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Reform of China’s ailing state-owned firms is emboldening them

Thu, 20 Jul 2017 14:44:55 GMT

ACCORDING to company lore, Yunnan Baiyao, a musty-smelling medical powder, played a vital role during the Long March. As China’s Communist troops fled from attacks in the 1930s, trekking thousands of miles to a new base, they spread its yellow granules on their wounds to stanch bleeding. To this day, instructions on the Yunnan Baiyao bottle recommend application after being shot or stabbed. Many Chinese households keep some in stock to deal with more run-of-the-mill cuts. But the government has recently put its maker into service to treat a different kind of ailment: the financial weakness of state-owned enterprises (SOEs).

Yunnan Baiyao has emerged as a poster-child of China’s new round of SOE reform. The company, previously owned by the south-western province of Yunnan, sold a 50% stake to a private investor earlier this year. The same firm had tried to buy a slice of Yunnan Baiyao in 2009 but was blocked. Its success this time has been held up in the official press as proof that a...Continue reading


An overhaul of Brazilian labour law should spur job creation

Thu, 20 Jul 2017 14:44:55 GMT

IN THE litany of bosses’ gripes about Brazil’s inclement business climate, rigid labour laws vie for pride of place with its convoluted tax laws and its licensing rules (on everything from health and safety to protection of cultural heritage). No wonder: Brazil ranks a miserable 117th out of 138 countries on labour-market efficiency, according to the World Economic Forum. Its rigid labour law was transplanted from Benito Mussolini’s Italy in 1943. Employers find it thoroughly unsuited to a modern economy and cheered on July 13th, when the president, Michel Temer, signed into law the biggest overhaul of the unwieldy statute in 50 years.

The reform is a big victory for the unpopular Mr Temer, who is under investigation in a corruption scandal (he denies wrongdoing). It introduces more flexible working hours, eases restrictions on part-time work, relaxes how workers can divvy up their holidays and cuts the statutory lunch hour to 30 minutes. It also scraps dues that all employees must pay to...Continue reading


Demand for exorcists is soaring in France

Thu, 20 Jul 2017 14:44:55 GMT

FOR A man poised for combat with evil spirits, Philippe Moscato looks remarkably at ease. In casual clothes and chatting about the tools of his trade—a “Vogel” crystal, compass, steel crucifix, pendulum and bag of salt from Jerusalem—he says he can deliver unreal results. Hired to exorcise an apartment in a wealthy district of central Paris, he predicts that the air will change. In the winter, he says, the owners will no longer need their central heating, the result of beneficial vibrations.

Mr Moscato’s work involves first waggling a pendulum, supposedly to assess the flat’s readiness, then lighting a candle, reciting from an exorcism manual, before blessing salty water that he splashes in every room. As he sprinkles, he delivers a flow of incantations. For an hour’s work he pockets €155 ($178). He has requests three or four times a week to de-spook property, and exorcises a person on average once a week. Paris, Lyon and the French Riviera are the areas most contaminated...Continue reading


Could bond funds break the market?

Thu, 20 Jul 2017 14:44:55 GMT

GOOD generals know that the next war will be fought with different weapons and tactics from the last. Similarly, financial regulators are right to worry that the next crisis may not resemble the credit crunch of 2007-08.

The last crisis arose from the interaction between the market for mortgage-backed securities and the banking system. As investors became unsure of the banks’ exposure to bad debts, they cut back on their lending to the sector, causing a liquidity squeeze. Since then, central banks have insisted that commercial banks improve their capital ratios to ensure they are less vulnerable.

Might the next crisis originate not in the banking system, but in the bond market? That is the subject of a new paper* from the Bank of England. The worry centres on the “liquidity mismatch” between mutual funds, which offer instant redemption to their clients, and the corporate-bond market, where many securities may be hard to trade in a crisis. The danger is that forced...Continue reading


KKR, a private-equity giant, lays out its succession plan

Thu, 20 Jul 2017 14:44:55 GMT

IN MOST four-decade-old firms run by greying co-founders, investors would have long since demanded clarity on succession. But private equity works differently: the industry has been dominated by its pioneers ever since its origins in the 1970s. So an announcement on July 17th about its future leadership by KKR, one of the world’s largest private-equity firms, puts it a step ahead of its rivals. Its aim of ensuring that the firm has the right structure in place “for decades to come” is not obviously shared across the industry.

KKR has been run since 1976 by two of its founders, Henry Kravis and George Roberts (both in their early 70s). They are staying on as co-chairmen and co-chief executives but with less of a day-to-day role. Lining up behind them are a pair of 40-somethings, Joe Bae and Scott Nuttall, who will join the board and take the titles of co-president and co-chief operating officer.

Such explicit, public succession planning is unusual. Stephen...Continue reading


Regulating credit unions in Africa

Thu, 20 Jul 2017 14:44:55 GMT

Striking a co-operative note

THE most recent time Moses Kibet Biegon needed a quick loan was when his roof blew away. He got one from the Imarisha Savings and Credit Co-operative, in Kericho in western Kenya. Imarisha channels the savings of its 57,000 members into loans for school fees, business projects or, in Mr Biegon’s case, roof repairs. It runs a fund to help with medical bills. And it pays dividends to its members from its investments, which include a shopping plaza that it opened last year.

Savings and credit co-operatives (SACCOs) like Imarisha are the African version of credit unions: member-owned co-ops, usually organised around a community or workplace. Some are rural self-help groups with a few dozen members and a safe. Others have branch networks and mobile apps. The largest SACCOs rival banks; Mwalimu National, which serves Kenyan teachers, has even bought one.

The co-operative model brings “a more humane face” to finance,...Continue reading


How Donald Trump is monetising his presidency

Thu, 20 Jul 2017 14:44:55 GMT

Golf conflict

“PRETTY close to a laughing stock.” That is Walter Shaub’s verdict on America’s standing in the world, at least from an ethics point of view, under President Donald Trump. Mr Shaub’s view counts: he stepped down this week as head of the Office of Government Ethics, a federal watchdog.

He is leaving his job six months early, frustrated at the president’s failure to separate himself from his businesses, at White House foot-dragging on disclosing ethics waivers for staff, at its failure to admonish a Trump adviser who plugged the family’s products in an interview, and more. “It’s hard for the United States to pursue international anticorruption and ethics initiatives when we’re not even keeping our own side of the street clean,” Mr Shaub told the New York Times.

No American leader has ever entered office with such wide business interests as Mr Trump. In the context of the country’s corporate...Continue reading


The spread of 3D models creates intellectual-property problems

Thu, 20 Jul 2017 14:44:55 GMT

Do try this at home

GROOT, a character from Disney’s film “Guardians of the Galaxy”, is usually mass-produced by the entertainment company as a small, collectable figurine and sold by retailers such as Toys “R” Us. But just before the release of the second film in the franchise earlier this year, Byambasuren Erdenejargal, a Mongolian enthusiast, noticed that people in a 3D-printing group on Facebook were searching for a computer model of Groot. So Mr Erdenejargal decided to create one. He spent four days perfecting the design and its printability before uploading his creation to Thingiverse, an online 3D-printing community based in New York. His digital model of the arboreal creature has since been downloaded (and probably printed in physical form) over 75,000 times.

Fans of popular TV programmes and films have long used arts and crafts to express their attachment to fictional characters. Etsy, an online marketplace for artisanal products, is full of...Continue reading


An action plan for Uber’s next chief executive

Thu, 20 Jul 2017 14:44:55 GMT

IT IS said that Travis Kalanick, who resigned as Uber’s boss last month, has been reading Shakespeare’s “Henry V”. Prince Hal’s transformation, from wastrel prince to sober monarch, is doubtless one he would like to emulate. But as a guide to the ride-hailing firm’s financial dilemma, “Macbeth” is the best play. This line especially resonates: “I am in blood stepp’d in so far that, should I wade no more, returning were as tedious as go o’er.”

Uber has bled money for years in an attempt to become the absolute ruler of its industry. Once Mr Kalanick’s replacement is found, voices will whisper that the firm, like Macbeth himself, is in too deep to alter course. But the new boss must change Uber from a company that sacrifices anything for its ambitions, to one which has a realistic valuation and uses resources efficiently.

Its product is elegantly simple. Uber makes a market between drivers and passengers and takes a cut of about a fifth of the fare. The...Continue reading


The Trump presidency may not have helped Kushner Companies

Thu, 20 Jul 2017 14:44:55 GMT

WHEN the deal was struck just over a decade ago, for $1.8bn, 666 Fifth Avenue, a 41-storey Manhattan skyscraper, became the most expensive office building ever sold in America. Now it is in limbo, awaiting billions of dollars of investment to rebuild it and raise it almost twice as high. Across the Hudson River, another hunt for money is under way, to build a property called One Journal Square in Jersey City. In June a property-investing start-up called Cadre attracted financial backing from Silicon Valley luminaries including Andreessen Horowitz, a venture-capital company.

The thread linking these ventures is Jared Kushner, Donald Trump’s senior adviser and son-in-law, whose family business, like that of the president, is in property. Mr Kushner helped conceive all three projects. He has a “passive ownership interest” in Cadre (meaning he is not actively involved in its management). His family co-owns 666 Fifth Avenue and One Journal Square.

Unlike the president, Mr...Continue reading


The power of populists

Thu, 20 Jul 2017 14:44:55 GMT

WITH the defeat of Marine Le Pen in her bid for the French presidency, establishment politicians in rich countries breathed a sigh of relief. The fortunes of extremist candidates have faltered since the populist surge that put Donald Trump into the White House. But it is hard to be confident that this was populism’s high-water mark without a better understanding of what caused the swell in the first place. The most convincing explanations suggest that populist upswings are not in the past.

It is tempting to dismiss the rise of radicalism as an inevitable after-effect of the global financial crisis. Studies show that the vote shares of extreme parties, particularly on the right, tend to increase in the years after a crisis. The Depression spawned some of the 20th century’s most dangerous and radical populist movements. But the facts do not fit that story precisely. In Europe, for example, populist parties have steadily won more voters since the 1980s. What is more, populist rage is...Continue reading


Podcast: Goodbye, Benito

Wed, 19 Jul 2017 13:12:18 GMT

Brazil’s rigid labour market regulations were transplanted wholesale from Benito Mussolini’s Italy back in 1943. Now President Michel Temer has approved an overhaul. Will it encourage job creation? Also, an exorcist in Paris fighting “bad spirits”. And why President Trump is playing hardball in renegotiating NAFTA. Hosted by Andrew Palmer.

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