MNCs in the News-2018-04-27

China

Foreign car companies like Daimler, Volkswagen, and Ford are pleased China plans to liberalize its auto sector and reduce import tariffs, but would like to see more concrete and meaningful initiatives. For instance, they value little the right to have wholly-owned auto operations in China versus a joint venture (JV). Instead, they want the right to import electric car batteries and market electric cars until their own logos and want reduced government subsidies for Chinese electric and autonomous vehicles (Keith Bradsher, “China is Opening Its Car Market. But Not Enough, Say Auto Companies,” New York Times, April 25, 2018, https://www.nytimes.com/2018/04/25/business/china-auto-trade.html)

United States (US) President Donald Trump’s plan to impose tariffs on shoes and apparel made in China are driving Puma, a leading German sportswear firm, to consider other bases for production besides China because the US is Puma’s largest market. Still, Puma, which has large operations in Vietnam, has not yet moved production from China and will watch what others do. Even if Puma moved shoe production out of China, it could take a year and North America would not be an option (Olaf Storbeck, “Puma Prepares to Shift Production from China over Tariff Fears,” Financial Times, April 24, 2018)

At the recent Shanghai Cooperation Organization (SCO) meeting in Beijing, India, which joined the SCO concurrently with Pakistan last year, did not express support for China’s Belt and Road (BRI) initiative in the post meeting communique issued by the attending foreign ministers. Representatives from other countries like Kazakhstan, Russia, and Tajikistan all stated their support for the BRI. India also has shunned the BRI-related multi-billion dollar China-Pakistan Economic Corridor (CPEC) scheme partly because CPEC runs through territory that it claims (Ben Blanchard, “China Fails to Get Indian Support for Belt and Road Ahead of Summit,” Reuters, April 24, 2018, https://www.reuters.com/article/us-china-summit-sco/china-fails-to-get-i...)

According to a top US Treasury Department official, the Trump administration is looking at “declaring a national economic emergency to impose new restrictions on Chinese investment” in sensitive areas. The action would be taken under the International Emergency Economic Powers Act, which normally targets “rogue regimes and terrorist groups.” The move is not only part of the US’s effort to punish China for stealing American intellectual property (IP) and forcing technology transfers but also designed to protect US technology in sectors like semiconductors and robotics (Shawn Donnan, “US Considers Emergency Curbs on Chinese Tech Investment,” Financial Times, April 20, 2018)

Japan

Toyota Motor will launch an electric SUV in China this year through a JV with Guangzhou Automobile Group (GAC). The JV, called GAC Toyota Motor, will handle sales for the SUV which will carry GAC’s rather than Toyota’s name. Toyota plans to starting selling its own electric vehicles in China in 2020 with production handled by GAC and FAW Group and expects to receive supplies from Chinese manufacturers as early as 2019 when new energy vehicle “production and sales minimums” take effect (Omoto, Yukihiro, “Toyota pushes forward launch of electric vehicle in China,” Nikkei Asian Review, April 28, 2018, https://asia.nikkei.com/Spotlight/Electric-cars-in-China/Toyota-pushes-f...)

Japanese trading house Itochu is pulling out of a nuclear power plant project in Turkey due to a surge in safety-related costs after the Fukushima nuclear disaster in 2011, casting “uncertainty” over the plant’s future and Tokyo’s infrastructure export ambitions. In 2013 the Japanese and Turkish governments agreed on the project and until March of this year a consortium including Itochu and Mitsubishi Heavy Industries had been conducting a feasibility study for the construction of a 4,500-megawatt plant near the Black Sea (Hayashi, Eiki, “Itochu pulls out of nuclear plant project in Turkey,” Nikkei Asian Review, April 24, 2018, https://asia.nikkei.com/Business/Companies/Itochu-pulls-out-of-nuclear-p...)

South Korea

America’s General Motors (GM) reached a last minute deal with its labor union and the South Korean government to save its Korean operations. GM and state-operated Korean Development Bank (KDB) will invest USD $6.4 billion and $750 million respectively in the carmaker. For their part, workers agreed to wage freezes, decreased bonuses, and the closure of an unprofitable plant. GM promised to run its South Korean operations for ten years, grant the KDB veto power, and launch two new models from Korea (“GM signs conditional deal with KDB to maintain S. Korean unit,” The Korea Herald, April 26, 2018, http://www.koreaherald.com/view.php?ud=20180426000953)

State-owned Korea National Oil Corporation (KNOC) is looking to sell its Canadian Harvest oil field to private South Korean or foreign investors to repay debts incurred by its Canadian subsidiary. Seoul’s Ministry of Trade, Industry and Energy has set up a team to investigate KNOC’s projects and recommend sales of assets in troubled ventures. A North American shale oil company owned by American investment bank Morgan Stanley is reviewing whether or not to acquire a stake in the Harvest oil field (Jung Min-hee, “Investors Are Showing a Keen Interest in Harvest Oil Field in Canada,” BusinessKorea, April 25, 2018, http://www.businesskorea.co.kr/news/articleView.html?idxno=21860)

Malaysia

Mahathir Mohamad, an opponent of the incumbent Prime Minister of Malaysia, vowed to reconsider Chinese contracts if he is elected on May 9. Discontent with Chinese investment in Malaysia has turned the topic into an election issue. To date, Malaysia has received nearly USD $34.2 billion from China for BRI-related infrastructure investment. The rising investment has prompted fears of increased debt, reliance on China, and environmental degradation. Furthermore, local businesses and workers felt overshadowed by Chinese companies bringing their own workers into Malaysia (Liz Lee, “Selling the country to China? Debate spills into Malaysia’s election,” Reuters, April 27, 2018, https://www.reuters.com/article/us-malaysia-election-china/selling-the-c...)

Malaysian pension provider Kumpulan Wang Persaraan (KWAP) will consider purchasing Insurance Australia Group’s (IAG) investments in the country if a deal with an American insurer falls through. Kuala Lumpur’s central bank recently mandated all foreign insurers must reduce ownership to 70 percent. KWAP is currently in talks with several foreign insurers, such as Britain’s Prudential PLC, to acquire their excess shares. KWAP must finish talks before Bank Negara’s April deadline, but may ask for an extension to negotiate with IAG (Ooi Tee Ching, “KWAP may consider IAG stake if Prudential deal doesn’t materialize,” New Straits Times, April 23, 2018, https://www.nst.com.my/business/2018/04/360856/kwap-may-consider-iag-sta...)