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A report by the American Chamber of Commerce in China reveals that tensions between Beijing and Washington continue to be the primary concern for U.S. companies operating in China. The report also highlights inconsistent policies, rising labor costs, and data security issues as other top worries. Despite claims by Chinese leaders that foreign businesses are welcome, many still face barriers to investment and operations. The report acknowledges the improvement in U.S.-China relations in 2023 but states that the U.S. presidential election is casting a shadow over the future business environment. The report emphasizes the need for high-level exchanges and communication between the two sides. It also provides recommendations for both China and the U.S., including the creation of transparent economic policies and clear visa policies for students. The report urges China to clarify and narrow the scope of its anti-espionage law and calls on the U.S. to engage with Chinese companies to address export control concerns. While American companies are not planning to move supply chains out of China, their willingness to increase investments there is decreasing.

 

U.S. News

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European Union lawmakers are set to vote on a new law that aims to ban products made using forced labor. Although the law does not explicitly mention China, many lawmakers hope it will be used to block imports from the region in the country where the Uighur Muslim minority lives. Human rights groups have reported widespread abuses in China's Xinjiang region, including forced labor and forced sterilization. The law, once approved by the EU's 27 member states, will give the European Commission the power to investigate supply chains outside the EU suspected of using forced labor. If proven, the products will be seized at the borders and withdrawn from the European market. The EU will also create a database to assess forced labor risks. Critics argue that the law falls short of the one adopted by the U.S., which banned the importation of products from Xinjiang unless businesses could prove they were not involved in forced labor.

 

AlJazeera

North Korean animators may have helped create popular television cartoons for big western firms, including Amazon and HBO Max, despite international sanctions on North Korea, a research report has found. The report discovered files on a North Korean internet server that included animations and instructions related to projects for foreign studios. The researchers observed that the files contained editing comments and instructions in Chinese, suggesting a go-between was responsible for relaying information between the production companies and the animators. The report could not determine the identity of the person or entity involved. The report also noted that North Korea's premier animation house, April 26 Animation Studio, has previously worked on international projects and is under sanctions. The researchers assessed with high confidence that the animation contracts had been outsourced to North Korea by a front company in China.

 

Reuters

The Federal Aviation Administration (FAA) is finalizing new rules that will require charter, commuter, air tour operators, and aircraft manufacturers to implement Safety Management Systems (SMS). SMS is a proactive approach to identifying and addressing potential operational hazards, aimed at reducing accidents. The FAA's decision to mandate SMS goes beyond the requirements set by Congress in 2020, following the fatal Boeing 737 MAX crashes. The National Transportation Safety Board (NTSB) has urged the FAA to require and verify SMS systems in all revenue passenger-carrying aviation operations. The NTSB has cited SMS systems in various incidents, emphasizing the need for their implementation. FAA Administrator Mike Whitaker believes that implementing a proactive approach to safety management will prevent accidents and save lives. The FAA's final rule comes after a mid-air cabin panel blowout on an Alaska Airlines Boeing 737 MAX 9 plane, which led to the FAA ordering Boeing to address quality-control issues. The new rules aim to enhance aviation safety and ensure that operators have effective safety management systems in place

 

Reuters

BNP Paribas is re-entering the Chinese market after 17 years, focusing on brokerage, research, and asset management. The French bank has hired close to 30 people to launch its securities operation in China. It has decided not to expand its onshore investment-banking business due to high costs and a bleak outlook for deals. BNP Paribas is leveraging its European status to slowly expand in China, while other Wall Street firms scale back amid U.S.-China tensions. The bank has been focusing on corporate banking in China, but has also hired industry veteran Ren Wang to revamp its investment banking business. BNP Paribas saw a significant increase in its ranking for mergers and acquisitions in China last year. Other banks, such as Goldman Sachs and JPMorgan, also own full control of their securities platforms in China. Morgan Stanley and UBS are opting not to build their own platforms, but will focus on specific areas of business in the country.

 

Bloomberg

ChatGPT developer OpenAI has hired its first employee in India, appointing a government relations head to shape AI regulations in the South Asian country. The move highlights OpenAI's efforts to push for favorable local rules as governments consider how to regulate the technology. India, with its large population and fast-growing economy, presents a significant growth opportunity for global tech companies. OpenAI faces competition from Google, which is developing an AI model specifically for India. OpenAI's CEO, Sam Altman, has called for more regulations and emphasized the importance of integrating AI technologies into government services. Altman also noted that India was an early adopter of OpenAI's generative-AI service, ChatGPT. The new hire, from Stockholm-traded contact verification firm Truecaller, will lead public policy affairs and partnerships for OpenAI in India.

 

Bloomberg

Just a few years ago, Western financial firms were expanding in China to take advantage of its booming economy. However, as doubts grow about China's economic recovery and its markets lag global peers, these firms are now facing a hit on their earnings and scaling back their ambitions. Fidelity International Ltd, Morgan Stanley, and Legal & General are among the companies that have cut China-focused jobs or shelved expansion plans. The souring of China's allure for Western financial firms comes at a time when Beijing is trying to attract more foreign capital. The decline in China-related deals and revenues has led to staff reductions and lower revenues for investment banks. Despite the challenges, many firms are expected to continue operating in China, betting on the country's economic rebound.

 

Reuters

A court in Russia has convicted the spokesperson of U.S. technology company Meta, which owns Facebook and Instagram, of justifying terrorism. Andy Stone was sentenced to six years in prison in absentia. The charges stem from Stone's remarks in 2022 following Moscow's invasion of Ukraine, where he announced temporary changes to Meta's hate speech policy. Stone's statement allowed for forms of political expression that would normally violate the company's rules. The Russian authorities opened a criminal case against Stone, describing his statement as "illegal calls to violence and killings of Russian citizens." Stone was also barred from administering websites for four years. Meta declined to comment on the verdict. In April 2022, Russia barred Meta CEO Mark Zuckerberg from entering the country.

 

Quartz

The Register

The Federal Trade Commission (FTC) has filed a lawsuit to block Tapestry's $8.5bn acquisition of Capri Holdings. The FTC argues that the deal would eliminate competition between the fashion companies' brands, such as Coach and Michael Kors, in the affordable luxury handbag market. The agency also claims that the merger could lead to lower wages and workplace benefits for employees. The combined company would employ around 33,000 people worldwide. The FTC's move reflects its more aggressive stance on antitrust issues. Both Tapestry and Capri strongly disagree with the FTC's decision and intend to defend the case in court. The FTC's lawsuit follows its previous action to block the merger between Kroger and Albertsons. The FTC argued that the merger would reduce competition and lead to higher grocery prices and lower wages.

 

CNBC

New York Times

Washington Post

U.S. gun manufacturers have requested the U.S. Supreme Court to review Mexico's $10bn lawsuit accusing them of facilitating the trafficking of firearms to violent drug cartels across the U.S.-Mexico border. The companies argue that the lower court wrongly concluded that the case qualified for an exception to the Protection of Lawful Commerce in Arms Act. Mexico alleges that the companies designed, marketed, and distributed military-style assault weapons in ways that armed drug cartels, leading to murders, extortions, and kidnappings in the country. The companies deny the allegations. Mexico claims that over 500,000 guns are trafficked annually from the U.S. into Mexico, with more than 68% made by the companies it sued.

 

Reuters

The German prosecutor leading the €10bn ($10.7bn) cum-ex tax scandal probe, Anne Brorhilker, is quitting her role due to a lack of political backing and weak law enforcement. Brorhilker criticized the German system for allowing powerful players to escape punishment, stating that defendants can often buy their way out of prosecution. She has decided to join Finanzwende, a political action group monitoring the financial industry, in order to address the root of the problem. The cum-ex scandal involved a tax-driven trading strategy that allowed multiple investors to claim refunds on a tax that was only paid once. Brorhilker's efforts to bring those responsible to justice have targeted international investment banks. However, she faced criticism and had to defend herself against her own state justice minister.

 

Bloomberg

Luxembourg Times

U.S. borrowers on lower incomes are increasingly struggling to keep up with their loan payments, according to recent data, and comments from bank executives. The deterioration in household finances for those earning less than $45,000 contrasts with financial resilience among those on higher incomes. "If the delinquency rate of consumer loans starts rising, that is often a leading indicator things are about to get worse," said Austan Goolsbee, Chicago Federal Reserve Bank President. First-time and low-income borrowers are experiencing higher default rates on their loans than people with larger incomes. Banks are becoming more cautious and tightening lending standards, including for credit cards and auto loans. Loan growth is expected to be muted for conservative lenders. Credit card delinquencies are rising, indicating that some consumers are living beyond their means. Overall consumer delinquencies have been increasing, particularly among those on low incomes. Younger Americans are also more likely to be delinquent on their loans.

 

US News and World Report

The Bank of England has warned that high interest rates are threatening to cause havoc in the £6.5tn ($8tn) private equity sector, with dire consequences for the wider U.K. economy. Nathanael Benjamin, the Bank's executive director for financial stability strategy and risk, cautioned that recent developments in the industry could disrupt funding to real economy companies and inflict significant losses on systemic institutions. The Bank's financial policy committee is conducting a closer review of private equity risks and will publish its findings in June. Private equity firms now face more expensive funding costs and the risk of credit losses in the future. Opportunities for private equity firms to offload companies through stock market flotations have also dried up, increasing borrowing across the sector. Michael Moore, chief executive of the British Private Equity and Venture Capital Association, said: “The private capital industry stands ready to detail how it has played a vital role in the U.K. economy for over 40 years, showing its resilience through different economic cycles.”

 

The Times

UnitedHealth Group says hackers stole health and personal data of potentially a "substantial proportion" of Americans from its systems in February. The hack at its Change Healthcare unit was one of the worst hacks to hit American healthcare and caused widespread disruption in payment to doctors and health facilities.

 

Reuters

Climate change is driving a crisis in workers' mental health, according to a report by the International Labour Organization (ILO). The report highlights that extreme weather, climate change-induced disasters, and exposure to excessive heat are contributing to anxiety, depression, and post-traumatic stress disorder among workers. The ILO said that workers may experience distress related to financial and workload problems, as well as loss of hope for the future of their community. The report also notes that climate change risks are worsening the financial situations of some workers, particularly farmers and fishermen, while also flagging that climate change will impact seasonal and transient farm workers, leading to increased stress.

 

The Daily Telegraph

Petra Hielkema, the chair of the EU’s insurance regulator, has said urgent action is needed to protect Europe from climate risk amid concerns that some areas could be rendered uninsurable.

 

Financial Times