MNCs in the News-2020 June

China

According to China Ministry of Commerce data, in April and May 2020, nonfinancial sector inward foreign direct investment (FDI) grew, respectively, 11.8 percent and 7.5 percent year-over-year (YOY). Observers expect continued growth over the second half of the year because of China’s growth prospects, fiscal measures, and opportunities in manufacturing and services. There also is a belief sectoral openings, the shortening of the inward FDI (IFDI) negative list, improvements in intellectual property protections, and free trade zone enhancements will spur IFDI (Zhong Nan and Cheng Yu, “FDI Growth Predicted for Second Half of Year,” China Daily, June 23, 2020, https://www.chinadaily.com.cn/a/202006/23/WS5ef13b15a310834817254b86.html)

China is trying to encourage more IFDI in its Western regions and has launched a new development plan offering subsidies and tax breaks. Foreign companies appear rather unexcited because they are distracted by other pressing challenges, past ventures outside China’s East have not gone well, and many areas in Western China do not fit their business plans. Beyond this, FDI in places like Tibet and Xinjiang may direct human rights scrutiny on them (Finbarr Bermingham, “China’s Go West Plan Fails to Capture Imagination of Foreign Firms suffering from ‘Regional Development Plan Fatigue,’” South China Morning Post, June 26, 2020, https://www.scmp.com/economy/china-economy/article/3090613/chinas-go-wes...)

The China Securities Regulatory Commission (CSRC) intends to give some Chinese banks the right to conduct investment banking business on the Chinese mainland. Beijing wants to ensure local firms can compete with foreign giants such as Credit Suisse, Goldman Sachs, and Morgan Stanley which are pouring into China’s steadily opening financial sector. The CSRC will start with a pilot program reportedly involving Industrial and Commercial Bank of China (ICBC) and one other bank. There are some Chinese banks doing investment banking through Hong Kong subsidiaries (“China Plans to Grant Investment Banking Licenses to Lenders: Caixin,” Reuters, June 28, 2020, https://www.reuters.com/article/us-china-bank-securities/china-plans-to-...)

The United States (US) Pentagon, pursuant to US Congressional requirements, finally has generated a list of 20 Chinese companies with links to China’s military that operate “‘directly or indirectly’” in the US. This list can be used as the basis for US presidential sanctions, though it need not be. The hope from so-called China hawks seems to be that it will encourage investors to retreat from such companies. Named companies include China Mobile, Huawei, and Hikvision and firms in aviation and nuclear power (Demetri Sevastopulo and Katrina Manson, “Pentagon Lists 20 Companies Aiding Chinese Military,” Financial Times, June 25, 2020)

India’s Ministry of Electronics and Information Technology has banned 59 Chinese mobile apps. It charges that these apps, which include Tik Tok, and WeChat, endanger the privacy rights of Indian users and compile and mine data in a way that is “‘hostile to the national security and defense of India.’” The action will seriously impact certain Chinese companies given the number of their Indian users. After the deadly border encounter between India and China, New Delhi also interfered with imports from China and took other actions (Stephanie Findlay, “India Bans Dozens of China Mobile Apps,” Financial Times, June 30, 2020)

Following a recent deadly border clash that led to the death of 20 Indian soldiers, the state government of Maharashtra, the home of India’s financial capital Mumbai, froze investment proposals from three Chinese businesses including Great Wall Motor Co. The Minister of Industries for Maharashtra, emphasizing that the state’s three agreements with Chinese firms were not cancelled, stated, “‘In the current environment we will wait for the federal government to announce a clear policy regarding these projects’” (Rajendra Jadhav and Aditi Shah, “Indian State Puts Three Chinese Investment Proposals on Hold after Deadly Border Clash,” Reuters, June 22, 2020, https://www.reuters.com/article/us-india-china-investment/indian-state-p...)

Japan

Japan recently has added select medical fields, particularly technologies related to dealing with the coronavirus pandemic, to the list of domestic industrial sectors subject to foreign investment restrictions. Restrictions, which will take effect on July 15, previously covered sectors such as nuclear power, cybersecurity, and arms production. Foreign investors are required to notify authorities in advance if they buy a stake of 1 percent or higher in 558 designated Japanese firms. However, foreign investors might enjoy an exemption if their investment relates to asset management (“Japan to tighten foreign investment regulations on medical fields,” The Mainichi, June 15, 2020, https://mainichi.jp/english/articles/20200615/p2g/00m/0na/071000c)

The Japanese government plans to use funds allocated to its New Energy and Industrial Technology Development Organization to support Japanese electronics makers and telecommunications companies to develop 5G wireless technologies so they can catch up with other players. Japanese firms such as NEC and Fujitsu lag competitors such as Huawei, Ericsson, and Nokia. NEC already is working with Nippon Telegraph and Telephone to codevelop 5G wireless network technology while Fujitsu is moving to test small-scale local 5G technologies (“Japan to Aid Firms Working on Next-Gen 5G in Bid to Catch Up with China,” The Japan Times, June 29, 2020, https://www.japantimes.co.jp/news/2020/06/29/business/tech/japan-aid-5g)

Japan’s beverage group Kirin Holding will commission an audit of its joint venture (JV) partner, Myanmar Economic Holdings Limited (MEHL), over allegations that its JV conglomerate channels funds to Myanmar’s military, which is accused of human rights abuses. Specifically, a United Nations report alleges Myanmar’s senior military leaders wield great influence over MEHL. If this allegation proves accurate, Kirin, which has come under criticism from human rights groups for their partnership with MEHL, will have to rethink their business strategy in Myanmar (Yuichi Nitta, “Kirin to probe Myanmar partner over army funding allegations,” Nikkei Asian Review, June 6, 2020, https://asia.nikkei.com/Business/Food-Beverage/Kirin-to-probe-Myanmar-pa...)

Indonesia and Japan have started discussions about Japan’s potential involvement in the high-speed railway project between Jakarta and Bandung. Specifically, Indonesian officials are proposing to link the Jakarta-Bandung line, which is built by Chinese investors, with a Japan-Indonesia infrastructure project connecting Jakarta and Surabaya. Project delay and cost overruns on the Jakarta-Bandung line has spurred Indonesian authority to expand the railway link to Surabaya and court Japanese FDI. Nevertheless, Japan, which already launched a feasibility study for the Jakarta-Surabaya link, is still unsure (Koya Jibiki, “Indonesia woos Japan as China-led high-speed-rail project stalls,” Nikkei Asian Review, June 8, 2020, https://asia.nikkei.com/Business/Transportation/Indonesia-woos-Japan-as-...)

South Korea

Korea Communications Commission (KCC) announced that Google would correct its subscription practices related to its YouTube Premium service. Specifically, Google will allow consumers to cancel their subscription immediately without having to wait until the end of the subscription period. Subscribers are also eligible for refunds and do not have to pay service charges after cancellation. These voluntary corrections were announced after KCC had imposed a fine of 867 million won on the tech giant for violating South Korean telecommunication laws (“Google to correct unfair subscription practices for YouTube Premium service in S. Korea,” The Korea Herald, June 25, 2020, http://www.koreaherald.com/view.php?ud=20200625000947&np=2&mp=1)

South Korea’s overseas FDI (OFDI) in the first quarter of 2020 fell 15.3 percent to US $12.62 billion. While the months of January and February only saw a small decrease, OFDI plunged 45.6 percent in March YOY. OFDI in finance and insurance fell 31.3 percent due to the impact of COVID-19 while OFDI in the manufacturing sector took a huge hit, plugging 55.4 percent. North America remains the most attractive location for Korean investment, accounting for 39.2 percent of Korea’s total OFDI (Jung Suk-yee, “S. Korea's Overseas Direct Investment Falls Over 15% in Q1,” Business Korea, June 22, 2020, http://www.businesskorea.co.kr/news/articleView.html?idxno=47875)

The Indonesian Jawa Thermal Power Plant Construction Project has passed a feasibility study by the Korea Development Institute (KDI) on the second try. The $3.2 billion project, which involves two coal-fired power plants near Jakarta, is promoted by Korean Electric Power Corp., Indonesia’s state-owned electricity company PT Indonesia Power, and Barito Pacific. Although Doosan Heavy Industries & Construction won the contract in 2019, it has not yet started it because it did not pass the first KDI feasibility study (Michael Herh, “KEPCO, Doosan Heavy Allowed to Promote US$3.2 Bil. Power Plant Project in Indonesia,” Business Korea, June 9, 2020, http://www.businesskorea.co.kr/news/articleView.html?idxno=47236)

The upcoming US election has created more pressures on Korean carmakers and tiremakers as politicians and trade unions demand them to produce more “Made in America” products. In particular, the United Steelworkers has called on Democratic presidential candidate Joe Biden to endorse stricter rules of origin provisions. If rules of origin get amended, Korean carmakers like Hyundai Motorsand Kia Motors, which assemble vehicles in the US, will have to adjust their supply chains and rely more on US steelmakers to escape duties (Nam Hyun-woo, “Looming US election throws challenges to Hyundai, tiremakers,” The Korean Times, June 26, 2020, https://www.koreatimes.co.kr/www/tech/2020/06/419_291855.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.