MNCs in the News-2020 July

China

In mid-July, Chinese President Xi Jinping sent a letter to the Global CEO Council in which he said that his country “‘will provide a better business environment for Chinese and foreign enterprises [to help them] explore new opportunities and new prospects,’” adding “‘You’ve made the correct choice of putting down your business roots in China.’” He further stated China would work for an open world economy and called for foreign business to cooperate with Chinese ones (Zhou Xin, “China President Xi Jinping Promises Foreign Firms Reform, Opening Up Amid Heightened US Tensions,” South China Morning Post, July 16, 2020, https://www.scmp.com/economy/china-economy/article/3093407/china-preside...)

China has announced it will impose (unspecified) sanctions on United States (US) firm Lockheed Martin, a major defense contractor, for selling weapons to Taiwan. Some see the lack of specificity and the failure to target more firms as evidence of limited Chinese options, especially since China previously stated it had compiled an “Unreliable Entity List.” It is unclear what is driving Chinese restraint, though China’s desire for greater foreign direct investment (FDI) and capital may be germane (Cissy Zhou, “China’s Lockheed Martin Sanctions Reveal Limited Options in Fighting Economic War with US,” South China Morning Post, July 21, 2020, https://www.scmp.com/economy/china-economy/article/3094024/chinas-lockhe...)

China’s tough cybersecurity laws and regulations have driven US investment banking firm Morgan Stanley to prevent its interns in China from remotely logging on to its virtual network. These laws and regulations pertain to the sharing of data across borders, Chinese government reviews of critical information systems, and political sensitive content. The limited experience of interns and their unfamiliarity to the bank drove the bank to opt for restricted access. Reportedly, Morgan Stanley further worried interns might present risks to the bank’s technology systems (Laura Noonan, “Morgan Stanley Blocks Remote Network Access for China Interns,” Financial Times, July 22, 2020)

As a result of special interest group pressures and its own development goals, the Indian government has periodically imposed various trade barriers on Chinese solar equipment to facilitate the development of India’s domestic solar industry. The recent border clash between India and China has only magnified India’s desire to reduce its dependence on Chinese imports, including solar goods. In line with this, New Delhi is examining various means “to discourage developers to import Chinese equipment and encourage investors to develop domestic manufacturing facilities” (Smiti, “India Looking to Strengthen Domestic Solar Manufacturing, Reduce Dependence on China,” CleanTechnica, July 12, 2020, https://cleantechnica.com/2020/07/12/india-looking-to-strengthen-domesti...)

In the wake of the US Pentagon stating China’s CRRC “was backed by the Chinese military” various special interest associations representing railways, steelworkers, and steel and other manufacturing interests sent a letter to US Treasury Secretary calling for sanctions against CRRC pursuant to the International Emergency Economic Powers Act. In the letter, they contend action against CRRC, which has won a number of passenger rail car bids in the US, is needed to protect the “‘economic and national security of the United States’” (Alexandra Alper, “China’s CRRC Should be Sanctioned by U.S., Lobby Groups Say,” Reuters, July 22, 2020, https://www.reuters.com/article/us-usa-china-crrc-sanctions/chinas-crrc-...)

Following the bloody Sino-Indian border clash in mid-June, many Indians have called for the boycott of Chinese smartphone products. However, many are skeptical the backlash will have a meaningful impact given the dominant market share of Chinese phone brands like Xiaomi and Oppo and the poor supply chains of Indian and other brands in India as well as their lack of price competitiveness. Chinese smartphones also have strong brands and marketing channels. Still Indian government actions such as delaying parts shipments are causing problems for Chinese smartphone companies (“Chinese Phone Brands Prevailing in India,” Global Times, July 22, 2020, https://www.globaltimes.cn/content/1195359.shtml)

Japan

During their negotiations about a trade pact, Japanese and British negotiators have come to an agreement on advanced digital standards whereby neither side would “force their companies to disclose algorithms or set up local data servers” and related facilities. Aside from advancing their companies’ interests in protecting corporate secrets and conducting more efficient operations, the two sides apparently hope their agreement may facilitate an international agreement allowing for the free flow of data and the protection of intellectual property (“Japan and Britain Agree to Protect Encryption Keys in Upcoming Trade Pact, Report Says,” The Japan Times, July 25, 2020, https://www.japantimes.co.jp/news/2020/07/25/business/economy-business/j...)

A growing number of shareholders, some influenced by shareholder advisory groups, will support “a resolution to curb coal project lending” that will be presented at the annual meeting of Mizuho Financial Group. Japanese financial institutions have been “one of the last remaining major holdouts on financing coal.” Mizuho’s Board of Directors, however, opposes the resolution, saying it already has mechanisms in place to ensure projects contribute to the Paris accord on climate change. Some key shareholders have not said how they will vote (“Environmental Shareholder Activism Comes to Japan as Mizuho Faces Climate Resolution,” Japan Times, June 23, 2020, https://www.japantimes.co.jp/news/2020/06/23/business/corporate-business...)

The Japan External Trade Organization (JETRO) reported that Tokyo has given support to 15 Japanese companies to move factories to Vietnam. JETRO said “this was a move to improve the gap in the Japanese supply chain since the spread of the COVID-19 pandemic” as well as to reduce dependence on China. Japan also is spending more than USD $650 million for nearly 90 Japanese companies to move production lines to places such as Myanmar, Thailand, and Vietnam and to move other projects to Japan (“Japan Helps 15 Companies Move Factories to Viet Nam,” Viet Nam News, July 21, 2020, https://vietnamnews.vn/economy/769860/japan-helps-15-companies-move-fact...)

The Burmese government has formally approved plans for Japan’s Marubeni, Sumitomo Corp., and Mitsui & Co. to build a $1.5-2 billion 1,250 megawatt liquefied natural gas (LNG) power plant that will generation power equivalent to 1/5th of the country’s existing power generation capacity. The project, which will be located in a port area near the Thilawa Special Economic Zone, will take 2-1/2 years and also entail a terminal for offloading LNG. The Japanese companies also will play a role in the plant’s operations (Yuichi Nitta, “Myanmar Approves Japanese Plans for LNG Power Plant,” Nikkei Asian Review, July 25, 2020, https://asia.nikkei.com/Business/Energy/Myanmar-approves-Japanese-plans-...)

South Korea

Following a meeting of government ministers, the Korean government announced it will spend approximately $4.1 billion to support an innovation-based economy. It will do so by funding various artificial intelligence, data economy (data platforms and sharing economy), hydrogen economy, biotechnology, and healthcare projects. Specific projects will involve “smart factories, smart farms, fintech, the new energy industry, smart cities, future cars, and so on.” Seoul also intends to adopt measures to support small- and medium-sized enterprises using big data (Jung Suk-Yee, “Korean Government to Invest 5 Tril. Won to Spur Development of Materials, Parts, and Equipment,” BusinessKorea, July 13, 2020, http://www.businesskorea.co.kr/news/articleView.html?idxno=24292)

The European Union (EU) will recommence its investigation of the merger of Daewoo Shipbuilding & Marine Engineering (DSME) and Hyundai Heavy Industries Holdings (HHIH). The EU worries that the DSME-HHIH merger could “‘reduce competition in…global cargo shipbuilding’” because the “‘combined entity would have a strong position in the liquified natural gas vessel market,’” among other market segments. This particularly concerns the EU given maritime transport represents a notable percentage of its freight trade and the EU has many of the world’s largest shipbuilding companies (Kim Yoo-Chul, “EU Confirms Restart of Probe into HHIH-DSME Deal,” Korea Times, July 19, 2020, https://www.koreatimes.co.kr/www/tech/2020/07/129_293035.html)

Incheon Port Authority (IPA) has joined the United Nations Global Compact (UNGC) “to promote the sustainable development of IPA through compliance with international norms in the fields of the environment, labor, human rights, and anti-corruption. Currently, 10,000 companies are members of the UNGC. UNGC principles will influence IPA employee practices, IPA equipment selection and operation choices, and corporate social responsibility reporting and the IPA wants UNGC norms to influence port-related agencies and private firms (Michael Herh, “Incheon Port Authority Joins UNGC to Promote Sustainable Development,” BusinessKorea, July 7, 2020, http://www.businesskorea.co.kr/news/articleView.html?idxno=48621)

Huawei has been facing a global backlash, most recently reflected in the United Kingdom’s decision to require the removal of all Huawei technology from the country’s 5G systems by 2027. Some wonder if this will create opportunities for Samsung which has been trying to win 5G deals in the US, UK, and elsewhere. Some, though, see Sweden’s Ericsson as much better placed and indeed in many countries Nokia has a bigger market share than Samsung. Still if Samsung has good prices it may find opportunities (Baek Byung-Yeul, “Will Samsung Benefit from Rising Huawei Ban?” Korea Times, July 20, 2020, https://www.koreatimes.co.kr/www/tech/2020/07/133_293098.html)

*The information compiled in the MNCs in the News digest is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content of the MNCs in the News digest does not necessarily represent the view of the Wong MNC Center, its Board of Directors, or its Advisory Board, but is intended for the non-commercial use of readers in order to foster debate and discussion and to facilitate and stimulate research.