The Economist USA 08.24.2019

(Axel Boer) #1

6 The EconomistAugust 24th 2019
The world this week Business


The Business Roundtable,
America’s foremost associa-
tion of chief executives, caused
a stir when it redefined the
purpose of a company, ditch-
ing the decades-old orthodoxy
that increasing shareholder
value should be the only
objective. Now, the bosses say,
companies should also look
out for the interests of custom-
ers, workers, suppliers and
communities, and aim to
increase diversity and protect
the environment. The state-
ment was signed by almost 200
ceos, encompassing relative
upstarts, such as Amazon and
Apple, as well as companies
that trace their roots back well
over 100 years, including
ExxonMobil, General Motors,
JPMorgan Chase and Macy’s.

The minutes from the Federal
Reserve’slatest meeting re-
vealed splits over whether to
lower its main interest rate.
The central bank opted for a cut
of a quarter of a percentage
point, but two of the ratesetters
wanted a half-point cut. Others
wanted to hold rates steady.

Germany’scentral bank
warned that there was a real
risk the country could slip into
recession, describing the
economy as “lacklustre”. The
Bundesbank pointed to data
showing that industrial
production is still slowing.

Thailand’sgovernment
announced a $10bn stimulus
package to spur growth in the
economy, which has been hit
by a surging currency, leading
to a slump in exports. gdprose
by 2.3% in the second quarter
compared with the same three
months last year, the slowest
rate since mid-2014. The stim-
ulus measures include in-
centives for Thais to holiday in
their country, as well as extra
support for farmers, small
businesses and the poor.

In a move that it described as a
“market-based reform”,
China’s central bankset a new
benchmark interest rate, the
Loan Prime Rate, which will
more closely resemble what
commercial banks pay it to
borrow.

Americanregulatorsapproved
aneasingoftherestrictionson
tradingbybanksthathadbeen
introducedundertheVolcker
ruleduringthefinancialcrisis.
Thechanges,firstmootedin
May2018,simplifythelegal
definitionsofwhatconstitutes
proprietarytrading,where
banksusetheirownmoneyto
invest.Criticscontendthat
weakeningtherulewillallow
banksonceagaintoengagein
riskybetsthroughopaque
financialinstruments.

Drop the pilot
Cathay Pacific’sshare price
had another turbulent week
following the surprise resigna-
tion of Rupert Hogg, its British-
born chief executive. Based in
Hong Kong, the airline has
become enmeshed in the city’s
recent political strife. China’s
state-run press has called for a
boycott of Cathay because of its
staff’s participation in ongoing
street protests. Separately,
Alibabahas reportedly post-
poned a blockbuster listing of
shares on the Hong Kong
exchange in part because of the
political uncertainty.

America’s Commerce Depart-
ment extended the exemption
period under which some
American companies can
conduct business with

Huawei, to November 19th.
This is primarily to allow rural
telecom providers more time
“to wean themselves off” the
Chinese maker of telecoms
equipment, which has been
slapped with a ban over
national-security concerns.

SoftBankwas reported to be
planning to lend staff up to
$20bn so that they can buy
stakes in Vision Fund 2. That
would come on top of the
$38bn that the Japanese con-
glomerate is itself ploughing
into the venture-capital pro-
ject, raising questions about
SoftBank’s exposure to poten-
tially risky tech startups.

A long stretch of cost-cutting
and the sale of its shale-gas
business boosted the fortunes
of bhp. The mining company
reported underlying income of
$9.1bn for the 12 months end-
ing June, its best annual profit
in five years, and returned a
record dividend to share-
holders. Although demand for
bhp’s iron ore, copper and coal
is still strong in China, it
flagged trade tensions as a
potential threat to business.

As it works towards restoring
investor confidence following
its troubled acquisition of
Monsanto, Bayer agreed to sell
its animal-health business for

$7.6bn. The German drugs and
chemicals group recently sold
its Coppertone sun-cream unit
and Dr Scholl’s foot-care
division, bringing in more
cash. Bayer faces a host of legal
claims that its Roundup
weedkiller, which it inherited
when it took over Monsanto,
causes cancer.

They’re over here for the beer

The weakness of the pound,
which lowers the cost of buy-
ing British assets to overseas
investors, was reportedly one
of the factors behind an offer
from CK Asset Holdings, a
property investment firm
based in Hong Kong, for
Greene King, a pub chain. The
deal is worth £4.6bn ($5.6bn).
Founded in 1799, Greene King
operates around 2,700 pubs,
which CK Asset believes will
continue to form a central part
of British culture long after
Brexit. Cheers to that.
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