MNCs in the News-2020 November

China

Foreign direct investment (FDI) into China is surging, recording seven consecutive months of increases, because of China’s success in recovering from the adverse impact of Covid-19 and troubles in other potential FDI destinations. There has been strong FDI growth in real estate, the ICT, and consumer sectors, among others, from investors looking to profit from China’s growth, sectoral development plans, and rising urbanization and consumption. In contrast China’s outward FDI (OFDI) has not recovered following a dampening resulting from political factors and worries about capital flight (Thomas Hale, “Foreign Investors Pile Back into Booming China,” Financial Times, November 17, 2020)

China’s Ministry of Commerce (MOFCOM) announced in early November that China “will further loosen foreign ownership restrictions on service industries, including value-added telecommunications services, commercial services and other sectors [such as education and entertainment], to facilitate the development of new forms of service trade.” A MOFCOM report encouraged foreign firms to aid China in exporting Chinese culture, digital services, and traditional Chinese medicine. FDI in services is supported by China’s large middle class as well as rising disposable incomes and China’s large service imports (“China to Further Loosen Foreign Ownership Restrictions on Service Sectors,” Global Times, November 6, 2020, https://www.globaltimes.cn/content/1205957.shtml)

Shanghai continues to draw notable amounts of FDI despite slower global economic growth and the adverse effects of Covid-19. For the nine months of 2020, Shanghai’s inward FDI (IFDI) rose 6.1 percent year-over-year, hitting USD $15.52 billion. Notably, Shanghai also drew in regional headquarters and research and development centers, with the former now totaling 758 and the latter 475. Among other factors, Shanghai officials point to outreach efforts, preferential policies, and other measures as reasons for Shanghai’s continued success in attracting IFDI (“Shanghai Remains Hot Spot for Foreign Investment,” China Daily, October 30, 2020, https://global.chinadaily.com.cn/a/202010/30/WS5f9bd6d2a31024ad0ba823b1....)

At the end of November, the Indian government banned 43 additional Chinese phone apps. This is on top of the 170 apps India already had banned saying they threatened consumer privacy as well as Indian national security. Of note, India targeted Aliexpress, an Alibaba e-commerce app. Alibaba is a big investor in Indian fin-tech firm Paytm and online grocer BigBasket. Indian actions also have adversely affected China’s Bytedance and Tencent. India’s initial sanctions came in the wake of a deadly border skirmish in June (“India Bans 43 More Mobile Apps as it Takes on China,” Reuters, November 24, 2020, https://www.reuters.com/article/us-india-china-apps/india-bans-43-more-m...)

A spokesperson for China’s Foreign Ministry stated at a briefing that China would continue to “firmly support the construction of the China-Pakistan Economic Corridor (CPEC)…on the basis of the sound operation of existing projects.” The Chinese Foreign Ministry highlighted CPEC as “an important pilot project of the” Belt and Road Initiative (BRI), which already has delivered billions of FDI to Pakistan and enhanced the country’s transportation and power infrastructure, created tens of thousands of jobs, and boosted Pakistan’s annual growth rate by 1 to 2 percent (“China to Firmly Support Construction of CPEC: FM,” Global Times, November 4, 2020, https://www.globaltimes.cn/content/1205754.shtml)

The Malaysian state of Melaka has terminated a $10.5 billion contract for a mixed-harbor development which included the construction of three man-made islands. Melaka concluded that KAJ Development, the local developer, which had partnered with three Chinese companies including PowerChina International, failed to complete the BRI project, also known as the Melaka Gateway project. The firm has to return the site to the local government. There have long been doubts about the economic viability of the project and its potential contribution to port overcapacity (Chen Lixiong, “Malaysia Terminates $10.5 Billion Infrastructure Project Involving Chinese Investors,” Caixin, November 21, 2020, https://www.caixinglobal.com/2020-11-21/malaysia-terminates-105-billion-...)

Japan

Over time, Nissan Motor will sell only electric or hybrid cars in China to satisfy China’s goal to make all new vehicles eco-friendly. Beijing has announced that by 2035 half of all new vehicles will be zero-emissions vehicles and the other half hybrid. In line with this, by 2025, Nissan will introduce nine new car models in China. Nissan currently is expanding its car production in China with new plants coming online in Jiangsu and Hubei Provinces (Tomoyoshi Oshikiri and Ryo Asayama, “Nissan to sell only electric and hybrid cars in China by 2025,” Nikkei Asia, November 1, 2020, https://asia.nikkei.com/Business/Automobiles/Nissan-to-sell-only-electri...)

Tokyo and fourteen other countries recently signed the world's largest trade deal, the Regional Comprehensive Economic Partnership (RCEP), which contains many provisions that will affect FDI and Japanese and other supply chains. RCEP will dramatically cut tariffs on a large swath of Japanese goods flowing to China, South Korea, and the Association of Southeast Asian Nations, which will lead to Japanese supply chains becoming “‘broader, more effective, and more resilient.’” RCEP also includes provisions relating to rules of origin, intellectual property, and customs (“Japan businesses expect RCEP deal to boost Asia trade and investment,” Japan Times, November 16, 2020, https://www.japantimes.co.jp/news/2020/11/16/business/japan-businesses-r...)

Due to Brexit, the possibility exists that the European Union (EU) will slap a 10 percent tariff on electric vehicles (EV) exported from the United Kingdom (UK) into the EU unless the vehicle has 55 percent or more EU content. On top of this, the EU may require that EV battery packs are 100 percent sourced from the EU or UK. These provisions likely will have a severe adverse impact on the UK EV industry into which Japan has poured significant FDI (William Hollingworth, “British Electric Car Industry Worried about Future Japanese Investment,” The Japan Times, November 5, 2020, https://www.japantimes.co.jp/news/2020/11/05/business/british-electric-c...)

Tokyo Gas and Marubeni will construct a liquefied natural gas (LNG) fired power plant in Vietnam to support the latter’s rising energy demands and need for cleaner energy. The Japanese firms have signed a memorandum of understanding with Petrovietnam, a state-run oil and gas group. The estimated cost of the project is USD $1.93 billion. The project will consist of the construction of the power plant, a terminal to receive LNG ships, and a pipeline to the plant (Fumie Yaku and Takefumi Kawaguchi, “Vietnam picks Tokyo Gas and Marubeni for $2bn LNG power plant,” Nikkei Asia, November 19, 2020, https://asia.nikkei.com/Business/Energy/Vietnam-picks-Tokyo-Gas-and-Maru...)

South Korea

After a four-year investigation of whether or not “Google hindered the development and use of a modified Android operating system by South Korean mobile phone manufacturers,” the Korea Fair Trade Commission (KFTC) has preliminarily concluded that “Google abused its market dominance.” In line with this it is likely to impose a large fine. To date, Korean smartphone firms have not had any ability to oppose Google’s prohibition against them developing and using a modified Android operating because Android commands a more than 74 percent global market share (Kim Eun-jin, “Korea Fair Trade Commission Concludes Google Abused Market Dominance,” BusinessKorea, November 12, 2020, http://www.businesskorea.co.kr/news/articleView.html?idxno=54866)

The labor union at IKEA Korea, which is associated with the Korea Confederation of Trade Unions, went on strike to demand similar treatment for employees at Korean locations and overseas. Data comparing IKEA stores’ wage systems reveals IKEA workers in other countries receive $15 an hour while workers in Korea only receive the minimum wage. The labor union has highlighted that “The type of work at IKEA Korea follows global standards, while wages and benefits for its employees are at the lowest level in the industry” (Choi Moon-Lee, “IKEA Labor Union Goes on Strike,” Business Korea, November 4, 2020, http://www.businesskorea.co.kr/news/articleView.html?idxno=54411)

Some Korean steelmakers are returning home because it has become financially appealing to do so due to a Korean government subsidy program. They are enticed by a program offered by Korea’s Ministry of Trade, Industry, and Energy, which encourages companies to return to Korea by providing funds that offset the costs of relocation and constructing a plant in Korea. Two recent relocation examples include KG Dongbu Steel, which liquated its plant in China and Aju Steel which shut down its plant in the Philippines (Jung Min-hee, “Steelmakers Maker U-Turn to Korea one After Another,” Business Korea, November 17, 2020, http://www.businesskorea.co.kr/news/articleView.html?idxno=55215)

A Korean consortium has won the rights to construct Bangladesh’s new $1 billion, 24-km Meghna River bridge in the capital. The contract award, the result of a decision by a joint Korea-Bangladesh committee on infrastructure development, provides for the consortium, consisting of Korea Overseas Infrastructure & Urban Development Corp., Daewoo Engineering & Construction, Hyundai Engineering & Construction, and Korea Expressway Corp., to engineer, construct, finance, and operate the bridge. The project is designed to further the development of infrastructure within Bangladesh (Choi Moon-Lee, “Consortium to Promote US $1 Bil. Meghna Bridge Project in Bangladesh," Business Korea, November 13, 2020, http://www.businesskorea.co.kr/news/articleView.html?idxno=55010)

*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.