Saturday, 2 September 2017

Uber’s Pick for CEO, China’s Internet Crack Down and Attacks on Merkel

Schulz Attacks Merkel as “Out of Touch”

The German SPD election candidate is focusing on relations with the US as he tries to turn around his flagging election campaign.

Editor’s Remarks: With only four weeks to go until the election, the Social Democrat Party (SPD) is trailing in the polls, with ratings of 22% against 38% for Angel Merkel’s Christian Democratic Union (CDU). Schulz has started to focus on traditional SPD anti-American and anti-nuclear weapon themes as he attempts to reach out to the approximate 40% of voters who are undecided and benefit from Germany’s strong disapproval of US President Trump. But the habitually pacifist German electorate has become more used to the country’s increased role in international affairs and seems comfortable with Merkel’s message of “stability and order.” The real race in this election is for third place. The CDU wants to avoid another “grand coalition” with the SPD and hopes that the pro-small business Free Democrats (FDP) can get enough votes to enter a CDU/CSU/FDP coalition.

China Merges Power Giants

Power generator China Guodian will merge with coal producer Shenhua Group to create the world’s largest power company by capacity.

Editor’s Remarks: The merger has been approved by China’s State-Owned Asset Supervision and Administration Commission (SASAC) and will create a utility giant with over $270bn in assets. The new company, to be called National Energy Investment Corp, will have 225 gigawatts of installed capacity, making it the largest in the world, and will blend Shenhua’s coal supplies and coal-powered generating capacity with Guodian’s clean energy capacity. The mega-merger underlines the direction of the government’s state owned enterprise (SOE) reform process, where it is focused on industrial consolidation to reduce overcapacity and improve efficiency. The Shenhua-Guodian tie-up has been mooted for months, and analysts expect more of these mega-mergers as the government continues its SOE reforms.

Samsung Tries to Move on

The South Korean electronics group announced a $7bn China investment after its vice-chair is jailed for five years for corruption.

Editor’s Remarks: While Samsung Electron ics has had a good year, generating record earnings and overtaking Intel as the world’s largest semiconductor company, its founding Lee family has not. The Group’s vice-chair and heir-apparent Lee Jae-yong has been sentenced to five years in prison for his part in a graft scandal involving ex-President Park Guen-hye, and there are worries of a “power vacuum” at South Korea’s largest company. The group has announced the China investment, to produce NAND flash memory chips that are used in smartphones, to build on its over 40% market share in the global NAND and DRAM semiconductor market. But following the conviction, Samsung could come under pressure from foreign shareholders, who own over 50% of Samsung Electronics, and may try to force a break-up and hostile takeovers of some of the Group’s businesses.

China Outlaws Anonymous Posts

The country’s government is taking further steps in limiting internet freedom.

Editor’s Remarks: The new rules, announced by China’s top censor and set to be enforced on October 1st, are meant to eliminate posts by anonymous internet users. Internet companies and services providers will be responsible for ensuring users provide their real names when online and will also have to report illegal content to the authorities. This comes after the Chinese government passed cybersecurity legislation in June forcing tech companies to store data on onshore servers, which makes them more accessible to the authorities. The country also banned the use of VPNs recently, which made Apple drop its VPNs from its China App Store. Facebook and Google are banned altogether in China, and players such as Apple need to decide which is the lesser evil – “bend” to the Chinese government and have access to the world’s largest market by number of potential users, or stick to their values and share the fate of some of its other American competitors.

Uber Wooing the Head of Expedia

The ride-sharing company offered its top position to Dara Khosrowshahi, of Expedia.

Editor’s Remarks: The shortlist is said to have also included GE’s Jeff Immelt and HP’s Meg Whitman. Khosrowshahi is the current CEO of American travel company Expedia and would not come cheap. According to media reports, the Silicon Valley company would have to pay the executive $160m in unvested stock options alone, should the deal be finalised. The move, however, would have one immediate short-term benefit: it could help bring an end to months of scandals and division that have engulfed Uber. The company’s former CEO and founder, Travis Kalanick, was ousted back in June. Khosrowshahi’s first line of business will probably be restoring investors confidence, especially considering the growing threats posed by competitors such as Didi and Lyft, and the fact that Uber is still reliant on investor support as it continues to bleed cash.

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