October 17, 2019

DealBook Briefing: China Is Now a Minefield for Western Companies

DealBook Briefing: China Is Now a Minefield for Western Companies


Good Wednesday morning. Breaking: The O.E.C.D. proposed new corporate tax rules this morning that would make it harder for multinationals to minimize their tax bills by shifting profits to different regions. (Was this email forwarded to you? Sign up here.)

Western companies across multiple industries have found it increasingly difficult to navigate Chinese markets as the Asian nation becomes more politicized — and punitive.

Controversies that other businesses have faced this year:

• Leica, the German camera company, created a stir with a promotional video featuring the “Tank Man” from the Tiananmen Square pro-democracy movement. (The company says it didn’t commission the film.)

• Coach, Givenchy and Versace apologized to China for producing T-shirts that apparently identified Hong Kong as an independent country.

• Tiffany & Company drew fire for an ad showing a model holding her hand over her right eye, which some in China saw as a reference to a Hong Kong protester who had been shot in the eye.

• And just yesterday, Activision Blizzard suspended a Hong Kong player and rescinded his prize money after he called for the liberation of the city in a post-match interview.

Companies once thought they were safe by not mentioning 3 T’s: Tibet, Taiwan and Tiananmen Square. But there’s now a much bigger list of issues that could arouse the wrath of Beijing and Chinese customers, including Hong Kong, Korea and Japan, the NYT reports.

“China watchers said rapping the knuckles of a popular sports league ensures that a wide swath of Americans get the message,” the WaPo writes. “That’s important to Beijing as it sees broad support for the Hong Kong protesters in the Western press and on social media, experts said.”

But the N.B.A.’s commissioner, Adam Silver, has begun to push back against China, even after state-run television canceled broadcasts of games this week. “We will protect our employees’ freedom of speech,” he said yesterday.

That may be because the N.B.A. has more leverage than other Western companies, since it’s the most powerful sports league in China. “There are other hotels, airlines and clothing brands,” the WSJ notes. “N.B.A. basketball is irreplaceable.”

____________________________

Today’s DealBook Briefing was written by Andrew Ross Sorkin, Michael J. de la Merced, Lindsey Underwood and Stephen Grocer.

____________________________

The White House opened a new front in its trade war with China this week by punishing Chinese companies and individuals over their roles in surveilling and detaining Muslim ethnic minorities. The moves come just ahead of a new round of trade talks.

What happened this week:

• On Monday, the Trump administration blacklisted eight Chinese companies from buying American-made technology.

• Yesterday, Secretary of State Mike Pompeo announced visa restrictions on Chinese officials believed to be involved in the abuse of ethnically Muslim Uighurs.

The moves suggest that the White House is willing to take aim at China’s tech dreams, particularly in artificial intelligence. Among the blacklisted businesses were iFlyTek, a specialist in voice recognition; Hikvision, a leading surveillance technology provider; and SenseTime and Megvii, both facial recognition companies.

They’re also new uses of a U.S. tool usually deployed against terrorists. “As far as I know, it was the first time Commerce explicitly cited human rights as a foreign policy interest of the U.S. for purposes of export controls,” Julian Ku, a law professor at Hofstra University, told the NYT.

A Beijing official accused the White House of using human rights as an excuse to punish Chinese companies. “This goes against the basic principles of international relations,” Geng Shuang, a spokesman for China’s Foreign Ministry, said yesterday.

Expect the punishments to cast a chill over trade talks, and in the longer term hurt the Chinese companies’ reputations, potentially limiting their sales in the U.S. and elsewhere.

More: The new head of the I.M.F. warned that the trade war could cost the global economy around $700 billion by next year.

The social network said it would not take down an ad from the Trump re-election effort that Joe Biden’s campaign says makes false accusations. That shows how the tech giant is determined to avoid moderating political speech, even after its platform was used to sow disinformation in 2016, Cecilia Kang of the NYT writes.

The 30-second ad asserts that Mr. Biden offered Ukraine $1 billion if it fired the prosecutor investigating a company tied to his son. The Biden campaign requested that it be taken down, but the social network declined.

Facebook said the ad did not violate its policies. “Our approach is grounded in Facebook’s fundamental belief in free expression, respect for the democratic process and the belief that, in mature democracies with a free press, political speech is already arguably the most scrutinized speech there is,” Katie Harbath, Facebook’s head of global elections policy, wrote in a letter to Mr. Biden’s campaign.

But CNN rejected the ad, saying that it made assertions “that have been proven demonstrably false by various news outlets.”

The social network has already faced accusations of censorship by conservatives, including President Trump. Abstaining from moderation of political content is leaving it open to criticism from liberals like Senator Elizabeth Warren, a rival of Mr. Biden’s, who say it’s widely spreading false information.

Venture capitalists and entrepreneurs are now focusing on getting start-ups on the path to profitability, and not just as big as possible, Erin Griffith of the NYT writes.

• The shift has come after the collapse of WeWork’s I.P.O. plans and the frosty reception in the public stock markets to Peloton, SmileDirectClub, Uber and Lyft. All lose money, and some lose a lot.

• “Now some investors and start-ups are beginning to rethink that mantra and instead invoke turning a profit and generating ‘positive unit economics’ as their new priorities,” Ms. Griffith writes.

• “At Eniac Ventures, a venture firm in New York and San Francisco, the partners recently combed through their companies and identified the ‘gross margins’ — a measure of profitability — for each one, said Nihal Mehta, general partner of the firm.”

• Bird, a highly touted scooter start-up, recently raised $275 million, but only after taking steps this year to shore up its losses, according to its C.E.O., Travis VanderZanden.

The carmaker named Makoto Uchida, the head of its China operations, as its new C.E.O. yesterday, sooner than expected, Ben Dooley and Liz Alderman of the NYT report.

Nissan’s board chose him unanimously because of his experience abroad — China is a huge market for the carmaker — and his understanding of the company’s alliance with Renault and Mitsubishi. (Renault is said to view him favorably.)

Mr. Uchida must steady the company after the ousting of Carlos Ghosn as chairman on charges of financial misconduct, dropping sales and the resignation of his predecessor over pay issues.

He must also deal with concerns about Hari Nada, the head of Nissan’s legal department, who played a key role in ousting Mr. Ghosn but is seen by some at the company as an obstacle to overhauling corporate governance.

The electric carmaker is staking its future on its autonomous-driving technology, though it is pushing for widespread adoption of a system whose safety is still being proven, Bloomberg Businessweek’s Zach Mider writes.

• “Autopilot is unlike almost any other consumer product in history, in ways that offer a preview of the uncomfortable questions we’ll confront in the dawning robot age.”

• “Tesla’s flamboyant chief executive officer, Elon Musk, says the technology saves lives, and legions of Tesla owners offer their own testimonies of hazards spotted and collisions avoided. (And they have YouTube videos to prove it.)”

• “It’s possible that both sides are right, that the computers are killing a few drivers who otherwise would have lived, but that they’re also saving the lives of many more. In the coming years, society — in particular, regulators and the courts — will have to decide whether that’s an acceptable trade-off.”

Afterpay, which provides interest-free financing for e-commerce customers, named a new advisory board that includes Larry Summers, the former Treasury secretary; Uli Becker, a former C.E.O. of Reebok; and Matthew Kaness, a former C.E.O. of ModCloth.

A co-founder of BlueMountain, Stephen Siderow, will leave the firm by year end. The asset manager is also closing its flagship Credit Alternatives Fund.

BlackRock named Manish Mehta as its global head of human resources, months after firing Jeff Smith from the role for failing “to adhere to company policy.”

Deals

• Saudi Aramco is expected to publish the prospectus for an I.P.O. on Saudi Arabia’s Tadawul stock exchange as soon as Oct. 25. (WSJ)

• WeWork is reportedly still negotiating with SoftBank over a new $1 billion investment that could pave the way for a credit line from banks led by JPMorgan Chase. (Reuters)

• Lions Gate is said to be considering a spinoff of its Starz premium cable channel. (WSJ)

• One Medical, a chain of health clinics whose investors include Alphabet, has reportedly hired JPMorgan Chase, Morgan Stanley and others to advise on an I.P.O. (CNBC)

• Bessemer Venture Partners has raised $525 million for its first fund to invest in later-stage start-ups. (FT)

Trump impeachment inquiry

• The White House has declared war on the House impeachment inquiry, setting up a constitutional clash between two branches of government. (NYT)

• How Energy Secretary Rick Perry’s focus on the Ukrainian energy industry ensnared him in the impeachment inquiry. (NYT)

• A majority of Americans support the Democratic-led impeachment inquiry, according to a new poll, though many don’t believe President Trump should be removed from office. (WSJ)

Politics and policy

• The Fed chairman, Jay Powell, said the central bank would increase its portfolio of government-backed securities and hinted at another interest rate cut. (NYT)

• The head of the I.M.F., Kristalina Georgieva, has asked her staff to analyze the consequences of easy-money fiscal policies around the world. (FT)

• President Trump plans to limit the use of federal guidance, which explains how the government might carry out a policy, as part of its rule-making process. (WSJ)

• A federal judge in San Francisco warned Education Secretary Betsy DeVos that she faces being found in contempt of court for continuing to collect on the debt of former students at the bankrupt for-profit school Corinthian Colleges. (Bloomberg)

Brexit

• Prime Minister Boris Johnson of Britain is seeking to convince the country that he is being forced to extend the Brexit deadline against his will. (NYT)

• Mr. Johnson’s allies described a call with Leo Varadkar, the prime minister of Ireland, over a potential Brexit agreement as “constructive.” But the Irish leader is less optimistic. (FT)

• At least 50 lawmakers from the governing Conservative Party would reportedly revolt against an election manifesto that called for a no-deal Brexit. (FT)

Tech

• Margrethe Vestager, the E.U.’s competition commissioner, warned Big Tech companies that she may look beyond fines as punishments for antitrust offenses. (FT)

• Twitter said that it had used for ad targeting the phone numbers and email addresses that users had uploaded for security reasons. (Bloomberg)

• The E.U. plans to introduce legislation to put limits on Facebook’s cryptocurrency project, Libra. (WSJ)

• PayPal will write down a $228 million loss in investments, largely because of a bad bet on Uber. (Bloomberg)

• Google cleaners are threatening to strike in London. (Business Insider)

Best of the rest

• Pacific Gas & Electric began shutting off power to about 800,000 customers in Northern California in an attempt to avoid wildfires caused by wind damage to equipment. (LAT)

• Dick’s Sporting Goods, one of the largest sellers of firearms in the U.S., destroyed $5 million worth of guns. (NYT)

• How the effects of the G.M. strike are spreading. (NYT)

• A Philadelphia jury ordered a unit of Johnson & Johnson to pay $8 billion over an anti-psychotic drug. (NYT)

• Dean & DeLuca has closed its flagship SoHo location … for now. (NYT)

• The clothing rental service Rent the Runway is open again, after being shut for 11 days because of problems with its supply chain. (Bloomberg)

• Lithium-ion batteries for vaping devices are suspected of starting fires in airplanes. (WaPo)

Thanks for reading! We’ll see you tomorrow.

We’d love your feedback. Please email thoughts and suggestions to business@nytimes.com.



Source link

About The Author

Related posts