HONG KONG (Reuters Breakingviews) - Google's hidden costs are giving Beijing sticker shock. Washington, busily upping the trade war ante, may ultimately ban Chinese telecom champion Huawei from using Google's proprietary technology, including its app store. The search engine is blocked in China, but local handset makers selling abroad have come to rely on the group’s technology anyway: the open-source Android system powers their phones. An embargo would threaten much of a $175 billion export market.
HONG KONG (Reuters Breakingviews) - China’s currency is feeling tariff pain. Washington and Beijing have slapped duties on swathes of each other’s products, sending the yuan sliding towards 7 per dollar. Depreciation might cushion mainland exporters, but it also encourages capital flight, hampering government efforts to gin up a flagging economy. To compensate, China may once again have to tighten controls.
HONG KONG (Reuters Breakingviews) - Luckin Coffee is serving up a rich brew. It said on Monday it plans to raise as much as $590 million in an initial public offering as it races to overtake Starbucks. Although their business models are different, on at least one comparative measure, the Chinese chain’s implied $4 billion valuation is high.
HONG KONG (Reuters Breakingviews) - Japan’s imperial retirement bash will test the country’s reluctant spenders. The world's third-largest economy takes a 10-day break, starting on Saturday, as Crown Prince Naruhito ascends to the Chrysanthemum Throne, replacing Emperor Akihito. Travel agents and malls hope for a spending spike, but Japanese workaholics may not turn swiftly into shopaholics. It’s poor news if they don’t, not least for planned efforts to meet rising social security costs.
HONG KONG (Reuters Breakingviews) - China's Starbucks wannabe is in an unseemly rush to deliver a New York listing. Luckin Coffee's draft prospectus argues, unconvincingly, that its fair value doubled in three months; an April funding round puts the company’s worth even higher, at a frothy near-$3 billion. Even with a rapidly-expanding chain of cheap outlets, it is still losing more than it rings up in cappuccinos. Add an unnecessarily complex corporate structure, and founder Qian Zhiya’s offer will leave investors worrying about a bitter aftertaste.
HONG KONG (Reuters Breakingviews) - Giant lenders like the $290 billion Industrial and Commercial Bank of China are ramping up loans to small businesses at the behest of Beijing. That will check their bias towards large state-owned enterprises. But it ignores perverse incentives at work within the banks and it is a misguided way to stimulate private investment.
HONG KONG (Reuters Breakingviews) - Weijian Shan spent his youth labouring in the Gobi Desert. Now he runs $30 bln at PAG, after stints at TPG and the World Bank. One of the first Chinese to study in America after the Cultural Revolution, Shan discusses trade tensions, and the economic risk of historical amnesia.
HONG KONG (Reuters Breakingviews) - Chinese financial xenophobia has thrown a wrench in MSCI's plans to offer up smaller local companies. Days after expanding the weight of mainland shares in its benchmarks, the index provider had to drop a popular tech stock thanks to policies capping foreign shareholdings. If happens too often, its indexes will be less representative of demand, and economic reality.
HONG KONG (Reuters Breakingviews) - Mizuho’s harsh medicine gives investors a taste of Japanese banking ills. The country’s second-biggest lender by assets took a $6 billion hit and slashed its annual profit forecast on Wednesday by 86 percent. Losses on dozy rural branches and duff offshore trades are symptomatic of ultra-loose monetary policy. New rules to ease consolidation should at least offer some relief.
HONG KONG (Reuters Breakingviews) - U.S. President Donald Trump's hard line on Beijing is softening by the minute. He has tweeted that he will delay hiking tariffs on $200 billion of Chinese goods, citing "substantial progress" on trade talks. He’s easing up on telecoms giant Huawei too. Stock market wobbles have pushed the president toward a quick-and-dirty settlement that will empower Chinese conservatives.