MNCs in the News-2019-11-08

China

Recently, China’s Ministry of Justice issued draft implementation rules pertaining to China’s new foreign direct investment (FDI) law. Of note, the guidelines provide for stronger penalties for intellectual property rights (IPR) violations, call upon government units to establish structures as well as policies and regulations to protect the business secrets they obtain in the normal course of their duties, and restrict the circumstances under which local governments and government units can break contracts in the absence of pressing national and social interests (Li Qiayi and Wang Cong, “China Issues New Guidelines for Foreign Investment,” Global Times, November 1, 2019, http://www.globaltimes.cn/content/1168696.shtml)

Prior to the China International Import Expo (CIIE), the European Chamber of Commerce in China warned of “promise fatigue” or the situation where businesses became tired of Beijing’s unfulfilled promises regarding FDI and said China had to “make rapid and substantial improvements.” China retorted there was no promise fatigue and it “‘would spare no effort in fulfilling its promises and commitments.’” While European Union (EU) firms have many of the same problems as do American ones, the EU has opted for a different strategy than Washington (“China Says No ‘Promise Fatigue’ on Opening Its Economy,” Reuters, November 4, 2019, https://www.reuters.com/article/us-china-trade-expo-eu/china-says-no-pro...)

As part of China’s efforts to enhance the FDI environment, its State Council recently “put forward 20 opinions in expanding opening-up, including the removal of all business restrictions on foreign banks, brokerages and fund management firms.” It specifically called for all scope restrictions on foreign banks, securities companies, and fund management companies to be removed. It also called for the reduction of various quantitative entry restrictions (e.g., operating history and total assets) in the banking and insurance industries (Ma Jingjing, Wang Yi, and Chi Jingyi, “China to Scrap Business Limits on Foreign Finance Firms,” Global Times, November 7, 2019, http://www.globaltimes.cn/content/1169357.shtml)

Ernst & Young, a consultancy, issued a report stating Chinese merger and acquisition (M&A) activity soared in the third quarter of 2019 relative to the second. Still, at USD $42.8 billion, it was almost 45 percent lower than the 2018 January through September period and was the lowest record M&A amount since 2014! “Consumer products, technology, media, and telecommunications, and financial services presented the lion’s share of M&A (Pearl Liu, “Chinese Overseas M&As Jumped 152 Percent in Third Quarter, but still More than 40 Per Cent Behind 2018, Ernst & Young Says,” South China Morning Post, November 6, 2019, https://www.scmp.com/business/companies/article/3036463/chinese-overseas...)

Japan

A survey by Japan’s Fair Trade Commission (FTC) highlighted that several of online shopping site operators’ practices such as prioritizing products made by themselves or their affiliates in users’ search results or requiring user companies to sell their products at a lower price than on other sites could be considered violations of the country’s anti-monopoly law. The FTC’s survey was part of government efforts to encourage fair competitive environment and strengthen the regulation of information technology corporations like Amazon, Apple, and Google (“Manipulation of search results may violate antitrust law, says Japan’s FTC,” The Japan Times, November 1, 2019, https://www.japantimes.co.jp/news/2019/11/01/business/manipulation-searc...)

Brexit had an unfavorable impact on 54 percent of Japanese companies with operations in the United Kingdom, an increase of 28.7 percentage points compared to last year, according to a survey conducted by the Japan External Trade Organization. Survey respondents were particularly concerned about the increased cost of developing inventories in case of Brexit because logistics and custom arrangements might become confusing for businesses. Companies also have had to limit capital spending as their customers consider relocation of operations (“Brexit having a negative impact on 54% of Japanese companies in U.K., survey shows,” The Japan Times, November 2, 2019, https://www.japantimes.co.jp/news/2019/11/02/business/economy-business/j...)

South Korea

The Chinese government’s plan to phase out its subsidy program for electrical vehicles using domestically produced battery by 2021 might offer opportunities for South Korean corporations to expand their operations in China. SK Innovation already set up its own subsidiary, “BEST,” in China in 2017 and is building its first factory in Changzhou. LG Chem plans to establish a joint venture with a domestic vehicle manufacturer, while Samsung SDI also anticipates new business opportunities other than the European market once subsidies are abolished (Jung Min-hee, “Korean EV Battery Makers Seeking to Penetrate Chinese Market,” Business Korea, November 7, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=37751)

South Korean payment services provider Alliex has entered a partnership with Vietnam's Central Bank to establish a cashless payment system in Vietnam. With an initial investment of $700 million, the system could come into operation next year. Cashless payment in South Korea accounts for over 90 percent of transactions, while Vietnam is still learning to establish its own system. Through this partnership, Alliex hopes to take advantage of business opportunities provided by a free trade agreement between Vietnam and South Korea (Yuichi Shiga, “Cashless in Vietnam: South Korea's Alliex partners with central bank,” Nikkei Asian Review, November 7, 2019, https://asia.nikkei.com/Business/Business-deals/Cashless-in-Vietnam-Sout...)