8 ★ FT Weekend 17 August/18 August 2019CHRISTIAN SHEPHERD— HONG KONGAmazonhas come under fire in China
over the online retailer’s response to
criticism that T-shirts supporting anti-
government protests in Hong Kong
were sold on its platform.Global Times, a nationalist state-backed
tabloid, on Thursday accused Amazon
of challenging China’s sovereignty by
allowing the sale of T-shirts with slogans
like “Free Hong Kong Democracy Now”,
written in English, or “Go Hong Kong”,
written in traditional Chinese charac-
ters.
Amazonresponded that it “accepted
and respected” the “one country, two
systems” framework, adding: “Every
country where we operate has different
laws, and we will continue to respect
those local laws where we do business,”
according to Chinese state media
reports.
But the statement, published in Chi-
nese yesterday, failed to appease online
commentators, instead becoming the
top-trending discussion on popular
microblog Sina Weibo, as users contin-
ued to criticise the company.“What they say and what they think
are two different things,” one user said,
after posting pictures of the T-shirts still
on sale on Amazon. “Come out and apol-
ogise,” another user wrote.
Some of the T-shirts — promoted with
descriptions like “Show your love for
Hong Kong democracy” and “Fight for
your right, fight for your freedom”
— appeared to still be available on Ama-
zon’s websites yesterday.
The company did not immediately
respond to a request for comment.
Amazon closedits Chinese market
place in April after struggling to com-
pete with domestic championsJD.com
andAlibaba, although some goods can
still be shipped to China and the com-
pany continues to sell the Kindle
ereader in the country.
Chinese officials and state media have
regularly fanned nationalist sentiments
and directed them at companies
deemed to have slighted China.
For China’s online nationalists, the
demonstrations have turned questions
of Hong Kong’s sovereignty and any
signs of supportfor protesters by inter-
national companies into live-wire issues.Technology
Amazon draws pro-Beijing ire
over Hong Kong T-shirt sales
MICHAEL POOLER AND SYLVIA PFEIFER
LONDONA rescue deal for British Steel is in sight
after an investment group owned by
Turkey’s military pension fund reached
a provisional agreement for a takeover
of the stricken company.
Under the terms of the agreement
announcedyesterday, Ataer was named
the preferred bidder for Britain’s sec-
ond-largest steelmaker. Ithas two
months to conduct due diligence and
complete the paperwork.
The development offers hope for
more than 4,000 workers at British
Steel who have been in limbo since the
company fell into insolvency three
months ago after the government
rejected a request for a state bailout
from its owner,Greybull Capital, the pri-
vate investment fund.
Operations have continued under the
official receiver, a court-appointed civil
servant whose duty is to find the best
outcome for creditors, with a taxpayer-
backed indemnity ensuring that wages
and bills are paid.
The official receiver said that after
discussions with several potential pur-chasers, “I have now received an accept-
able offer from Ataer Holdings A.S. for
the purchase of the whole business.I
will be looking to conclude this process
in the coming weeks.”
Ministers and unions have pushed
for the business to be sold as a single
going concern, with fears that
a break-up could lead to the closure
of the Scunthorpe plantwith mass
redundancies.
British Steel also operates a handful of
smaller plants in north-east England,
Franceand the Netherlands.
The UK government is expected to
offer a financial support package in the
form of commercial grants.
Andrea Leadsom, business secretary,
said the development was an “impor-
tant and positive step forward in secur-
ing the future of British Steel”.
Greg Clark, her predecessor, who had
toured India, China and Turkey to meet
potential buyers, said he had been
impressed by the “positive vision” Ataer
had for steelmaking in the UK.
Gavin Stace, director-general of UK
Steel, the trade body, said the news was
“enormously positive”, but the govern-
ment needed to “address the businesswhich has investments in steel, cement,
agriculture and automotive. It owns
49.3 per cent of Erdemir, the country’s
biggest steelmaker.
Suleyman Savas Erdem, general man-
ager of Oyak, said that the agreement
was “one of the biggest achievements
of the Turkish steel industry”. The
fund believed “in the importance of
merging world league players into our
group”.
The company plans to increase the
production capacity of British Steel, but
job losses have not been ruled out.
Ataer’s plans in conjunction with a
cost-reduction programme drawn up by
British Steel’s management would
result in several hundred job losses,
according to two people with knowledge
of the talks.
The Turkish bid was chosen over a
rival offer from Liberty House, the
industrial conglomerate led by Sanjeev
Gupta, the businessman, that owns a
number of steel plants in the UK.
Both bidders envisaged changes to the
steelmaking facilities at Scunthorpe,
but Liberty’s intention to close one of its
two functioning blast furnaces raised
concerns about job losses.British Steel rescue hopes rise
as Turkish fund agrees terms
3 Ataer named preferred bidder 3 4,000 jobs in limbo 3 Plans to lift output
LOUISE LUCAS AND JAMES KYNGE
HONG KONGAlibaba is to acquire rival NetEase’s
cross-border online shopping plat-
form, according to two people familiar
with the matter, as China’s highly com-
petitive $2tn ecommerce market takes
early steps towards consolidation.The Chinese tech giant, whichthis week
reported a robust 42 per cent year-on-
year jump in quarterly revenuesto
Rmb114.92bn ($16.3bn), could pay
about $2bn for Kaola, according to one
person familiar with the deal.
Chinese shoppers have turned in large
numbers to online retailers, led by Ali-
baba’s Taobao and Tmall platforms and
JD.com, spending roughly four times as
much as their US peers.
But as more players, including Pin-
duoduo, pile into the market, the com-
petition to woo shoppers has intensified
and left smaller players on the sidelines.
NetEase, which is best known for its
gaming and music operations, has been
seeking to sell its ecommerce unit for
the best part of a year, according to
bankers. Alibaba and NetEase declined
to comment.
Unlike Alibaba, which usually oper-
ates as a platform on which merchants
sell goods, Kaola buys in inventory from
global brands.NetEase also conforms to
a different model than fellow tech peers
such as Alibaba and Tencent, whichdepend on sprawling ecosystems offer-
ing everything from shopping to pay-
ments to movies, designed to keep users
on their platforms as long as possible.
Amazon was among the potential bid-
ders looking at Kaola earlier this year,
according to bankers. However, that
was scotched when the US groupclosed
its Chinese online store that allowed
domestic consumers to buy from Chi-
nese merchants, shifting its focus to sell-
ing imported goods in China.
According to one analyst,a fewoptions were on the table at the time.
“Either Amazon would double down
[on China] or sell the business to
NetEase and NetEase would double
down,” the analyst said. “But neither
happened, because both of them
wanted to sell. It doesn’t make sense for
NetEase to keep [Kaola]. Because it’s
small scale.”
Online sales in China are expected to
reach almost $2tn this year, according to
eMarketer, which expects the figure to
rise to $2.4tn next year. That compares
with $587bn in the US this year, rising to
$668.5bn in 2020.Alibaba to buy NetEase’s
retail platform for $2bn
Decline in UK steel output
Source: House of Commons LibraryIndices rebased UK economyTota l
manufacturingSteel industry British Steel’s Scunthorpe plant. Ataer is a vehicle of Oyak, Turkey’s military pension scheme, which owns half of steel producer Erdemir— Lindsey Parnaby/AFP/Gettyenvironment in the UK, which currently
undermines our competitiveness”.
Roy Rickhuss, general secretary of
Community, the steelworkers’ union,
said the news was a“milestone” but
“this is not yet a done deal and we have a
lot of hard work ahead of us”. The union
would engage with Ataer and “scrutinise
their plans”.
Ataer is a subsidiary of Oyak, Tur-
key’s military retirement scheme,The proliferation
of online platforms
in China such as
Pinduoduo has
led to intense
competitionCopycat crimeSecurity experts warn of
rising use of AI to fake identities— ANALYSIS, PAGE 10
Argentine routHasenstab debacle suggests
age of the bond king is ending— MARKETS, PAGE 11
ALISTAIR GRAY,SAMI VUKELJA ND
ANDREW EDGECLIFFE-JOHNSONCorporate America cheeredDonald
Trump’s decision this week to delay
tariffs on another round of imports
from China, yet tensionwith Beijing is
disrupting another valuable arrival
into the US — tourists.Tens of thousands of Chinese tourists
are shunning the country, and compa-
nies fromTiffanytoHyatt Hotelsare
counting the cost.
Tourists from China hold special
appeal for US business because of how
much they spend. Including the costs of
flights and accommodation, each
splurges on average $7,000 per visit,
according to data cited by the US Travel
Association.
After several years of double-digit
growth, however, Chinese visitor num-
bers rose only 4 per cent in 2017 and last
yeardeclined for the first time since- There were 2.99m arrivals in
2018, a drop of 6 per cent from the previ-
ous year. The weakness is continuing
this summer, according toUS business
executives, who say the slowdown is
weighing on profits.
“It’s a significant worry, given China
has represented so much of the growth
in international tourism over the past
decade,” said Adam Sacks, president of
Tourism Economics.
Macy’sthis week blamed, in part,
a 9 per cent drop in sales from interna-
tional tourists for aweak second quarter
that prompted the department store
chain to warnon full-year profits.
Jeffrey Gennette, chief executive, said
overseas visitors were an important
contributor in destinations such as New
York, where the company has its flag-
ship Macy’s store on Herald Square and
Bloomingdale’s on 59th Street.
The fall-off was a particular problem,
he said, since sales to tourists were very
high margin. “They’re more apt to buy
at full price, and there’s virtually no
returns,” he said.
Tapestry, owner of Kate Spade and a
portfolio of other brands, pointed to
“pressure from lower tourist spend” in
North America at its luxury leather
goods chain Coach in disappointing sec-
ond-quarter earnings that drove the
shares down 22 per cent on Thursday.
Victor Luis, Tapestry chief executive,
cited “ongoing volatility” in theDaigou
trade. China has been cracking down on
buying by agents who source goodsabroad for lower prices than those
offered at home.
Several additional factors explained
the slowdown, analysts said, from more
restrictive visa issuance by Washington
to the wider fallout from the trade war.
“[The] Chinese don’t feel so welcome
any more,” said Wolfgang Georg Arlt,
founder and director of the China Out-
bound Tourism Institute.
A travel advisory from Beijing earlier
in the summer warned of the risk of“shootings, robberies and theft” in the
US and potential for “harassment” from
local law enforcement. Mr Sacks of
Tourism Economics said he had heard
such warnings were spurring cancella-
tions among student and tour groups.
Crossing the Pacific has also become
more expensive after a fall in theren-
minbi, which Beijing allowed this
month to move beyond seven per dollar
for the first time in over a decade.
Standing with family members out-side Tiffany, the luxury jeweller on
Manhattan’s Fifth Avenue, a professor
who splits his time between the US and
China said thedepreciation had “defi-
nitely impacted” his family’s spending
on their trip. It even prompted a mem-
ber of his party to reconsider the pur-
chase of an Omega watch.
“There’s no longer any advantage to
buying things here,” the man said.
“[One] might as well just go to Hong
Kong and buy it there.”
While Chinese nationals accounted
for fewer than 8 per cent of visitors to
the US in 2018 compared with almost
12 per cent from the UK, according to
the National Travel and Tourism Office,
they contributed more to the US econ-
omy than those from any other country.
Tiffany generates a “double digit”
percentage of sales at its US retail busi-
ness from foreign tourists and these rev-
enues dropped about 25 per cent in its
first quarter from a year ago. The com-
panysaid the decline from Chinese
tourists was even steeper.
A broader slowdown is also contribut-
ing to the decline in tourists. Mark
Hoplamazian, chief executive ofHyatt
Hotels, told analysts this month that
economic conditions in China hadweighed on demand, along with trade
tensions with the US.
Other retailers that have been hit
include newsagent chain Hudson,
which manages 1,000 outlets with a
focus on airports, stations and hotels.
Presenting second-quarter earnings,
Roger Fordyce, chief executive, blamed
a slowdown in Chinese tourists for a 5.
per cent decline in like-for-like duty-
free sales. The company was facing
“uphill battles in replacing that”, he
said.
At Macy’s, in the 40 or so stores that
were most affected by the slowdown, Mr
Gennette said the company was trying
to find ways to encourage more visits
from domestic tourists and local cus-
tomers. “We’re really focused in these
40 stores on what we can do to offset
that” decline in business from Chinese
tourists, he said.
Other executives said they were hold-
ing off on changes to their strategy, how-
ever. “It’s important that one doesn’t
just pull back because of any sort of
short-term blip,” said Glenn Fogel, chief
executive ofBooking Holdings, the com-
pany behind Kayak and Priceline.
“China is a great opportunity for the
long run.”Retail & consumer
US stores face ‘uphill battle’ after trade war jitters keep China tourists away
Tourists outside the Chinese Theatre on Hollywood Boulevard— Mike Blake/Reuters
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