MNCs in the News - 2022-February

China

Didi Global, a ride hailing company most prominent in China, announced recently that it would leave Russia and Kazakhstan due to “‘changing market conditions and other challenges.’” Shortly thereafter, it stated “it would continue to operate in Russia,” where it has been operating for about 18 months. It was not clear why Didi retreated from its initial action, but it might have had to do with criticism that its initial decision seemed to signal capitulation to United States (US) pressure on Russia (Tony Munroe and Brenda Goh, “China’s Didi Reverses Course, will Remain in Russia,” Reuters, February 26, 2022, https://www.reuters.com/technology/chinas-didi-reverses-course-will-rema...)

The Russian invasion of Ukraine has led many Chinese business there such as Power China (a Chinese state-owned enterprise) and Xinjiang Beiken Energy Engineering to stop operations, terminate orders, and adopt measures (e.g., limiting travel, stockpiling of essential supplies, and safety drills) designed to “ensure the safety of employees and projects.” The Chinese Embassy in Ukraine suggested that Chinese citizens in Ukraine affix Chinese flags to their vehicles as one way to minimize security risks (Yin Yeping, “Chinese Firms in Ukraine Halt Operations, Take Measures to Ensure Workers’ Safety,” Global Times, February 24, 2022, https://www.globaltimes.cn/page/202202/1253129.shtml)

Indian tax officials recently searched Huawei Technologies Co. Ltd.’s offices in New Delhi and “met with some of its staff as part of a tax evasion probe.” Huawei, one of the world’s largest telecommunication equipment makers, stressed it cooperated with all relevant laws and regulations while the Chinese Ministry of Commerce criticized the action as one in a series of anti-Chinese company actions. Indian tax authorities recently fined Xiaomi approximately $90 million for improper tax payments (Du Zhihang and Ding Yi, “Tax Raids on Huawei Could Signal New Delhi’s Hardening Standard on Chinese Tech,” Caixin Global, February 18, 2022, https://www.caixinglobal.com/2022-02-18/tax-raids-on-huawei-could-signal...)

In early February, the United States (US) Federal Communications Commission revoked the license of China Unicom Global Ltd.’s US subsidiary, China Unicom (Americas) Operations Ltd. (CUA). China Unicom Global issued a statement noting that the revocation lacked “‘any justifiable grounds and…required due process.’” Moreover, it emphasized it had a “‘good record of complying with relevant US laws and regulations and providing services.’” It noted that CUA would act to protect its rights, with its parent stating that it would “closely follow the development of the situation” (Ma Si, “China Unicom Says FCC’s Action Unjustifiable,” China Daily.com, February 3, 2022, global.chinadaily.com.cn/a/202202/03/WS61fb33c6a310cdd39bc848e4.html)

Japan

In late February, responding to Russia’s invasion of Ukraine, Japan implemented a variety of economic sanctions against Russia. These include a freeze on assets held by Russia banks, restrictions on exports to “military-linked groups,” and exports controls on high-tech goods such as semiconductors. Tokyo already had limited the issuance and trading of Russian bonds and said it stood ready to implement additional sanctions as circumstances warranted. It added it would pursue measures to soften the impact of rising energy prices flowing from the invasion (“Japan Targets Banks, Military Groups in New Sanctions on Russia,” The Mainichi, February 26, 2022, https://mainichi.jp/english/articles/20220225/p2g/00m/0in/028000c)

“Japanese companies are increasingly concerned about the sanctions” instituted against Russia for its invasion of Ukraine, especially since they could escalate. For now, sanctions against Russian financial institutions such as VEB and Bank Russia might have negative impacts by hindering payments to Japanese firms in Russia. In addition, Japanese financial institutions and trading houses have cooperative ventures with Russian financial institutions that may suffer adverse consequences. Japanese firms further may find their exports of high-tech products and vehicles and vehicle production affected (“Sanctions War over Ukraine Invasion Triggers Concern for Some Japanese Companies,” The Japan Times, February 26, 2022, https://www.japantimes.co.jp/news/2022/02/26/business/japanese-companies...)

Korea

The Korea Communications Commission (KCC) said it wants firms such as Apple and Google to provide better plans for complying with Korea’s Telecommunications Business Act, passed last year, which prevent companies from forcing others to use their payment systems in their App stores. Even though the KCC has not finalized the implementing rules for the legislation, it said both Apple and Google need to offer more detailed and/or appealing (e.g., lower service charges when alternative payment plans are used) plans (Joyce Lee, “S. Korea Seeks Improved Compliance Plans from Apple, Google on App Store Law,” Reuters, February 3, 2022, https://www.reuters.com/technology/skorea-seeks-improved-compliance-plan...)

The Russian invasion of Ukraine will create further headaches for the Korean construction sector, which is already challenged by the rising prices of inputs (aluminum, coal, and nickel) from Russia. First, the invasion may make it very difficult for Korean firms to obtain raw materials. Second, even if materials can be procured, the cost may jump dramatically due to economic sanctions against Russia. Third, construction projects in Ukraine likely will cease and some in Russia may stop due to the conflict as well as sanctions (Park Jae-Hyuk, “Korean Builders Hurt by Ukraine Crisis,” The Korea Times, February 23, 2022, https://www.koreatimes.co.kr/www/tech/2022/02/419_324418.html)