Business and finance 5 April 2018

A trade war between America and China takes shape

TALK of tariffs is in danger of developing into cries of trade war. On April 3rd America published a list of some 1,300 Chinese products it proposes to hit with tariffs of 25%. Just a day later China produced its own list, covering 106 categories. “As the Chinese saying goes, it is only polite to reciprocate,” said the Chinese embassy in Washington, DC.According to the Peterson Institute for International Economics, a think-tank, America’s list covers Chinese products worth $46bn in 2017 (9% of that year’s total goods exports to America; see graphic). China’s covers American goods worth around $50bn in 2017 (38% of exports). The sums were enough to move markets on April 4th, though the S&P 500 index soon made up lost ground.

Read More →

TSMC is about to become the world’s most advanced chipmaker

MORRIS CHANG is preparing for retirement. After 30 years in the role, the founder of Taiwan Semiconductor Manufacturing Company (TSMC), the island’s largest firm, will step down as chairman in June. He will hand the reins over to the current co-CEOs, C.C. Wei and Mark Liu, the former becoming sole CEO and the latter chairman. Later that month the company will ship new semiconductors manufactured with its latest technology. For the first time the world’s most powerful chips will be made by TSMC, not by Intel, its American rival.Intel and TSMC are different sorts of company. Intel is an integrated device manufacturer (IDM). It both designs and manufactures chips. TSMC is a “foundry”, making chips for designers without factories, or “fabs”, which cost a fortune. TSMC’s latest fab will cost $20bn. The Taiwanese company pioneered this model and is its dominant exponent. In 2017 it had 56% of the foundry market, according to Trendforce.Intel led the pack in squeezing...Continue reading

Read More →

Chinese carriers are the new disrupters in air travel 

The Chinese have got their tails upANYONE who doubts the ambitions of China’s airlines need only look over the plans for Daxing International Airport, which will serve Beijing after it opens in late 2019. It will be the world’s biggest airport by far, with eight runways and room for 100m passengers a year. The new facilities are needed to serve a fast-growing appetite for air travel. The three Chinese carriers that will dominate the passenger traffic passing through Daxing’s cavernous halls are all in rapid ascent. And that has rivals everywhere complaining about the sorts of subsidies that have fuelled airlines since the dawn of commercial aviation.China’s airlines are adding passengers at a rate not seen since Emirates, Etihad and Qatar Airways started to attract customers to their Gulf hubs, handily placed between Europe and Asia, with a winning combination of cheap fares and superior service. Between 2010 and 2017 passenger numbers on China’s three biggest...Continue reading

Read More →

Online retailers go offline in China

THE season for the best xiaolongxia (“little dragon shrimp”) is just beginning, and so on a recent evening four young friends tucked into a pile of steaming-hot crayfish. But rather than sitting in a restaurant they were at a table surrounded by supermarket aisles stocked with nappies, baby formula and cooking oil. Above them, groceries and made-to-order meals, gathered by store attendants from shelves and nearby cooking stations, were wafted on aerial conveyor belts into a storeroom. There they were packaged and whisked to Shanghai homes within a 3km radius, at any hour and in under 30 minutes.“Eat-as-you-shop” is one innovation of Hema Xiansheng, a chain of fancy supermarkets. And these shops are themselves the showiest elements of a bid by Alibaba, a Chinese e-commerce emporium that handles more transactions than Amazon and eBay combined, to master “online-to-offline”, or O2O, retailing, in which customers use digital channels to buy from physical businesses....Continue reading

Read More →

Takeda eyes up Shire

Takeda shows some bottleWHEN it comes to foreign deals, Japanese drug companies are interested in buying the product, not the company, says Fumiyoshi Sakai of Credit Suisse, a bank. So the news that Takeda, Japan’s biggest pharmaceutical company, wants to buy Shire, a similar-sized Irish drugmaker that specialises in treatments for rare diseases, came as something of a surprise. At $85bn, the combined value of the two firms would be in the ranks of industry behemoths such as Bayer and GlaxoSmithKline.In recent years Takeda and its domestic rivals, Astellas and Shionogi, have bought a handful of small foreign firms. Most were American biotechnology companies with one or two specialist products. But the need to expand abroad is becoming a matter of greater urgency for Japanese drugmakers.Their main domestic client, the government-run health system, accounts for 40% of drug spending. As Japan’s ageing population puts ever more pressure on its budget, the...Continue reading

Read More →

Viacom rejects a merger with CBS

Mr Redstone has a message for youNOTHING is ever easy at Sumner Redstone’s media empire. For two months the boards of CBS and Viacom, two entertainment companies controlled by the Redstone family, have explored a possible combination, something long wished for by Shari Redstone, the ailing media mogul’s daughter and anointed deputy. But on March 30th those talks turned to acrimony after CBS made an offer valuing Viacom below its market capitalisation of $12.5bn, and reserved no leadership role at the combined firm for Viacom’s CEO, Bob Bakish. Ms Redstone and Viacom’s bosses regarded the offer as an insult, according to sources.The tactics amount to a stunning power play by Les Moonves, the CEO of CBS. It leaves Viacom, owner of Paramount film studio and cable networks including MTV and Comedy Central, in a state of limbo. Viacom’s board made clear the offer was a non-starter, and is expected to make a counter-offer that would include a leading role for Mr...Continue reading

Read More →

Insurance and the gig economy

THE rise of the gig economy means not only workers, but those who insure them, are having to adapt. Take third-party liability insurance—the sort that would pay out if, for instance, a courier hit and injured a pedestrian. An employee driving a company van would be covered by a standard commercial-insurance policy. But “gig” couriers, working when they wish and using their own cars, must often insure themselves. Even if they have personal cover, it will not usually pay out for accidents that happen while they are driving for work.Among the firms seeking to fill this gap is Zego, which sprang up to serve scooter couriers such as those working for Deliveroo, a food-delivery service. Deliveroo and its rivals require proof of insurance from couriers, but had no easy way to check it was valid. Couriers, meanwhile, were often loth to pay stiff premiums. Harry Franks, formerly of Deliveroo and co-founder in 2016 of Zego, spotted an opportunity and convinced insurers that a different model could be...Continue reading

Read More →

The choice of a boss for the New York Fed ends in a familiar way

John Williams: a neutral answerTHE president of the Federal Reserve Bank of New York is perhaps the second most important person in America’s financial hierarchy, behind only the chairman of the Federal Reserve. Unlike the presidents of the other regional Reserve Banks, he sits permanently on the committee in Washington, DC that sets interest rates. The New York Fed supervises Wall Street and, during financial crises, often gathers bankers to hash out a fix or to impose one on them. On April 3rd it was announced that John Williams would be next in line to take charge of the institution, replacing William Dudley.Mr Williams has led the San Francisco Fed since 2011, when his predecessor in that job, Janet Yellen, moved to Washington. He is best known for his academic contributions to monetary policy. In particular, his estimates of the “neutral rate” of interest, at which money is neither tight nor loose, are regularly cited. In recent years he has appeared moderately...Continue reading

Read More →

Germany’s biggest lender is in the doldrums

No walk in the parkJOHN CRYAN has spent almost three years on the thankless task of revitalising Germany’s biggest bank. Deutsche Bank’s shares fetch around €11 ($13.50) each. That is less than half their price when he became joint chief executive in July 2015 (he became sole boss 11 months later) and an eighth of the peak in Deutsche’s pre-crisis pomp (see chart). Paul Achleitner, the chairman of Deutsche’s supervisory board—perhaps sharing investors’ impatience, perhaps to shore up his own position—has reportedly sounded out possible replacements for Mr Cryan.The two men are also said to...Continue reading

Read More →

Tesla is heading for a cash crunch

“WE ARE sad to report that Tesla has gone completely and totally bankrupt.” So tweeted Elon Musk, boss of the electric-car company, on April 1st. He even posted a picture of himself supposedly drunk and inconsolable as proof. It was meant as an April Fool’s Day joke, but the gag backfired. It is uncomfortably close to the truth. America’s leading manufacturer of electric vehicles is under pressure. Mr Musk is fighting battles on many fronts and they all exacerbate his main threat: a financial squeeze that could eventually push Tesla over the edge.Even Tesla’s shareholders, who are rarely put off by bad news, are jittery. Its shares have fallen by 16% since the end of February, most steeply after a Tesla using the firm’s Autopilot software crashed into a roadside barrier in California on March 23rd, killing the driver and raising questions about the safety of its system for semi-autonomous driving. The crash is being investigated by the authorities.The pile-up of woes...Continue reading

Read More →

Fake news flourishes when partisan audiences crave it

THE theories lurk in odd corners of the web, occasionally bubbling into broader public consciousness. That President Donald Trump is working with Robert Mueller, for example, and preparing a hammer blow against the true threats to American democracy: Barack Obama, Hillary Clinton and their “deep state” allies. Such fabrications are not new. Yet the capacity of fake news to influence the outcome of political votes seems to have grown, and is provoking a backlash. France, for example, may soon allow judges to censor fake-news stories during election seasons. Malaysia’s government says it may jail those who publish or circulate fake news. Such steps risk enabling governments to limit legitimate speech (on April 3rd India’s government abandoned similar plans after widespread criticism). What is more, they are unlikely to do much to stem the flow of disinformation so long as there remains an audience of readers hungry for fakery.Outrage over fake news is overwhelmingly targeted at the supply side:...Continue reading

Read More →

Economics renames itself to appeal to international students

ECONOMISTS do not much like their discipline being dubbed the dismal science. Some American universities are paying more attention to the noun than to the adjective. The reason is not philosophical, but pragmatic. Foreign STEM graduates (the acronym stands for science, technology, engineering and mathematics) can get visa extensions for three years of practical training (ie, work). Those from other disciplines are allowed only a year.Two more years working in America means more earnings. It also means a better chance of finding an employer willing to sponsor an application for an H-1B visa, the main starting-point for skilled foreign workers who hope to settle permanently. In 2012 the Department of Homeland Security expanded the list of STEM courses. Now any reasonably crunchy economics degree can count as STEM with a tweak to its federal classification code, from economics (45.0601) to econometrics and quantitative economics (45.0603).Economics departments appear to be catching on....Continue reading

Read More →
Calendar