MNCs in the News-2019-12-13

China

In its 2019 report on foreign direct investment (FDI) in China, the Institute of International Economy at UIBE Beijing noted the progress that China had made in improving the environment for FDI. Examples include China’s improved negative list, its revamped foreign investment law, and its free trade zones (FTZs). However, due to the adverse global economic and political situation, the report stressed that China could do more such as enhancing the role of the market in the allocation of resources and strive to use more FDI (Jin Shuiyu, “Foreign Investment Efforts Need More Impetus,” China Daily, December 11, 2019, www.chinadaily.com.cn/a/201912/11/WS5df028c6a310cf3e3557d44d.html)

All Chinese “government offices and public institutions must remove foreign computer equipment and software within three years.” This comes in the wake of United States (US) action against Chinese firms and goods, but also fits China’s effort to achieve technological self-sufficiency. The policy may require the acquisition of 20 to 30 million new pieces of hardware, a huge boon for domestic firms. China will find it challenging to “go local” vis-a-vis software and some putatively “Chinese” hardware contains foreign parts (Yuan Yang and Nian Lu, “Beijing Orders State Offices to Replace Foreign PCs and Software,” Financial Times, December 8, 2019)

The US has been cracking down on Chinese companies and goods in various ways. The National Defense Authorization Act is the latest instance of this. The Act bans the “use of federal funds to purchase buses and passenger cars made by Chinese manufacturers,” with a two-year grandfather provision. This will affect BYD, a Chinese electric bus manufacturer which has a plant in California. Chinese analysts warned the move will hurt US jobs, ignored global economic rules, and would hurt US consumers (“Washington’s Latest bill Targeting Chinese Firms ‘Destined to’ Weigh on US Economy: Expert,” Global Times, December 11, 2019, https://www.globaltimes.cn/content/1173120.shtml)

Pakistan, reportedly under Chinese pressure, created a new China-Pakistan Economic Corridor (CPEC) authority, under military control, to expedite progress on the CPEC as well as to ensure the security of CPEC projects. The progress still will face considerable economic pressures due to Pakistan’s fiscal and current account deficits, slow economic growth, and poor trade performance. Pakistan also has a considerable debt burden, some related to CPEC, with which it must grabble. Beijing, though, has rejected US charges that it is burdening Pakistan with debt (Stephanie Findlay, “Pakistan Revives Belt and Road Projects Under Chinese Pressure,” Financial Times, December 10, 2010)

Japan

The labor union at Uber Eats Tokyo recently protested over the US tech giant’s decision to lower the base pay of workers. According to the union, Uber slashed base pay from 793 to 621 yen without a proper explanation. Uber countered it was free to do so because its staff is recognized as independent contractors, not regular workers, under Japanese law. Uber previous has been criticized about not providing insurance for accident compensation and other benefits usually enjoyed by regular workers (“Uber Eats labor union in Japan calls for pay cuts to be reversed,” The Mainichi, December 6, 2019, https://mainichi.jp/english/articles/20191206/p2g/00m/0bu/042000c)

Japan’s Asahi Group Holdings Ltd.’s plan to buy Anheuser-Busch InBev’s local Australian operations for USD $11 billion is at risk due to antitrust concerns of the Australian Competition and Consumer Commission (ACCC). The deal, which would make Asahi the world’s third-largest brewer, is part of Anheuser-Busch’s plan to reduce its $100 billion debt and focus on other markets. The ACCC fears that the Asahi acquisition might reduce competition in Australian cider and beer markets and constrain other competitors (“Blow for AB InBev's $11 billion asset sale to Asahi as Australian regulators raise concerns,” The Japan Times, December 12, 2019, https://www.japantimes.co.jp/news/2019/12/12/business/corporate-business...)

South Korea

South Korea’s reported inward FDI (IFDI) in 2019 reached $20.3 billion, the fifth consecutive year that its IFDI exceeded the $20 billion mark. On a year-over-year (YOY) basis, reported IFDI fell in the first and second quarters of this year and only rebounded in the third quarter due to several large-scale investment projects in October. However, realized IFDI often runs lower than reported data. For example, actual IFDI in the third quarter totaled $1.36 billion, a decrease of 32.7 percent YOY (Jung Suk-yee, “Actual FDI On the Decline Despite Continuous Increase in Reported Investment,” Business Korea, December 10, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=39055)

Korean consortium HPH Joint Venture, which consists of Hyundai Engineering & Construction and POSCO Engineering & Construction, might lose its $2.5 billion bid to build Line 3 of the Panama Metro project. HPH was initially awarded the bid based on the evaluation commission’s bid assessment. However, the Public Procurement Directorate partially annulled the report and requested a re-evaluation of proposals submitted by, respectively, HPH and China Railway Group. Observers believe the decision might have been made under pressure from the Chinese government (Jung Min-hee, “Korean Consortium Could Lose US$2.5 Bil. Panama Metro Construction Project,” Business Korea, December 12, 2019, http://www.businesskorea.co.kr/news/articleView.html?idxno=39187)