MNCs in the News-2021 January

China

China was the world’s largest recipient of foreign direct investment (FDI) in 2020 according to United Nations Conference on Trade and Development (UNCTAD) data, garnering USD $163 billion in FDI. Per analysts, the increase of 4 percent year-over-year during an otherwise very challenging year was a reflection of China’s economic recovery from the negative impact of Covid-19, its growth prospects, its efforts to control the pandemic, and improvements in business environment such as improving market access and reducing FDI barriers (Liu Zhihua and Heng Weili, “UN Report: China Largest Recipient of FDI in 2020,” China Daily, January 26, 2021, http://global.chinadaily.com.cn/a/202101/25/WS600e2c6ba31024ad0baa4d00.html).

China’s 2020 revised catalog of encouraged FDI, released at the end of 2020, has taken effect. It “has 127 more items, an increase of 10 percent in the number of sectors encouraging foreign investment compared with the 2019 version. Meanwhile, up to 88 existing items were modified to expand their coverage.” Per the revised catalog, the government is encouraging FDI in in an effort to upgrade its supply chains, bolster advanced manufacturing and competitiveness, and facilitate progress in more underdeveloped areas (Zhang Hongpei, “New Foreign Investment Encouragement Catalogue Takes Effect, will Spur More Opportunities,” Global Times, January 27, 2021, https://www.globaltimes.cn/page/202101/1214168.shtml)

China has issued rules allowing authorities to “issue orders saying that companies or people in China don’t need to comply with foreign restrictions.” The rules also permit Chinese nationals and businesses to sue for compensation in Chinese courts if they suffer harm because of foreign restrictions on their business activities. This will make foreign entities following foreign government provisions vulnerable. China’s aims to improve its ability to fight back against the United States (US)’s increasing application of extra-territorial restrictions (James Mayger, Dingmin Zhang, and Colum Murphy, “China Pushes Back against U.S. Sanctions with New Rules,” Bloomberg, January 8, 2021, https://www.bloomberg.com/news/articles/2021-01-09/china-issues-rules-to...)

A majority of China’s total Belt and Road Initiative (BRI) investment in energy infrastructure went into renewable energy projects. While it constituted 57 percent of the $11 billion total in 2020 (a dramatic increase over 2019), coal power investments also jumped dramatically versus their share in 2018. Per one analyst, the newfound emphasize on renewables had to do with an increased understanding of the risks associated with carbon-intensive energy production, though many host countries still welcomed massive investment from China in traditional fossil fuels (Christian Shepherd, “China Pours Money into Green Belt and Road Projects,” Financial Times, January 25, 2021)

In 2020, the Indian government banned nearly 180 Chinese mobile phone apps saying they raised national security risks as well as consumer data privacy risks. Recently, it has decided to permanently ban several dozen apps because of “dissatisfaction with the app operators’ responses to a list of follow-up points it wanted clarified following the initial action.” Many of the Chinese companies with the highest profile banned apps (e.g., ByteDance, Baidu, Alibaba, and Tencent) were unclear if their apps were permanently banned (Yang Ge and Guan Cong, “Update: India Cements Ban on TikTok, Other Chinese Apps,” Caixin, January 26, 2021, https://www.caixinglobal.com/2021-01-26/india-cements-ban-on-tiktok-othe...)

A China Ministry of Commerce (MOFCOM) spokesperson said that China had asked India for clarification about the permanent ban to be imposed on dozens of Chinese mobile phone apps such as TikTok. The MOFCOM spokesperson stressed that China requires its companies overseas to follow international as well as local laws and regulations and respect local customs. The MOFCOM representative also called for India to ensure an “open, fair and nondiscriminatory environment” for Chinese firms and said bilateral economic cooperation had benefitted both countries (Liu Zhihua, “China Asks India to Clarify Ban on Chinese Apps,” China Daily, January 28, 2021, http://global.chinadaily.com.cn/a/202101/28/WS60127c38a31024ad0baa5cdf.html)

Japan

Japan has created an office called the Financial Market Entry Office to assist foreign financial companies in surmounting the hurdles they encounter when starting operations in Japan. The office’s English-language help with pre-application consultation and post-registration supervision and inspection aims to increase Japan’s appeal as an international financial center. The office also will serve as a “contact point for inquiries on procedures regarding financial laws and regulations in connection with the establishment of a business in Japan by foreign operators” (“FSA Opens Office to Give English Guidance to Foreign Financial Firms Entering Japan,” The Japan Times, January 17, 2021, https://www.japantimes.co.jp/news/2021/01/17/business/english-foreign-fi...)

Japan’s Sumitomo Electric Industries has sold roughly 90 percent of its 5G base station semiconductors to Huawei Technologies in the past. Due to the recent ban on semiconductor sales to Huawei by the United States (US), Sumitomo Electric is seeking to broaden its client portfolio by expanding its presence in Europe and seeking more European customers. Restrictions on Huawei’s involvement in many infrastructure projects make them a less appealing customer for Sumitomo and other Japanese parts manufacturers, which face a loss of overall demand (“5G Chipmaker Sumitomo Electric Hedges Bet on Top Client Huawei,” Nikkei Asia, January 20, 2021, https://asia.nikkei.com/Business/Electronics/5G-chipmaker-Sumitomo-Elect...)

The Brexit deal between the United Kingdom (UK) and the European Union (EU) allows Nissan to avoid tariffs on electric cars produced in the UK. Specifically, it eliminates a prospective 10 percent tariff on UK produced cars that satisfy certain local content rules. Thus, Nissan will continue to make Leaf electric cars at the Sunderland factory since they use a locally sourced battery. To avoid the tariffs on some high-powered batteries previously imported, Nissan also will produce them in the UK (Pitas, Costas. “Nissan to Source More UK Batteries as Part of Brexit Deal ‘Opportunity,’” Reuters, January 22, 2021, https://www.reuters.com/article/uk-britain-eu-nissan/nissan-to-source-mo...)

In mid-January, South Korea President Moon Jae-In stated he viewed the possible sales of Japanese companies’ assets to compensate groups of South Korea wartime laborers as “undesirable.” The issue relates to a ruling in 2018 by Korea’s Supreme Court that Japanese corporate assets in Korea could be seized and sold to pay damages to victorious Korean plaintiffs. Japan did not react positively to the remarks, saying words needed to be matched with deeds or that asset sales needed to be stopped (“Japan Skeptical after South Korea’s Moon Labels Asset Sales over Wartime ‘Undesirable,’” The Japan Times, January 18, 2021, https://www.japantimes.co.jp/news/2021/01/18/national/politics-diplomacy...)

South Korea

During a speech to the Korean Automobile Manufacturers Association, the Chief of G.M. Korea Co., Kaher Kazem, said there are challenges associated with having a business in South Korea, which makes it difficult for Korea to attract FDI. On the positive side, the US-Korea Free Trade Agreement, Korea’s stable economy, manufacturing capabilities, and the competitive supply base are all strengths for luring FDI into Korea. On the negative side, interested investors face tumultuous industrial relations, uncertain labor policies, and annual wage negotiations (“G.M. Korea Chief Picks Labor Issues as Key Concern for Investment,” The Korea Herald, January 28, 2021, http://www.koreaherald.com/view.php?ud=20210128000923)

SK Innovation has decided to invest roughly $895 million in a battery plant in Georgia to meet growing battery demand. Industry insiders believe, though, that another rationale for the investment is to boost SK Innovation’s prospects for winning an electric vehicle battery lawsuit that awaits a final US International Trade Commission (ITC) verdict. LG Energy Solutions filed the lawsuit and won the initial verdict. An unfavorable verdict has the potential to block SK Innovation’s sales channels within the US (Michael Herh, “S.K. Innovation Lays out Plan to Invest 1 Tril. Won in U.S. Battery Plant,” BusinessKorea, January 7, 2021, http://www.businesskorea.co.kr/news/articleView.html?idxno=58048)

Daewoo Engineering & Construction Co., a major South Korea contractor, announced in early January that it had won a $2.7 billion deal with the Iraqi government to build port facilitates at the Al Faw port in Basra, Iraq. The mega deal, between it and the General Company for Ports of Iraq, includes “a tunnel, a container terminal, and roads” to the Faw port. The company already had won in 2013 a multi-billion dollar deal to build a terminal, a seawall, and other port facilities at Faw (“Daewoo E&C Wins W2.9tr Port Deal in Iraq,” Korea Herald, January 4, 2021, http://www.koreaherald.com/view.php?ud=20210104000847)

Korea Hydro & Nuclear Power, a subsidiary of Korea Electric Power Corporation, will participate in two major dam building projects in Pakistan that have a total value of $1.6 billion. For the larger project, Korea Hydro & Nuclear will not only construct the dam (a six-year endeavor), but also will run the associated power plant for thirty years. The second project was awarded to a Kepco subsidiary in 2017, but the ward was delayed for several years due to various legal considerations (“Korean Companies Asked to Undertake $1.6bn of Hydroelectric Schemes in Pakistan,” Global Construction Review, January 8, 2021, https://www.globalconstructionreview.com/news/korean-companies-asked-und...)

*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.