Edition:
United States

Pete Sweeney

Breakingviews - Hong Kong will be lucky to end up like Singapore

Aug 11 2020

HONG KONG (Reuters Breakingviews) - Hong Kong will be lucky to end up like Singapore, or even a second-tier Chinese city. Police arrested pro-democracy media mogul Jimmy Lai for “foreign collusion” on Monday. Meanwhile, Chief Executive Carrie Lam’s administration has postponed elections and is purging the education system of dissidents. Businesses might have hoped Hong Kong would settle into a model resembling Singapore, where politics are authoritarian and commercial rule of law is upheld. That looks increasingly far-fetched.

Breakingviews - China bank failure fires quiet warning shot

Aug 10 2020

HONG KONG (Reuters Breakingviews) - Beijing will let Baoshang Bank go under in the first such insolvency since 2001 – a quiet warning shot fired at Chinese financial markets. The liquidation of the municipal lender, used as a piggy bank by an insurer, will raise borrowing costs for small peers and possibly push more of them to the brink. With the economy still wobbling, it’s a risky time to cleanse the system.

Breakingviews - Trump’s swipe at Tencent hits China’s softest spot

Aug 07 2020

HONG KONG (Reuters Breakingviews) - President Donald Trump has hit China in one of its softest spots: Tencent. The White House on Thursday said it will block “transactions” with the $687 billion tech colossus. That could cripple its payments-to-messaging app WeChat outside China and put a vast portfolio of overseas investments at risk. The ban could ultimately sting China harder than the campaign against telecoms-equipment maker Huawei.

Breakingviews - Pompeo's Chinese web wall is a tall order

Aug 06 2020

HONG KONG/SAN FRANCISCO (Reuters Breakingviews) - Washington’s Chinese firewall is a tall order. U.S. Secretary of State Mike Pompeo wants to purge America’s internet of Chinese telecoms, apps, cloud services and more. In effect he is trying to put an information ring-fence around the People’s Republic, and wants other countries to join in.

Breakingviews - Stock markets in China grow governance teeth

Aug 04 2020

HONG KONG (Reuters Breakingviews) - Chinese equity market regulators are growing a set of governance teeth. The Supreme Court has finally permitted shareholder lawsuits similar to the class-action litigation deployed against corporate malfeasance in the West, mostly famously in the cases of Enron and WorldCom. As other liberalisations unleash massive rallies on domestic bourses, it’s past time to deter executive abuses.

Breakingviews - Huawei might starve overseas before it sells

Jul 20 2020

HONG KONG (Reuters Breakingviews) - Huawei might starve before it sells its offshore assets. The Chinese telecoms kit maker is under renewed attack from Downing Street to Washington. Founder Ren Zhengfei has mulled divesting intellectual property, but overseas buyers for that, or for handset or network units, are few. Nor will Beijing permit a sale that looks like defeat. Ren’s attempts to evade the Americans’ brawl with Beijing have failed. Despite protestations that it is privately owned, Chinese diplomats have made it clear that Huawei’s commercial interests are inseparable from its government’s diplomatic agenda. And Beijing threatened to punish Great Britain if it gave in to Washington’s push to pull Huawei equipment from UK networks – which it eventually did. A big chunk of Huawei’s business is in the crossfire: the company generated over 40% of its $123 billion in revenue outside of China in 2019. But with its smartphones blocked from Google’s app store, its executives unable to get U.S. visas, and the certainty of sustained American pressure, spinning off overseas assets to preserve value looks increasingly attractive from a financial perspective. Ren himself last year floated the idea of selling the company’s fifth generation telecommunications intellectual property. The United States has no 5G champion per se, but a firm like Cisco, say, could become one by acquiring Huawei’s patents. Westinghouse did something similar with its nuclear power technology in China. U.S. officials shot that idea down, however. Huawei could try to sell its offshore network equipment businesses to Samsung Electronics, but with the Chinese out of the way, customers will welcome the South Korean giant regardless, to prevent an Ericsson-Nokia duopoly. The bigger problem is domestic optics. Any sale might be trumpeted by the White House as a sign that Huawei, and by extension the Chinese government, has lost a round. Beijing can’t have that. This might explain why the company is not offloading its offshore handset business, which is crippled by the embargo on Google tools. Instead it is pushing its own operating system called Harmony, riffing on the Chinese Communist Party’s “Harmonious Society” slogan. That is unlikely to take much share from Android. But even if Ren, a former military man, wanted to surrender, his commanders won’t let him.

Breakingviews - China’s jobless recovery risks debt indigestion

Jul 16 2020

HONG KONG (Reuters Breakingviews) - China has avoided a recession, but debt problems are piling up. Output rose 3.2% year-on-year in the three months to June, following last quarter’s record contraction. Investment still looks tepid, employers are shedding jobs, and retail is anaemic. That means more bad loans. Unfortunately, the country is running low on distressed debt investors.

Breakingviews - This Chinese stock pop has firmer fundamentals

Jul 08 2020

HONG KONG (Reuters Breakingviews) - China’s latest stock pop mixes the bitter with the sweet. Indexes have spiked to levels not seen since 2015, and leverage is rising, adding to fears of a crash. Weakness in shadow banking and property are pushing speculative funds into shares, but the rally is also underpinned by reforms accelerating a shift into equities.

Breakingviews - China smothers Hong Kong in heavy security blanket

Jul 01 2020

HONG KONG (Reuters Breakingviews) - On the 23rd anniversary of its return to Beijing’s control, Hong Kong is being reshaped into a less distinct city. Harsh new security laws targeting a long-running protest movement have been secretly drafted and hastily imposed without the local legislature’s involvement. They may quash the disruptive demonstrations that have vexed the business community, but the price of order will be high.

Breakingviews - The looming war over working from home

Jun 23 2020

HONG KONG (Reuters Breakingviews) - As the Covid-19 epidemic began to peak in Asia, Piyush Gupta tried to boost morale for his quarantined workforce. The chief executive of Singaporean bank DBS led his management team through a parody version of Gloria Gaynor’s disco breakup anthem “I Will Survive,” in which they sang off-key praises for their new remote working arrangements. “We grew strong,” one managing director howled into a wooden spoon. “We learned how to work from home!” 

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