MNCs in the News-2019-10-25

China

China has issued a draft of implementation regulations for the new foreign direct investment (FDI) law that it adopted in March 2019. American and European industrial association like the European Chamber of Commerce have commented positively on the regulations since they inter alia provide stronger intellectual property rights (IPR) enforcement and empower foreign companies to participate in standards-setting activities and government procurement. There remain concerns, though, about vague provisions pertaining to trade secrets, technology transfer, and national security. Not surprisingly, implementation remains a longer-term concern (“China’s New Investment Law a Positive Step, Foreign Firms Say,” Bloomberg, October 22, 2019, https://www.bloomberg.com/news/articles/2019-10-23/china-s-new-investmen...)

At a press conference, a senior China’s National Development and Reform Commission official touted China’s efforts to improve the enforcement of IPR. Per the official, among other signs of progress, China has “tightened the crackdown on IPR violations, improved the IPR penalty system, improved the efficiency of IPR reviews, and strengthened international cooperation in IPR protection.” In his view, the improvement is reflected by notable year-over-year (YOY) increases in foreign patent and trademark applications in China. The official stressed “‘compulsory technology transfer will absolutely not be allowed’” (“China Continues to Further Strengthen IPR Protection,” Global Times, October 23, 2019, http://www.globaltimes.cn/content/1167765.shtml)

Two US Senators have sent a letter to the United States (US) acting director of national intelligence asking for a review of the security risks posed by TikTok, a video-sharing platform that is owned by ByteDance. They apparently seem to believe TikTok poses a threat because Chinese firms apparently have to share user information “with Chinese intelligence officers.” They also dislike the fact that TikTok reportedly has censored materials. Several weeks previously, another US Senator asked for an investigation of ByteDance’s purchase of Musical.ly (“Kiren Stacey and Tim Bradshaw, “US Senators Call for TikTok Investigation,” Financial Times, October 24, 2019)

Tanzania has proposed 5 new conditions for the USD $10 billion Bagamoyo port project that China Merchants Holdings International (CMHI) must accept if it wants to continue running the project. First, CMHI will only get a 33-year rather than a requested 99-year lease. Second, it will not get a tax holiday. Third, it will not get special utility rates. Fourth, all operations in the port were subject to government approval. Fifth, the government could develop other ports that competed with Bagamoyo if it so desired (“Tanzania Gives Chinese Firm Conditions for Bagamoyo Port,” The East African, October 21, 2019, https://www.theeastafrican.co.ke/business/Tanzania-gives-chinese-firm-co...)

Japan

Japan’s Hitachi wants to expand its markets beyond Europe and Japan, which together accounted for nearly 80 percent of its rail business revenue last fiscal year, due to uncertainties flowing from Brexit and Japan’s potentially weak growth. Consequently, it is seeking to win contracts for railway projects in Texas and Bangkok. Regarding the former, Hitachi might supply rolling stock and signaling systems for a route connecting Houston and Dallas. For the latter, it looks to join a project linking airports around Bangkok (Kiu Sugano, “Hitachi targets high-speed rail projects from Texas to Thailand," Nikkei Asian Review, October 24, 2019, https://asia.nikkei.com/Business/Transportation/Hitachi-targets-high-spe...)

Japanese clothing retailer Uniqlo, owned by Fast Retailing, had to pull a commercial airing in South Korea after receiving criticism it mocked victims of wartime labor and “comfort women.” Words in the commercial from one participant sparked a strong online protest in South Korea, with online protestors demanding an apology from Uniqlo and boycott of its products. Uniqlo withdrew the commercial and insisted the ad had no political motives. Fast Retailing already has suffered a substantial sales drop due to fraying Japan-South Korea relations (“Uniqlo under fire in South Korea over TV commercial,” Nikkei Asian Review, October 22, 2019, https://asia.nikkei.com/Spotlight/Japan-South-Korea-rift/Uniqlo-under-fi...)

South Korea

The Iraqi Port Authority awarded South Korean Daewoo Engineering & Construction (Daewoo E&C) a construction project worth $86 million to build a prefabrication yard for an immersed tunnel in southern Iraq that will connect Umm Qasr and Al Faw. This project is part of the Iraqi government’s plan to transform Al Faw New Port into one of the world’s largest ports via connections with neighboring countries. Beyond this project, Daewoo E&C has won three other construction projects in Iraq this year (Michael Herh, “Daewoo E&C Wins US$86 Mil. Prefabrication Yard Construction Project in Iraq,” Business Korea, October 22, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=37234)

US trade restrictions against Chinese telecommunication giant Huawei have had differential effects on Korea’s Samsung and SK Hynix. Not surprisingly since Huawei is a major buyer of its memory chips, semiconductor supplier SK Hynix has been significantly affected by US restrictions and its Q3 earnings are estimated to be only 429.7 billion won. In contrast, Samsung saw its Q3 profits increase to 7.7 trillion won due to Huawei’s slumping position in the European phone market and global communications equipment market (Kim Eun-jin, “Samsung Electronics and SK Hynix Differently Affected by U.S. Restrictions on Huawei,” Business Korea, October 22, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=37223)