Good morning.
Snapchat succumbed yesterday to a wave of online outrage about a filter that smacked of anti-Asian racism (a yellow face with closed, slanted eyes). It seems a good moment to wonder if the same outrage will ever be directed at those who are blocking Chinese investment overseas.
It may be easier to illustrate the problem in three cases where U.S. interests aren’t directly affected. Today, Australia moved to block a Chinese consortium of state and private interests taking a controlling stake in the country’s largest electricity network over national security concerns.
Last week, the U.K.’s new Prime Minister slammed the brakes on a project to build the country’s first new nuclear power station in 40 years due to China having a minority stake in it (although one suspects that London is more concerned about wriggling out of a ludicrously high power-purchase contract it has already signed with the lead partner, France’s EDF).
The national security risk may be clear, given widespread evidence of Beijing’s formidable and growing cyberwarfare capabilities. But one reflects a legitimate desire for a reliable yield in a world of low returns, and the other an important (if arguably misguided) learning experience in the country’s search for a long-term low-carbon energy future.
But, either way, how credible is the threat of China abusing the leverage it gets through such investments? It is a country that guarantees its internal stability by exporting to the rest of the world. Breaching the trust of its trading partners would quickly prove counterproductive. The example of Vladimir Putin (of whom, more below) and his use of the gas weapon in Europe makes this only too clear.
Even where there is no national security interest and no direct line back to politicians back in Beijing, as in the acquisition of German robot maker Kuka by China’s Midea Group, western politicians continue to resist Chinese investment much more stiffly than that of other countries. Security concerns matter, obviously. But when domestic business isn’t investing despite five years of pleading from governments and central banks, you’re allowed to wonder whether it makes sense to be so sniffy about foreigners who are.
(Alan Murray is away today.)
| Geoffrey Smith | |
| @geoffreytsmith | |
| geoffrey.smith@fortune.com |
Top News
• New E-Mail Trove Embarrasses Hillary
A new batch of emails released on Tuesday appear to show that Hillary Clinton and her aides at the State Department sought to intervene on two occasions on behalf of donors to her philanthropic efforts and her 2008 campaign. The emails, revealed by the conservative watchdog group Judicial Watch, suggest that aides sought to connect a prominent Clinton Foundation donor with a U.S. ambassador, and in another instance assisted an associate of a 2008 campaign donor in finding a position at the State Department. There is no clear evidence that the donors were ultimately rewarded with special access, but it is clear that Clinton and her aides said they would act on their behalf. In a welcome diversion from the ongoing row over his comments on the Second Amendment GOP nominee Donald Trump described the incidents as proof that “Crooked Hillary Clinton put the State Department up for sale, with top aides pulling strings and doing favors for fat-cat donors.” Fortune
• Bill Maris Leaves Google Ventures
Silicon Valley’s top corporate venture capitalist is heading for pastures new. Google Ventures CEO Bill Maris is leaving only a year after the creation of Alphabet, the holding company designed to better distinguish the core Google business from its ‘moonshots’ and other investments. Maris’ departure comes on the heels of that of Tony Fadell, who headed Nest, and Chris Urmson, a key member of Alphabet’s autonomous car project. It’s not clear whether the departures are linked to reports of a tighter financial rein on Alphabet companies, whose losses were the source of some investor grumbling after the company’s last quarterly report. Fortune
• Valeant Under Criminal Investigation
Federal prosecutors are investigating Valeant Pharmaceuticals over suspicions that its business relationship with mail order pharmacy Philidor Rx amounted to a fraud on health insurers, according to The Wall Street Journal. The WSJ suggested that the probe could be the most serious faced yet by the troubled company, and that it could lead to criminal charges against former Philidor executives and Valeant as a company. The potential legal liabilities of Valeant’s corporate governance woes have long been reflected in its share price, which is down 90% from last year’s peak. However, it’s indicated to open down another 11% today. Fortune
• Christie ‘Flat Out Lied’ About Bridgegate
New Jersey Governor Chris Christie “flat out lied” when he denied involvement in the Fort Lee “Bridgegate” scandal in 2013, according to the testimony of a former aide that emerged yesterday. The Wall Street Journal reported that legal documents filed in advance of the trial of Bill Baroni, formerly deputy executive director of the Port Authority of New York and New Jersey, and Bridget Kelly, Christie’s former deputy chief of staff. Prosecutors say the defendants engineered massive traffic disruption on the George Washington bridge to punish Fort Lee’s Democratic mayor, Mark Sokolich, for not endorsing the Republican Christie. The claim comes from Christina Renna, another former aide to Christie. WSJ
Around the Water Cooler
• An Explosive Diversion in Ukraine
Now here’s a turn-up for the books. With just over a month to go to elections to its rubber-stamp parliament, Russia is suddenly facing a foreign policy “emergency”. President Vladimir Putin Wednesday accused Ukraine of fomenting terrorism in the Crimean peninsula, which it annexed in 2014. Russia’s Federal Security Service said it foiled a group of planned attacks by infiltrators carrying 20 improvised explosive devices, losing one of its agents in the process. Ukraine, which is also prone to whipping up scare stories to shore up domestic opinion, accused it of fabricating excuses for another invasion (reminiscent of its tactics in Georgia in 2008). Ukraine’s civil war has been heating up again recently despite official maneuvers on both sides to revive the search for a lasting peace. While the motive for the latest incident is unclear, it may dilute Russian voters’ focus on the decline in their living standards when they vote next month. The economy has shrunk for five successive quarters, although the signs are it will have broken that streak in the three months to June. BBC
• Tom Wheeler Takes a Hit
An appeals court upheld the right of states to stop municipalities from offering broadband internet services, in what looks like a big victory for the telecoms industry and a defeat for FCC chairman Tom Wheeler—and consumers. The FCC had claimed the right to pre-empt such laws, seeing it as central to expanding the availability of high-speed broadband nationwide, but the court said it needed a clear directive from Congress to intervene. In both of the cases considered by the court, the result had been lower prices for broadband services. Telecom companies argue that they shouldn’t have to compete with state-funded offerings, and that the use of taxpayers’ money to create them is wrong in the first place. Fortune
• Oil Under Pressure – Good News for Drivers
Oil prices rebounded a touch from overnight lows after the International Energy Agency’s latest snapshot of market trends eased fears about the global glut. But the IEA still shaved its forecast for global demand growth next year by 100,000 barrels a day to 1.2 million b/d. This comes in the same week that Saudi Arabia, Iraq and Kuwait all published record output figures for July, and the U.S. reported another rise in crude stocks. The oil market’s slow and unsteady return to balance is also being tested by a massive overhang of refined products in advanced economies: the IEA noted that commercial stocks in OECD hit a record 3.09 billion barrels in July. That’s also reflected in the Energy Information Administration’s forecast on Tuesday that gas prices could fall below $2 a gallon in the fourth quarter of this year. Given the direct impact of gas prices on inflation, that means that the Federal Reserve may have to look extra hard for reasons to raise interest rates as the year goes on. • Bloomberg
• Samsung Snaps up Dacor
Samsung Electronics said it’s agreed to buy Dacor, supplier of cookers and other kitchen appliances to the wealthy, as it seeks to expand its footprint in the U.S. and move upmarket. Samsung said it will keep Dacor’s brand name and leave its operations unchanged following the acquisition—a wise move given the ingrained American habit of viewing Samsung as essentially an inferior alternative to Apple. No financial terms were disclosed but the Korea Economic Daily said Samsung paid around $150 million. It’s the latest in an increasingly frequent rhythm of small acquisitions by the Korean company, whose organic growth is stalling due to the saturation of the smartphone market and oversupply in the chip market. Fortune
