MNCS in the News-2020-01-31

China

The coronavirus is driving “more and more overseas companies are taking moves to shrink or even suspend their operations in the Chinese mainland.” Examples include Ikea which suspended business at all of its mainland stores and Starbucks which has closed a huge number while reducing hours at others. Telsa also has suspended production at its new Shanghai plant. Still, they remain committed to the mainland and see good long-term prospects on a number of fronts. Per one interviewee, there will be no “‘extreme moves’” (Xie Jun, “Overseas Companies Cautiously Confront Epidemic While Remaining Optimistic,” Global Times, January 30, 2020, https://www.globaltimes.cn/content/1178021.shtml)

The former Chairman of Chinese oil firm Sinopec recently opined “acquisitions by Chinese companies in Europe and the United States [US] are ‘more political sensitive than ever’ and could be severely limited for the next decade.” He further observed there would not be IT/high-tech deals and that major deals were highly unlikely. In 2019, Chinese outward foreign direct investment (FDI) fell to its lowest levels over the past 10 years (Chad Bray, “‘No way.’ Ex-Sinopec Boss Warns Chinese Firms will Shy Away from Buying Abroad as Executives Stay Cautious Amid Trade War,” South China Morning Post, January 29, 2020, https://www.scmp.com/business/companies/article/3047935/no-way-ex-sinope...)

A top Namibian transportation official recently announced that three Chinese companies (China Gezhouba Group, Qingjiang Group, and Unik Construction Engineering) had been awarded tenders to upgrade a railway line in his country, which seeks to become a logistics hub in the southern region of Africa. The railway line project is funded by the African Development Bank. Chinese firms have been quite active in Namibia, having already participated in the construction of a container terminal, oil storage facilities, and sundry road upgrading projects (“Chinese Firms Win Railway Tender in Namibia,” China Daily, January 23, 2020, http://www.chinadaily.com.cn/a/202001/23/WS5e2982c8a3101282172730c8.html)

Japan

In an effort to improve transparency as well as protect consumers and small retailers, a new Diet bill proposes requiring tech giants to submit reports on business practices to Japanese authorities annually. The bill will target major technology firms operating in Japan such as Google, Facebook, Amazon, and Rakuten. These companies also will be required to give prior notice and explanations for changing contract terms and raising fees, set up a mechanism to process complaints, and establish clearer rules regarding data collection (“Tech giants will have to report annually to Japan on business practices,” The Japan Times, January 28, https://www.japantimes.co.jp/news/2020/01/28/business/japan-reports-from...)

Toyota Motors announced it would halt operations in China until February 9 due to China’s coronavirus outbreak. Joining other multinational corporations in reducing business activities in China, Toyota said it would monitor the situation and make further decisions on February 10. The Japanese automaker already has restricted travel to Hubei province, the center of the outbreak, and requested its employees not to take unnecessary trips to China. However, the company did not comment on possible effects of the outbreak on its supply chain (“Toyota stops production in China until Feb. 9 amid coronavirus outbreak,” The Japan Times, January 29, https://www.japantimes.co.jp/news/2020/01/29/business/corporate-business...)

South Korea

Korea wants to spur growth and one way it seeks to do this is to create a better environment for startups. In particular, it wants to recruit foreign startups “to help the country become a business hub and improve the global competitiveness of local industries.” Korean officials tout the country’s infrastructure, technology level, and passage of laws to encourage business in areas like AI and big data. Korea further plans to simplify visa procedures and improve foreign language services on government websites (Baek Byung-Yeul, “SME Minister Vows to Make Korea for Foreign Startups,” The Korea Times, January 31, 2019, http://www.koreatimes.co.kr/www/tech/2020/02/133_282676.html)

South Korea’s FDI in the US reached USD $10 billion for the fourth year in a row. With the US manufacturing competitiveness index projected to reach 100 this year while South Korea’s index is declining, more South Korean companies are increasing their investments in the US. For example, Lotte Chemical recently opened an ethylene plant in Louisiana while Hyundai Motors invested another 480 billion won in its Alabama facilities. Among other things, high economic growth and low corporate tax rates contributed to the FDI increases (Jung Min-hee, “South Korean companies flocking to the United States,” Business Korea, January 29, http://www.businesskorea.co.kr/news/articleView.html?idxno=40612)