China, One More Time… — CEO Daily, Monday 11th December

Good morning,

One CEO Daily reader accused me of being “breathless” in my coverage of China innovation last week. So let me provide some perspective, with the help of my friends at the McKinsey Global Institute. They released a report last week, in conjunction with the Fortune Global Forum, that provides data where I was offering impressions.

Here are areas where a digital China is clearly leading the world:

  • China now accounts for a whooping 42% of global commerce – more than France, Japan, the U.K. and the U.S. combined.
  • Mobile payments are now used by 68% of China’s Internet users and totaled $790 billion last year — 11 times more than in the U.S.
  • China’s venture capital industry has exploded from $12 billion, or 6 percent of the global total, in 2011–13, to $77 billion, or 19 percent of the worldwide total, in 2014–16. China leads the U.S. in fintech venture investment.
  • The BAT companies – Baidu, Alibaba, Tencent – provide 42 percent of the venture funding in China, compared to the 5 percent provided in the U.S. by the FANG companies – Facebook, Amazon, Netflix, Google.

For all that, the U.S. remains far ahead of China in venture investment in areas like AI, big data and robotics. And while China leads the world in digitization of commerce, the U.S. still leads in digitization of industry. MGI finds U.S. industry is 3.7 times more digitized than China – although that gap is down substantially from 4.9 times in 2013.

You can read the full McKinsey report here. News below.

More news below.

Top News

Hospitals’ Turn to Seek Scale

Two of the U.S.’s biggest hospital operators are in talks to merge, according to The Wall Street Journal. Ascension and Providence St. Joseph, both non-profit organizations, would become the country’s biggest hospital operator if they complete their deal, with 191 hospitals and annual revenue of over $44 billion. The talks are consistent with a broader trend toward scale in the health care sector as the issue of cost control looms ever larger. The WSJ argues that a combined entity would have more leverage vis-à-vis health insurers (and, one imagines, the medical device industry). The insurance sector, of course, saw two big planned mergers blow up amid antitrust concerns at the start of this year.  
Fortune

U.S. Jobs, Chinese Credit Data Propel Stocks

Asian stocks started the week on a strong note, with confidence in the world economy still riding high in the wake of Friday’s U.S. employment report. Fresh impetus came Monday from data showing Chinese lending well above expectations in November, again defying talk of deleveraging and tightening financial conditions there. The U.S. jobs report, which extended the sharp post-hurricane rebound in hiring, effectively nailed on an interest rate hike this week when the Federal Reserve’s policy-making Federal Open Markets Committee meets. That meeting will be Janet Yellen’s swansong as chairwoman.
Bloomberg

DoJ Sheathes the Sword of Damocles Over HSBC

The Department of Justice said it won’t prosecute HSBC for money-laundering and sanctions-busting, lifting a threat that had been hanging over the bank for five years. The move, which comes only weeks after HSBC settled its dispute with France over abetting tax evasion with its Swiss private banking unit, is something of a milestone as the bank puts a series of conduct-related scandals behind it.  HSBC had paid heavy fines for laundering Mexican drug money and violating U.S. sanctions on Libya and Iran in 2012, under a deferred prosecution settlement that ran for five years. In the meantime, it has also paid heavily to settle claims relating to the rigging of interest rates and foreign exchange markets.  
FT, metered access

•  Wildfires Rage Through Santa Barbara

Wildfires continued to rage through southern California over the weekend.  Santa Barbara county ordered wholesale evacuations on Sunday evening as the so-called “Thomas” fire spread over 230,000 acres, threatened tens of thousands of homes. Fires elsewhere across the state have in the meantime been brought largely under control.  
LA Times

Around the Water Cooler

More Players, More Leverage = More Bitcoin Fun

The dollar price of Bitcoin popped higher still as futures contracts on the digital currency debuted on the CBOE. Interest was so high that the exchange’s website crashed in the first hour of trading. By mid-morning in Europe, other exchanges were quoting BTC/USD at $16.280, around 9% higher than the CBOE futures’ opening. The Financial Times quoted the head of the BitFlyer exchange in Tokyo, which claims to run around 20% of global Bitcoin trading, as saying that his clients were leveraging their bets up to 15 times. The launch of futures had promised to introduce more two-way flow in the market by making it possible for people to short the asset. However, when there is no credible methodology for valuing it, timing such a trade remains a highly risky exercise. 
Fortune

Ive Returned

Jony Ive, the man behind some of Apple’s most important designs over two decades, is to resume hands-on leadership of Apple’s design teams, having overseen the completion of the company’s new headquarters in Cupertino. Ive is by many people’s lights the second-most important man at Apple after CEO Tim Cook. The news will surprise those who had predicted his work on the ‘spaceship campus’ would be a halfway house to leaving the company.   
Fortune

 Haley Acknowledges the Harassment Disconnect

The U.S.’s ambassador to the UN, Nikki Haley, told CBS’s Face the Nation that the women who had in 2016 accused now-President Donald Trump of sexual harassment “should be heard and they should be dealt with.” Her comments put her at odds with the rest of the administration but reflect the remarkable shift in public opinion in just 12 months, epitomised last week by Time’s award of its Person of the Year accolade to the #MeToo movement. “Any woman who has felt violated or felt mistreated in any way, they have every right to speak up,” Haley said.  
Fortune

Saturday Night at the Movies (Riyadh Remix)

Saudi Arabia has lifted a 35-year ban on movie theaters, in another move away from the ultra-conservative Islamic traditions that have stamped its society in recent decades. “Opening cinemas will act as a catalyst for economic growth and diversification,” according to Minister of Culture and Information Awwad bin Saleh Alawwad. Elsewhere, more details continue to seep out regarding the purchase of the Salvator Mundi by (allegedly) Leonardo da Vinci. The Saudi embassy in the U.S. has confirmed that Prince Bader, a close associate of Crown Prince Mohammed bin Salman, had bought the painting “as an intermediary” on behalf of neighboring Abu Dhabi. It’s still not clear exactly whose money was used, but a $450 million ‘gift’ to another country when ‘MbS’ is both implementing austerity at home and using corruption allegations to squeeze millions out of political opponents detained in the Riyadh Ritz Carlton is, to say the least, an interesting look.   
Fortune

Summaries by Geoffrey Smith; [email protected]

@geoffreytsmith

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