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The World BusinessMirror
Sunday, July 1, 2018
UK worries on what Donald Trump could promise Putin
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s the United Kingdom prepares to welcome Donald J. Trump next month, there are fears at the top of government about what he might do when he meets Vladimir Putin. One Cabinet minister, speaking on condition of anonymity, said that, having watched the president’s meeting with North Korean leader K im Jong Un, they worry Trump would want to burnish his deal-maker credentials by outlining a plan to reduce military presence around Europe’s Eastern boundaries. Right after that June 12 summit with Kim, Trump called off joint military exercises with South Korea that had been an irritant to North Korea. The UK has reason to be vigilant given its claim that Moscow was behind the poisoning of a former Russian spy on British soil. It’s also been thrown off by the prospect of Trump and Putin meeting just before-or after-the US leader’s visit to the United Kingdom on July 13 and around the time of a North Atlantic Treaty Organization (Nato) summit. Britain has forces stationed on Nato’s Eastern frontier to deter Russian aggression. The risk is that if Putin staged any kind of incursion, as has happened in the Ukraine and Crimea, there could be a direct confrontation between UK and Russian troops. Some of the senior minister’s concerns are shared within Prime
China opens up more of its economy to foreign investors
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hina formalized the easing of foreign investment restrictions on a range of industries from banking to agriculture, against the backdrop of an escalating trade dispute with the United States. China’s National Development and Reform Commission on Thursday published an updated version of its so-called negative list, which outlines industries where foreign investment is limited or banned. Among the changes, many of which have been previously announced, caps on foreign ownership of banks will be removed, ownership limits on brokerages and insurance companies will be lifted in 2021, and in 2022 for passenger car manufacturing. The US government has repeatedly criticized the lack of openness in China’s economy, and relations between the two nations are deteriorating, with both threatening to increase tariffs from early July and impose other restrictions. On Thursday, China issued a stout defense of its trade and business prac tices, responding to the persistent accusations from the White House that it steals American technology and shuts foreigners out of its economy. “China has been a strong advocate for free trade,” according to a white paper, entitled “China and the World Trade Organization,” issued by the State Council Information Office. “China has comprehensively fulfilled its commitment to the WTO [World Trade Organization], substantially opened its market to the world, and delivered mutually beneficial and win-win outcomes on a wider scale.” China is looking to increase foreign access to its market, both with these investment changes and also by cutting tariffs for various goods. The statement said that the number of sectors restricted for foreign investors is being reduced to 48 from 63 in 2017, and is effective from July 28. Bloomberg News
Minister Theresa May’s government and Conservative Party. Another UK official agreed it was difficult to know what Trump might say when he met Putin. May’s spokesman, Alison Donnelly, said “the meeting is a matter for them”—Putin and Trump— and that the “prime minister has been clear on our policy with Russia, and that is to engage, but beware.” The minister didn’t say whether the UK had raised these concerns with other allies or the White House. British diplomats and politicians have struggled to read Trump since he took office, and been repeatedly caught out by him, leaving them wary of what he may do next. Bob Seely, a Tory lawmaker
Vladimir Putin, Russia’s president, gestures as he speaks during the plenary session at the SaintPetersburg International Economic Forum in Saint Petersburg, Russia. Andrey Rudakov/Bloomberg
and member of the foreign affairs parliamentary committee, saw grounds to be concerned about what Trump might do. On his way to the Group of 7 (G7) Summit, Trump blindsided other leaders by saying that Russia ought to be readmitted, and then caught them off guard again by rejecting the joint statement he’d just agreed to. He went from there to meet Kim, and was much warmer about the North Korean dictator than he had been about his G7 colleagues. “There seem to be three or four different policies towards Russia in Washington,” Seely said in
There seem to be three or four different policies towards Russia in Washington. The State Department is quite Russia-skeptic, but Trump seems quite pro-Putin. They veer between them.”—Seely
an interview. “The State Department is quite Russia-skeptic, but Trump seems quite pro-Putin. They veer between them.” Even if Trump doesn’t go so far as to offer Putin a deal, Seely said there’s reason for concern that a warm embrace from the US president will set back efforts to contain the Russian leader. “ T he wor r y is about t he mood music,” he sa id. “Br ita in doesn’t want to g ive succor to t he Russians. Putin w i l l want Tr ump to say he’s ready to move t he relationship on, w it hout a ny t h ing in ret u r n. But the nicer the Americans are towards Putin, t he more Putin w il l think he can get away w ith ag g ressive beh av ior towa rd s his neighbors.” The date—and location—for the meeting between Trump and Putin will be announced Thursday, simultaneously from Moscow and Washington, according to US National Security Adviser John Bolton. He was in Moscow Wednesday helping pave the way for the encounter. Bloomberg News
Alibaba Group pulls back in America amid Chinese investment crackdown
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libaba Group Holding Ltd. is scaling back its presence in Silicon Valley—a sign that the Trump administration’s crackdown on Chinese investment in US companies is casting a chill. After a flurry of deal-making, the Chinese e-commerce giant’s corporate venture arm has announced only one fresh investment in the United States this year, leading a $26.4-million funding round in a New York and Tel Aviv data-analysis startup called SQream Technologies. And that’s a tiny deal compared with the hundreds of millions Alibaba lavished on high-profile US companies, such as Magic Leap, Jet.com and Snap Inc. Earlier this year the company lost its top US dealmaker, Michael Zeisser, according to people familiar with the matter. R at her t ha n hir ing a n outside replacement, A libaba is promoting Peter Stern, who used to be an investment banker at Credit Suisse, the people s a id . A l ibaba’s pu l l back coincides with escalating tensions between the US and C hina. T he Tr ump administration has been cracking down on Chinese investments in US technology, from takeovers to venture capital funding rounds. On Tuesday administration officials said Trump wants Congress to give expanded powers to the Committee on Foreign Investment in the United States, or CFIUS, which reviews foreign take-
overs. Earlier this year, Ant Financial—the payments giant spun out of A libaba—abandoned plans to buy MoneyGram International after CFIUS blocked the transaction on national-security grounds. “Given the current environment, it remains to be seen what investments they can make without CFIUS getting against them,” says Hans Tung, managing partner at GGV Capital, an early investor in Alibaba. Going “where they’re more welcomed makes more sense.” Alibaba declined to comment. A l ibaba’s pr ior it y in t he US has long been to persuade businesses there to sell to Chinese consumers v ia its massive on line ba zaars, rat her than chasing US consumers and competing w ith the likes of A mazon.com Inc. A libaba looked for American start-ups that would help it learn about new technologies and trends, a s we l l a s bu si nesses t h at would complement its core ecommerce offerings in Asia. Alibaba took sizable stakes in sports e-commerce retailer Fa n at ic s, g a m i ng compa ny Kabam, messaging app Tango, ride-hailing start-up Lyft, ecommerce company Jet.com and Snap. More recently, Alibaba’s investments had shifted toward early-stage companies that would help make Alibaba more efficient, including data-storage firms and startups building location-based technology.
Now Alibaba is once again focusing its dealmaking on Asia. To fulfill billionaire cofounder Jack Ma’s vision of bringing Chinese supermarkets and department stores into the 21st century, Alibaba has sunk billions of dollars into traditional retail, from buying existing companies to openi n g c a s h ie r l e s s b r i c k- a nd mortar stores. To attract new consumers in the fast-growing economies of Southeast Asia, Alibaba invested $4 billion in Singapore-based e-commerce giant Lazada Group and led a $1.1-billion investment round in Tokopedia, an Indonesian online marketplace. Alibaba isn’t the only Chinese company avoiding the US these days. In the first five months of the year, Chinese acquisitions and investments fell to the lowest level in seven years, a drop of 92 percent, according to Rhodium Group. Though it may become increasingly difficult for Alibaba to make big investments in US companies, it’s finding other ways to innovate. The company has pushed into a huge range of businesses from cloud services to entertainment, a vast laboratory to experiment with such emerging technologies as artificial intelligence and quantum computing. Last year Alibaba said it would spend $15 billion on research and recruiting scientists from the US, China, Russia, Israel and Singapore. Bloomberg News
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Pakistan back on global terrorism financing list
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global anti-money laundering agency placed Pakistan back on its terrorism financing “grey” monitoring list in a bid to push Islamabad to halt support for militant groups as the country’s economy faces headwinds ahead of national elections. In Paris meetings this week, the Financial Action Task Force (FATF) decided to place Pakistan back onto its watch list three years after it was previously removed, Mohammad Faisal, a spokesman for Pakistan’s foreign ministry, told reporters in Islamabad on Thursday. The move follows a push by the United States and European allies in February to get Pakistan to do more to combat militancy and close financing loopholes to terrorist groups. With elections scheduled for July 25, Pakistan faces financial difficulties due to a widening current-account deficit and dwindling foreign-exchange reserves. While FATF’s decision is a blow to Islamabad, Pakistan still managed to negotiate an International Monetary Fund bailout package and continued to tap the global bond market when it was last included on the monitoring list. “Pakistan’s inclusion will not trigger a draconian impact of financial sanctions,” said Hasnain Malik, the global head of equity research at Exotix Capital. However, the placement could be a precursor to Pakistan’s eventual addition onto FATF’s socalled “black” list, which would mean more serious sanctions. Islamabad has been rushing since
the start of the year to avoid inclusion. A week before the FATF meetings Pakistan changed financial regulations and sought disclosure of the ultimate beneficial owners and details of all legal persons and legal arrangements before they offer any services.
Pakistan Sanctuaries
In February it also banned organizations linked to the suspected planner of the 2008 Mumbai attacks, Hafiz Saeed and changed a law to allow security agencies to take action against groups on the United Nations Security Council sanctions list. Yet, while apparently clamping down on some groups, Pakistan on Wednesday removed a six-year ban on suspected terror group Ahle Sunnat Wal Jamaat and unfroze the assets of its leader. The military has also been accused of renewing a push to lend certain militant outfits political legitimacy, which it denies. Relations between the US and Pakistan have deteriorated drastically this year after President Dona ld J. Tr ump in Januar y suspended billions of dollars of military aid and said Islamabad gave “ lies and deceit” in return for funding. Pakistani sanctuaries sheltering insurgents are the biggest challenge to stabilizing Afghanistan, US Army Lieutenant General Austin Miller, who is Trump’s nominee to lead allied forces in the 17-year Afghan conflict, told the Senate Armed Services Committee last week. Bloomberg News
Angela Merkel, Germany’s chancellor, gestures while speaking to lawmakers during a budget policy plan speech in the lowerhouse of the Bundestag in Berlin, Germany. Krisztian Bocsi/Bloomberg
Merkel says Germany only thrives when Europe thrives
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h a n c e l lo r Angela Merkel said German-French proposals for the euro area won’t lead to a “debt union” and rejected unilateral measures to curb migration as she headed to a summit with other European Union (EU) leaders. In a speech to the lower house of parliament in Berlin, Merkel also reiterated a commitment to boosting defense spending and flagged trade conflict with President Donald J. Trump’s administration as a summit topic, saying leaders should discuss how to engage the US in talks “to avoid further tariffs and thus further steps toward a trade war.” As a clash over migration threatens the stability of her governing coalition, Merkel said Thursday she doesn’t expect EU leaders to agree on a comprehensive migration plan this week. Merkel’s accord with French President Emmanuel Macron on a euro-area budget also faces criticism from some in her party bloc, prompting her to push back in her speech. “Of course, the rules apply: everyone needs to stick to the agreed rules, every member-country is responsible for its own budget,” Merkel said. “There will be no debt union.” Looking ahead to a North Atlantic Treaty Organization (Nato) summit in July, Merkel reminded lawmakers that an alliance agreement in 2014 to boost capabilities was in par t a response to Russia’s annexation of Crimea. She renewed her commitment to lifting
German defense spending to 1.5 percent of GDP by 2024. While that’s less than demanded by Trump, Merkel said Nato “remains central to our security.” The German leader devoted long stretches of the speech to migration, where a clash over border security with Bavaria’s ruling Christian Social Union party, which helps secure her government’s parliamentary majority, has triggered one of the biggest crises of her almost 13 years in power.
Slain teenager
Departing from her focus on policy details, she cited two cases that provoked populist outrage and newspaper headlines this month: an Iraqi immigrant suspected of slaying a 14-year-old German girl and the allegedly slow process of deporting Osama bin Laden’s former body guard from Germany. “We can’t just let that happen,” she said. While suggesting that Germany needs to further reduce asylum numbers, Merkel said the refugee crisis had abated and cited a series of EU measures to block refugees at the union’s outer borders as the model for further action, including steps to help Italy. “Europe faces many challenges, but migration may well turn into a question of the European Union’s destiny,” Merkel told lawmakers. The EU needs to “tackle it in a way that people in Africa and elsewhere believe we are being guided by values and that we’re committed to multilateralism, not unilateralism,” she said. Bloomberg News