform, Opening-Up Measures,” Global Times, August 26, 2019, http://www.globaltimes.cn/content/1162742.shtml)

United States (US) President Donald Trump recently called upon American companies to leave China. The head of the US-China Business Council opined, though, that “‘Our members are in China for the long term. None of them are anticipating orders to leave.’” Despite the Sino-US trade war, which has cost American companies market share, and a tough regulatory environment in China that burdens them with discriminatory policies, they view China as a future source of global growth and a large percentage are profitable (James Politi, “US Companies Unlikely to Heed Trump’s Call to Leave China,” Financial Times, August 29, 2019, https://www.ft.com/content/d9490bae-ca81-11e9-a1f4-3669401ba76f)

China’s top leader President Xi Jinping and Philippine’s President Rodrigo Duterte just met in Beijing. During the visit, Duterte raised issues pertaining to China’s activities in the South China Sea such as the passage of Chinese warships through the Philippine’s territorial waters. Chinese President Xi did not accept Duterte’s charges and requests, but he did call for the two sides to consider joint development of oil & gas in the Reed Bank area. The Philippines already has proposed a 60-40 split for joint development (“China’s Xi sees Bigger Role for Joint Energy Exploration with Philippines,” Reuters, August 29, 2019, https://www.reuters.com/article/us-china-philippines/chinas-xi-sees-bigg...)

Japan

Tokyo has been increasing the attention it gives to tax maneuvers, such as profit shifting to subsidiaries, by high-tech giants like Amazon, Apple, and Google. It recently concluded that some profits Facebook was booking in Ireland should be booked in Japan, which has a 30 percent corporate tax rate versus Ireland’s 12.5 percent. “Facebook is believed to have corrected its tax declaration and paid the additional levies of over ¥100 million imposed by the Tokyo Regional Taxation Bureau” (“Tax body finds Facebook Japan failed to report ¥500 million in income over two years,” The Japan Times, August 29, 2019, https://www.japantimes.co.jp/news/2019/08/29/business/corporate-business...)

The Tokyo International Conference on African Development (TICAD) has concluded. Following the event, Japan and 53 African countries signed the Yokohama declaration which stressed “‘quality infrastructure investment.’” The declaration also “‘took good note of’ Prime Minister Abe Shinzo’s Free and Open Indo-Pacific Initiative.” For some, the 7^th TICAD and the Yokohama Declaration allowed Japan to challenge China’s infrastructure activities. Following TICAD 7, Japan is sending experts to African countries to train them about debt and risk issues (Reiji Yoshida, “TICAD closes with effort by Japan to differentiate its African investment projects from China’s,” The Japan Times, August 30, 2019, https://www.japantimes.co.jp/news/2019/08/30/national/politics-diplomacy...)

South Korea

In 2016, Seoul established a new policy for network fees. In late August, a Facebook Korea executive stated the government’s “interconnection standards on telecommunications equipment and facilities have created an environment in which data transmitters’ costs cannot but increase and content providers’ burden will be shifted to users.” In an effort to escape some of the aforementioned fees, Facebook rerouted traffic which led to poorer service and a fine for the poorer service. Facebook sued the government over the fine and won (Kim Eun-Jin, “Facebook Putting Pressure on South Korean Government and Mobile Carriers,” Business Korea, August 28, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=35410)

The Korea Startup Forum, the Korea Internet Corporations Association, and local and foreign content providers such as Naver and Netflix released a statement calling upon Seoul “to completely overhaul its network fee calculation structure.” They charged the new network fee policy had forced South Korean mobile carriers to pay “usage-based connection fees” which in turn were passed on to content providers. They further highlighted that the new policy “‘is adversely affecting the international competitiveness of South Korea’s IT industry and local users’ convenience’” (Kim Eun-Jin, “Google and Naver Call for Network Fee System Improvement,” Business Korea, August 27, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=35341)