MNCs in the News-2020-02-21

China

China’s Ministry of Commerce (MOFCOM) reported that non-financial inward foreign direct investment (FDI) grew 4 percent in January over the same period last year. According to MOFCOM data, notable contributors to inward FDI (IFDI) included South Korea (157.1 percent increase), Japan (50.2 percent increase), and Singapore (40.6 percent increase). IFDI flowing into the high-tech sector represented about 36 percent of the total, with particularly great interest reflected in the medical equipment and instrumentation sector and, to a much lesser degree, the pharmaceutical sector (Zhong Nan, “FDI Climbs in January,” China Daily, February 17, 2020, http://www.chinadaily.com.cn/a/202002/17/WS5e4a03e3a3101282172780c9.html)

At a recent event orchestrated by the Hong Kong Trade Development Council in the United States (US), a survey of attendees revealed they were enthusiastic about the “Greater Bay Area” (GBA) development initiative because of the size of the GBA’s consumer market, opportunities to offer services and products, and Beijing’s liberalizing policy measures such as the opening of the mainland China market to Hong-Kong-based legal and entertainment service providers. Still, capital controls, US-China trade frictions, and legal, policy, and regulatory issues may hinder FDI (HKTDC Research, “US Companies Upbeat on the Great Bay Area,” The HKTDC TATHK Survey 2019, http://economists-pick-research.hktdc.com/business-news/article/Research...)

The coronavirus seems to have “choked key elements of…[the] Belt and Road Initiative.” Reasons include travel restrictions in China and in project host countries as well as factory closures in China. As a result of these factors, projects are short of the laborers and managers, machinery, and parts that they previously have been sourcing from China. Specifically, the Jakarta-Bandung railway in Indonesia, the Sihanoukville Special Economic Zone (SEZ) in Cambodia, and the Payra coal power plant in Bangladesh have experienced adjustments or stoppages (Keith Zhai and Matthew Tostevin, “Coronavirus Slows China’s Belt and Road Push,” Reuters, February 18, 2020, https://www.reuters.com/article/us-china-health-silkroad/coronavirus-slo...)

China Railway Group Ltd. and Power Construction Corp. of China both have rejected foreign media claims that Indonesia’s Jakarta-Bandung high-speed railway project “has hit obstacles amid the novel coronavirus pneumonia outbreak.” Their representatives as well as one interviewee countered that people are working nonstop; that “‘the report exaggerated the situation,’” and that materials shortages are not a big deal. At a press conference, a MOFCOM spokesperson noted that “overseas projects invested and operated by Chinese companies are stable overall” (Ma Jingjing and Li Qiaoyi, “Contractors Deny Western Reports that Jakarta-Bandung High-Speed Railway Construction Hindered,” Global Times, February 20, 2020, https://www.globaltimes.cn/content/1180284.shtml)

Japan

Foreign investors seeking to purchase 1 percent or more stakes in twelve strategic sectors in Japan will be subject to prescreening procedures. These sectors include arms, aircraft, space-related industries, nuclear power, and general-purpose products with the potential to be used for military purposes. The new rule is an integral part of the Foreign Exchange and Foreign Trade Act, which was adopted by the Japanese Diet in November 2019 and aims to prevent foreign influence in companies critical to Japan’s national security (Mariko Kodaki, “Japan tightens entry of foreign investors in 12 strategic sectors,” Nikkei Asian Review, February 21, 2020, https://asia.nikkei.com/Economy/Japan-tightens-entry-of-foreign-investor...)

A joint venture between Japanese general contractor Shimizu Corp. and Indonesian state-owned construction company P.T. Adhi Karya will undertake an extension of Jakarta’s mass rapid transit system. The contract, which is worth USD $295 million, covers the design and construction of train stations along an 11.8 km northward extension of the North-South Line. The work will begin in March and is expected to be completed in December 2024. The project is expected to ease Jakarta’s notorious traffic congestion (“Work to begin on Jakarta's mass rapid transit extension next month,” Mainichi Shimbun, February 18, 2020, https://mainichi.jp/english/articles/20200218/p2g/00m/0bu/043000c)

South Korea

The US International Trade Commission (ITC) recently issued a default judgment in favor of Korea’s LG Chem in its legal wrangle with SK Innovation over the latter’s infringement of its trade secrets. In April 2019, LG Chem filed a lawsuit in Washington claiming SK Innovation had stolen trade secrets relating to electric vehicle rechargeable batteries. The ITC is expected to issue a final ruling in October, which might result in a ban on the import of SK Innovation's products into the US (Michael Herh, “LG Chem Wins Battery Lawsuit against SK Innovation in U.S.,” Business Korea, February 17, 2020, http://www.businesskorea.co.kr/news/articleView.html?idxno=41391)

Korean tech giant Samsung has been put in a bind due to its decision to scale back business in Iran as evidenced by its move to restrict Galaxy Store app services for Iranian users, perhaps due to American sanctions. Per the Iranian Ministry of Information and Communication Technology, Iran might refuse entry to Samsung executives and staff and might exclude their cellphones from registration with Iranian mobile networks. Iranian authorities also warned the country might boost cooperation with Chinese tech firms like Huawei and Xiaomi (Song Su-hyun, “Iran warns Korean tech firms: reports,” The Korea Herald, February 19, 2020, http://www.koreaherald.com/view.php?ud=20200219000756&np=1&mp=1)