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DealBook Briefing: Apple Gives Way to Pressure From Beijing

11-14 minutes - Source: NYT

CreditCreditChris Mcgrath/Getty Images
Apple is the latest U.S. company to feel heat from China
The tech giant removed an app last night that allowed protesters in Hong Kong to track the police, after criticism from China’s state media. It’s the latest clash between American businesses and an increasingly political China willing to flex its muscles to promote its interests.
Apple said it had withdrawn the app from its App Store because it was being used to target and ambush police officers and threaten public safety. A Twitter account reportedly run by the app’s developer called that reasoning false and “ridiculous.”
The decision was made after a scathing editorial was published in People’s Daily, the Chinese Communist Party’s flagship newspaper. As Javier Hernández of the NYT notes, it’s the latest example of Beijing putting pressure on multinationals.
Apple is heavily dependent on China, given that it assembles nearly all its products there and tallied nearly $44 billion in sales in the country during the 12 months ended June 30. The company’s C.E.O., Tim Cook, travels there frequently and has remained largely silent on Chinese politics, even as he speaks out on American current affairs.
The move comes as the N.B.A. is still dealing with blowback from a Houston Rockets executive’s tweet supporting the Hong Kong protesters. Many of the league’s partners in China have cut ties, though N.B.A. officials remain unwilling to give Beijing an apology.
More: Farhad Manjoo of NYT Opinion argues that China’s economic riches aren’t worth the required capitulation.
Today’s DealBook Briefing was written by Andrew Ross Sorkin, Michael J. de la Merced and Stephen Grocer.
Representatives from the two countries are scheduled to sit down for another round of negotiations starting today, with the aim of avoiding a new set of tariffs. But complications in the trade war have made the chance of a big breakthrough less likely.
China’s vice premier, Liu He, and other officials are supposed to meet with U.S. Trade Representative Bob Lighthizer and Treasury Secretary Steven Mnuchin today and tomorrow.
There have been gestures toward compromise recently. Beijing has sought to appease Washington by increasing its purchases of American farm products and opening up its financial sector. And the Trump administration plans to let some American companies supply nonsensitive goods to China’s Huawei, the NYT reports.
But tensions have also grown. The White House blacklisted some Chinese tech companies this week, citing the use of their products in repressing Muslim minorities in China. And the Trump administration is reportedly considering a crackdown on shipments of contraband from China, the FT reports.
The state of the talks’ schedule is unclear. The White House denied a report by the South China Morning Post yesterday that Mr. Liu would leave Washington tonight. But an unnamed source told CNBC that the schedule for the talks has become “fluid” and that Friday’s session was “an open question.”
U.S. stock futures were slightly lower today ahead of the talks, as investors and other policymakers professed little hope that the discussions would lead to much. “It’s unrealistic to think we’re going to solve all the issues in one go,” Craig Allen, the president of the U.S.-China Business Council, told the WSJ. “We have too many issues.”
The current political environment might eventually lead to restrictions on the free flow of capital across national borders. That could pose a risk for the global economy, David McCormick, the co-C.E.O. of Bridgewater, the world’s biggest hedge fund, writes in an FT op-ed.
• Protectionism could lead to a bias against “megafunds,” which include the biggest sovereign wealth funds, national pension funds and other huge investment vehicles. Just 40 of them represent about $12 trillion in assets.
• “These funds deploy capital where others can’t or won’t, pushing the frontiers of capital markets,” Mr. McCormick writes. “This approach drives the expansion of capital formation by investing where liquidity is limited.”
• Though some policymakers may worry that these funds could be used for political ends, “these investors appear to have for the most part acted responsibly with free market economic motivations.”
• “Policymakers should take heed of the role they play in the global economy.”
Facebook’s C.E.O., Mark Zuckerberg, will testify before the House Financial Services Committee this month about his company’s cryptocurrency project, which has drawn political fire from around the world.
Lawmakers in the U.S. and elsewhere have argued that Libra poses a risk to the global financial system because its payments network could be used to launder money or finance terrorism. European regulators went further this week, saying that Libra had the potential to undermine the euro.
Two Democratic senators urged Visa, Mastercard and Stripe to reconsider their involvement in Libra. The lawmakers, Sherrod Brown of Ohio and Brian Schatz of Hawaii, cited news reports about difficulties that members of a coalition supporting Libra have had in obtaining information on the organization’s management.
Mr. Zuckerberg will seek to allay those concerns. He has already said that Facebook will not move forward with the project in the U.S. until regulators’ worries are quelled.
As Senator Elizabeth Warren rises in the polls among Democratic presidential candidates, corporate America is trying to prepare for a candidate who has built her campaign on criticizing business for a host of problems, Greg Ip of the WSJ writes.
Among the sweeping changes that Ms. Warren has proposed:
• Regulating Big Tech and breaking up big banks
• Banning fracking and phasing out carbon emissions from buildings, cars and power plants within 15 years
• Forcing big companies to appoint worker representatives to at least 40 percent of their board seats
• Banning private health insurance and, effectively, for-profit colleges
• Imposing higher taxes on the wealthy and on companies
Some executives and analysts worry that Ms. Warren would impose onerous burdens on businesses. “She could create an environment where it is next to impossible to function” for health insurers,” Vicky Gregg, the former C.E.O. of BlueCross BlueShield of Tennessee, told Mr. Ip.
Others think that few of her most radical proposals would become law, because she would be forced to tack to the center if she becomes the Democratic nominee, or because Congress and federal courts would oppose some of her agenda.
Many don’t have a problem with Ms. Warren’s goals, Mr. Ip writes — just with the speed and the way in which she might try to achieve them. Her carbon emissions targets, one utility executive said, are based on unrealistic expectations.
More: Ms. Warren said that she wouldn’t hold fund-raisers with big-dollar donors even as the Democratic nominee.
The bankrupt California utility no longer has the sole right to devise a financial reorganization plan, Peter Eavis of the NYT reports. That could lead to a competing plan devised by several owners of PG&E debt.
“Losing the exclusive right to put forward restructuring terms is a huge blow to PG&E’s management and its largest shareholders,” Mr. Eavis writes. In Chapter 11 bankruptcy proceedings, companies have the first chance to devise how to sort out their finances.
A rival proposal by creditors would give current shareholders a tiny stake in PG&E once it emerges from bankruptcy. But the company opposes that offer because, in its view, it lets bondholders take over the utility on the cheap.
The creditors’ plan is backed by individuals with claims against PG&E over wildfire damage. Their proposal would pay up to $14.5 billion to wildfire victims, while PG&E’s offer would pay them $8.4 billion.
The judge in the case appears to be encouraging a compromise. “A dual-track plan course going forward may facilitate negotiations for a global resolution and narrow the issues which are in legitimate dispute,” Judge Dennis Montali wrote.
Bed Bath & Beyond hired Mark Tritton, Target’s chief merchandising officer, as its new C.E.O.
Chief executives are leaving their posts at a record pace this year.
• Goldman Sachs said it was reconsidering its role in the Hong Kong I.P.O. of Megvii, a Chinese facial recognition start-up, after the Trump administration blacklisted the company. (Reuters)
• Senator Marco Rubio, Republican of Florida, urged a national security panel to review the takeover of the short-form video app by the Chinese company TikTok, citing concerns about censorship. (Reuters)
• The Hong Kong Stock Exchange’s failed takeover bid for its London rival shows the challenges of consolidating global stock markets. (WSJ)
• AT&T agreed to sell its operations in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America for $1.95 billion to help cut its debt load. Related: Some in Hollywood worry that media companies have too much debt. (Bloomberg, Hollywood Reporter)
Trump impeachment inquiry
• Joe Biden, for the first time, called for President Trump to be impeached. (NYT)
• House Democrats plan to issue more subpoenas related to Mr. Trump’s dealings with Ukraine. (NYT)
• Trey Gowdy, the former Republican lawmaker, has joined Mr. Trump’s legal team. (NYT)
Politics and policy
• President Trump reportedly urged then-Secretary of State Rex Tillerson to encourage the Justice Department to drop a case against an Iranian-Turkish trader who was a client of Rudy Giuliani. (Bloomberg)
• Several Fed policymakers worry that weaker business activity could lead to slower hiring and reduced consumer spending. (NYT)
• Central banks are slowly shifting their currency reserves away from the dollar. (FT)
• The European Central Bank restarted its bond-buying program despite objections from its monetary policy committee. (FT)
• A Pentagon analyst was charged yesterday with leaking classified information to two journalists. (NYT)
• The E.U. warned Prime Minister Boris Johnson of Britain that Northern Ireland must remain in the European customs union. (FT)
• Mr. Johnson pledged that his Conservative Party’s election manifesto would not explicitly embrace a no-deal Brexit. (FT)
• The cost of staying atop Google’s search results is rising. (Bloomberg)
• A defense of Facebook’s policy for political ads. (Verge)
• Why Amazon reversed course on its film strategy, largely abandoning big-screen rollouts. (NYT)
• Consumer Reports criticized Tesla’s Smart Summon feature, comparing it to a distracted driver. (Consumer Reports)
• The I.R.S. published, for the first time in five years, guidance for calculating taxes owed on cryptocurrency holdings. (CoinDesk)
Best of the rest
• A new book by Ronan Farrow discloses fresh details about sexual assault accusations against Matt Lauer. He has denied the allegations. (NYT)
• A lawyer at Pimco sued the asset management giant, accusing it of gender and race discrimination. (FT)
• Nissan cleared a senior legal executive, Hari Nada, of “inappropriate involvement” in its inquiry into the ouster of Carlos Ghosn, its former chairman. (NYT)
• Corporate America’s coming earnings season doesn’t look good. (WSJ)
• The day Warren Buffett tried to call the C.E.O. of Bank of America with an investment offer — but dialed a call center and was rebuffed. (Bloomberg)


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