Philippa Kaur

THE TIES that bind the world’s two biggest economies are unravelling, in fits and starts. The latest episode involved fits, starts and chaos. On December 31st the New York Stock Exchange (NYSE) announced it would delist China Telecom, China Mobile and China Unicom, three telecoms giants, shares in which have been traded on Wall Street for years. It did so, it said, to comply with President Donald Trump’s executive order in November banning American investments in companies with links to the People’s Liberation Army (PLA).
This set off a fit among their American shareholders. As the trio’s share prices swung wildly, funds scrambled to sell their stakes before the delisting, which the nyse said would occur by January 11th. Speculation raged that CNOOC and PetroChina, state-run energy goliaths also listed in New York, could be next. Then came the start. Late on January 4th the NYSE declared it would not eject the firms after all. Those same funds had to repurchase the shares, the price of which had popped up on news of the NYSE’s U-turn. If that weren’t chaotic enough, two days later NYSE changed its mind again. It would, after all, boot out the three companies.

Amid the murk one thing is clear. Chinese companies listed in America are in for uncertain times. In December Mr Trump signed a bi-partisan law that would expel from exchanges in America those companies that do not allow American regulators to audit their accounts, which is the case for many Chinese ones. Mr Trump’s executive order is likely to remain a problem; Joe Biden may hesitate to rescind it after he takes office on January 20th. It affects more than 30 firms deemed too cosy with the PLA. To comply, FTSE Russell, which maintains global equity indices, plans to cut at least 11 Chinese technology firms from its roster. MSCI, a rival indexer, plans to boot ten Chinese firms from its benchmarks.
A rupture seems inevitable, then. How much will it matter? If it is limited to Chinese state-owned enterprises (SOEs), then not much. Only about a dozen SOEs trade in New York—and only thinly. Most have a more robust listing in Hong Kong or mainland China. Paul Gillis of Peking University argues that it “makes no sense for these companies to have us listings and be subject to us regulations”.
That leaves two other potential casualties. If private-sector firms are included then the number of Chinese firms listed in America swells to over 200, many of them in hot industries like technology and finance. Their combined market capitalisation exceeds $2.2trn. Many may have links (however tenuous) with the PLA.
Losing access to America’s sophisticated investors and deep pools of capital would sting such innovators as Lufax, a mainland fintech giant, which pulled off a $2.4bn flotation in New York in late October. It is why Alibaba, China’s e-commerce titan with a New York listing, hedged its bets in late 2019 by floating in Hong Kong as well. Others may follow.

Another victim would be American investors. Goldman Sachs, a bank, estimates they hold 28% of the $2.2trn in Chinese-linked market value in America. These stocks have outperformed the S&P 500 index of big American firms in recent years. Those with no secondary listing in China, which have most to lose from expulsion, did even better (see chart). A hasty exodus by Chinese stars could force a fire sale. With Mr Biden unlikely to go easy on China, the most investors can hope for is more coherence—and fewer fits and starts.
Editor’s note: This article has been updated since publication. More

THE TIES that bind the world’s two biggest economies are unravelling, in fits and starts. The latest episode involved fits, starts and chaos. On December 31st the New York Stock Exchange (NYSE) announced that it would delist China Telecom, China Mobile and China Unicom, three telecoms giants, shares in which have been traded on Wall Street for years. It did so, it said, to comply with President Donald Trump’s executive order in November banning American investments in companies with links to the People’s Liberation Army (PLA).
This set off a fit among their American shareholders. As the trio’s share prices swung wildly, funds scrambled to sell their stakes before the delisting, which the NYSE said would occur by January 11th. Speculation raged that CNOOC and PetroChina, state-run energy goliaths also listed in New York, could be next. Then came the start. Late on January 4th the NYSE declared it would not eject the firms after all. Those same funds faced the prospect of repurchasing the shares, the price of which had popped up on news of the NYSE’s U-turn. If that weren’t chaotic enough, two days later the NYSE changed its mind again. It would, after all, boot out the three companies.

One thing is clear: Chinese companies listed in America face uncertain times. In December Mr Trump signed a bipartisan law that would expel from exchanges in America those companies that do not allow American regulators to audit their accounts, which is the case for many Chinese ones. On top of this law, Mr Trump’s executive order is likely to remain a problem; Joe Biden may hesitate to rescind it after he takes office on January 20th. It affects more than 30 firms deemed too cosy with the PLA. To comply, FTSE Russell, which maintains global equity indices, plans to cut at least 11 Chinese technology firms from its roster. MSCI, a rival indexer, plans to boot ten Chinese firms from its benchmarks.
A rupture seems inevitable, then. How much will it matter? If it is limited to Chinese state-owned enterprises (SOEs), then not much. Only about a dozen SOEs trade in New York—and only thinly. Most have a more robust listing in Hong Kong or mainland China. Paul Gillis of Peking University argues that “it makes no sense for these companies to have US listings and be subject to US regulations”.
That leaves two other potential casualties. If private-sector firms are included the number of Chinese firms listed in America swells to over 200, many of them in hot industries like technology and finance. Their combined market capitalisation exceeds $2.2trn. Many may have links (however tenuous) with the PLA.
Losing access to America’s sophisticated investors and deep pools of capital would sting such innovators as Lufax, a mainland fintech giant, which pulled off a $2.4bn flotation in New York in late October. That risk is why Alibaba, China’s e-commerce titan with a New York listing, hedged its bets in late 2019 by floating in Hong Kong as well. Others may follow.

American investors would suffer, too. Goldman Sachs, a bank, estimates that they hold 28% of the $2.2trn in Chinese-linked market value in America. These stocks have outperformed the S&P 500 index of big American firms in recent years. Those with no secondary listing in China, which have most to lose from expulsion, have done even better (see chart). A hasty exodus by Chinese stars could force a fire sale. With Mr Biden unlikely to go easy on China, the most investors can hope for is more coherence—and fewer fits and starts.■
Editor’s note: This article has been updated since publication.

This article appeared in the Business section of the print edition under the headline “NYSE knowing you” More

THE YEAR 2020 put worker morale to the test. It did not help that many employees were unable to enjoy a normal holiday, or had to change their plans. For Bartleby, two sun-drenched weeks in Spain were converted into a wet week in Cornwall, marked by an attempt to eat a pasty on the beach in the face of a sudden hailstorm. Finding a restaurant was virtually impossible because of the high demand created by the British government’s “eat out to help out” scheme.
Like many people, Bartleby is left with unused annual leave. But he is lucky that The Economist is a benign employer, willing to let him carry over a couple of weeks. Not every company can afford to be so kind. The occasional loss of a business columnist is not much of a handicap. Things are rather different when the employee is the client manager for the firm’s largest customer or the production manager at a microprocessor plant.

The more vital the worker, the more likely they will have been to be asked to postpone their annual leave in the pandemic. This may leave employers with headaches in the coming year as workers catch up before their unused holiday is lost. Brian Kropp of Gartner, a consultancy, expects to see the lion’s share of staff shortages to land in the first half of 2021.
For multinational firms, the different rules and customs that apply across the world further complicate things. America lacks federal laws that guarantee workers vacation time; rules are down to individual states. Even when Americans do get a holiday allowance, 55% of them do not use all of it, according to a survey from 2018. In Japan only 52% of workers took all their paid leave that year.
Unlike their European peers, American and Japanese workers seem to succumb to social pressure: the fear that taking vacation reflects a lack of commitment to their job (or reveals their dispensability). Many American states also allow companies to impose a “use it or lose it” policy, under which they can insist employees cannot carry over unused leave into the following year. That may have prompted a lot of workers to take an extended Christmas break to avoid the loss of their precious allowance.
Still, wise employers may want to allow a little flexibility after what has been an extraordinarily difficult year. It is no good forcing people to turn up for work if, in the process, you inflict permanent damage on their well-being. Indeed, the evidence seems to suggest that workers put in extra effort in 2020, with those working from home adding an extra hour to their work day. They avoided the agonies of commuting but also lost the clear separation of work from home life, which probably added to stress. Some will have spent a “staycation” at home—which does not offer an invigorating change of scenery or routine for those who have been confined within the same four walls since March.

So there is a balance to be struck by employers between the need for adequate staffing and the need to keep on good terms with hard-working employees. In some countries, governments have intervened on workers’ behalf. Under Britain’s working-time regulations, employees were already entitled to carry eight days of leave over to the following year, if the employer agreed in advance. The rules were amended in 2020 to take account of covid-19, so a further four weeks could be carried over into 2021 and even 2022. The Chartered Institute of Personnel and Development, an association of HR managers, says this means that, in theory, workers can roll over all five weeks of leave from 2020. In Denmark the rules were changed to allow workers to roll over their unused holiday entitlements into 2021.
In Belgium companies often allow employees to carry over five days of leave but they have to be used by the end of March. Doug Gerke of Willis Towers Watson, a benefits consultant, says that many employers are willing to give workers even more flexibility. Likewise, he says, many European companies may have an official “use it or lose it” policy, but in practice they are reluctant to confront workers over the issue.
Mr Kropp says that some firms are asking employees to commit to the amount of leave they are planning to take in the first quarter of 2021, the better to forecast the staffing challenges they face. Others are extending “use it or lose it” deadlines to parcel out any absences over a longer period. Once the vaccines are distributed and travel is possible again airports could see a Gadarene rush. In 2021 managing people when they are not working will be just as important as managing them when they are.
Editor’s note: Some of our covid-19 coverage is free for readers of The Economist Today, our daily newsletter. For more stories and our pandemic tracker, see our hub
This article appeared in the Business section of the print edition under the headline “Tough breaks” More

IT MAY BE the most hyped technology since blockchain. But even sophisticated telecoms giants are now placing huge bets on 5G. In early December American regulators started the process of auctioning off radio-frequency bands needed to roll out superfast fifth-generation mobile networks. Industry experts had expected bids to come in at $25bn-30bn between them, less than the $45bn fetched in the last big 4G spectrum sale in 2015—but a tidy sum nonetheless.
In fact, when the first part of the auction was concluded on December 23rd, the bids had reached a staggering $70bn. The winners will be on the hook for “clearing costs” of another $13bn-15bn, in part to compensate satellite firms for giving up some of their spectrum that is particularly well-suited for 5G. The auction will resume on January 4th. By the time it ends, the proceeds may exceed $90bn.

At first blush, this seems like a classic case of overbidding by zealous telecoms firms chasing a shiny new technology. It could leave AT&T and Verizon, America’s mobile-telephony giants, saddled with huge debts. New Street Research, a firm of analysts, reckons that the industry’s overall debt will be between $45bn and $60bn higher than previously forecast.
There is an alternative view, however. As Jonathan Chaplin of New Street puts it, “it is almost impossible for carriers to overpay for this spectrum.” This case rests on three arguments.
First, the specific frequencies on offer give firms their best chance to get “large swathes of contiguous spectrum needed for 5G to realise its full potential”, points out Tom Wheeler, former chairman of the Federal Communications Commission, the agency supervising the auction. These frequencies, clustered around 3GHz, enable transmission speeds ten times higher than 4G. The current, pseudo-5G offerings in lower frequencies are often barely faster than 4G connections. The new spectrum also supports 20-25% more capacity than bands of 2GHZ or lower.
The second justification for splurging on spectrum is to defend market share. T-Mobile, America’s third-biggest provider, leapt ahead in 5G thanks to its recent acquisition of Sprint, a smaller rival endowed with desirable frequencies. For AT&T and Verizon the auction was “do or die”, as one analyst puts it. For its part, T-Mobile may be entering stalking-horse bids to ensure bigger rivals do not win chunks of spectrum for a pittance. As Mr Wheeler notes, firms are asking “How do I keep my competitor from getting an advantage over me through his spectrum position?”

And competition is not confined to wireless rivals. Comcast and Charter, two large cable-television firms, have formed a joint venture to bid on 5G spectrum in the hope of taking on the incumbents. Dish Network, a big satellite-TV provider, is also taking part in the auction. Walter Piecyk of LightShed Partners, a research firm, adds that the bids are soaring because earlier, futile efforts at using inferior frequencies have left America far behind China, its main strategic rival, in the 5G race.
The final factor fuelling the bidding war is cheap money. Mr Piecyk reckons an extra $10bn in bids costs just $500m a year to finance at today’s rock-bottom interest rates, which telecoms giants can easily afford. Or as Dish’s boss, Charlie Ergen, puts it more colourfully: “They are printing money, but they aren’t making more spectrum.” ■
This article appeared in the Business section of the print edition under the headline “The $90bn prize fight” More

ALMOST EVERYONE in China knows “Austin” Li Jiaqi. The 28-year-old “Lipstick Brother”, started out flogging make-up products in Nanchang, a provincial city, and now sells them to millions by live-streaming on Taobao, part of Alibaba, China’s biggest internet retailer—once shifting 15,000 sticks of lipstick in five minutes. Some will recognise Chen Yi, nicknamed “Little Monster”, a 24-year-old girl-next-door from the coastal city of Qingdao who sells sunscreen, snacks and lots more besides to her 20,000 followers on WeChat, a ubiquitous messaging app: a nice supplement to her day job as a bartender. More obscure but no less enterprising, farmers and fishermen show off juicy apples or prize lobsters in short videos, digital showmanship accompanied by new delivery networks that allow city dwellers to procure the produce.
Such are the faces—lipsticked, sunscreened, weather-worn or besnorkeled—that have helped propel an explosion of e-commerce in China. In rapid-fire videos or days-long jamborees, they flicker across hundreds of millions of smartphone screens in a cyber-bazaar that in 2019 was almost twice the size of those of America, Britain, Germany, Japan and South Korea combined—and growing faster (see chart 1).

As online shopping has soared, even before covid-19 added extra fuel, Chinese internet firms have dreamed up new ways to engage consumers. In contrast to Taobao, the new ventures do not yet make money. But they are growing apace. Chinese tech firms are pouring fortunes into them. Some of this capital flows straight back out as subsidies to entice buyers and sellers to the platforms, which clearly cannot go on for ever. But the effervescence is here to stay—and Westerners are only starting to notice. “If you want to see the future, look at China,” Mark Schneider, boss of Nestlé, the world’s biggest food company, instructs his executives. Lubomira Rochet, head of digital marketing at L’Oréal, a French beauty behemoth, contrasts the bottom-up, “consumer-centric” vibrancy of Chinese e-commerce with the West’s “tech-driven”, top-down approach.

Some Western tech executives dismiss the Chinese experience as a function not of creativity and enterprise but of structural forces. They cite China’s higher mobile share of e-commerce—90% versus 43% in America (see chart 2). Others put it down to a concentrated market, where the top three firms, Alibaba, JD.com and Pinduoduo, account for more than 90% of all digital merchandise sales, a state of affairs that is beginning to trouble Chinese trustbusters, who on December 24th announced an investigation into Alibaba (see article). In America the online titan, Amazon, and its two challengers, Shopify and eBay, accounted for less than 50%.

Yet a survey of Chinese e-commerce reveals genuine dynamism. It is not just Alibaba making the running. In a few years Pinduoduo has captured 14% of the market, helping to trim Alibaba’s share from 67% to 61%—and forcing the giant to moderate the “take rate” it charges those selling via its platforms. Digital firms from outside retail are muscling in, including Meituan, which started out in food delivery, and ByteDance, which owns TikTok and its Chinese short-video cousin, Douyin. The newcomers bring the sort of verve to online shopping in China that characterised America’s consumer boom of the 1950s and 1960s.
Indeed, to understand the evolution of Chinese e-commerce, look back to the birth of 20th-century consumerism in America. It was built around overlapping technologies. The car carried people to the suburbs, giving rise to the shopping mall, a place not just to shop but to mingle and have fun. Although radio and television played a role, through advertising and product placement, Western retail’s bedrock was—and continues to be—bricks and mortar. According to Bain, a consultancy, America has 3.3 times as much physical shop floor per person as China does. Bernstein, a broker, reckons that America’s 330m people have 30 times as many malls as 1.4bn Chinese do.
The West’s finest shops are as dazzling as ordering on Amazon is drab. They also represent legacy investments that retailers are loth to undermine. As a result, neither retailers nor their customers have had much of an incentive to shun them—at least before covid-19.
Not so in China. Like everyone else in the world, Chinese still buy most things in physical shops. Especially outside big cities, though, many of these are shabby. Some sell fake goods. So China’s nascent middle class, armed with smartphones and broadband internet, finds online shopping both more rewarding and comfier than in the West, says Marc-André Kamel of Bain. A high population density makes delivery cheaper for consumers.

The result is a mix of shops, entertainment venues, food courts, games arcades and gathering places that replicates the 20th-century American mall in digital form, and hybrid links of the virtual with the physical. Videos show something being crafted by hand. Influencers draw attention to how the item is used. Friends recommend it (or not) on social media. Shoppers band together with other netizens to buy it in bulk at a discount. Live broadcasts turn the whole process into entertainment. And a network of real-world businesses delivers the purchases.

The anchor cyber-tenant is commonly a super-app like WeChat, which has 1.2bn users. It is owned by Tencent, China’s biggest internet company—and directs traffic to JD.com and Pinduoduo, in which Tencent holds stakes. The line in people’s minds between social networks and shopping websites does not exist in China, notes Frédéric Clément of Lengow, a consultancy. Shoppers love it. Bernstein expects e-commerce to account for more than a quarter of all retail sales in China by 2021, roughly twice the share in America, even after the pandemic-induced stampede online.
The first pillar of this new retail architecture is “social commerce”. This relies on three related technologies: live-streaming, short-form video and social-networking. The biggest live-streamer is Alibaba’s Taobao Live. In just 30 minutes of presales for Singles Day, China’s answer to Black Friday, it notched up $7.5bn-worth of sales, about as much as Amazon is thought to have sold in its “Prime Day” in October (which actually lasted 48 hours). In June Douyin set up its own shopping platform, having earlier hosted live-streams where the likes of Taobao teamed up with celebrity influencers to sell products. The video-app’s 600m daily users confer a valuable resource—their attention. In the autumn it made its proprietary debut on Singles Day.
Fitch, a ratings agency, thinks the market for live-stream retail neared 1trn yuan ($153bn) in 2020, double the prior year’s amount (see chart 3). Kuaishou, Douyin’s short-video rival, expects the gross value of goods sold on live-streams to rise from 4.2% of online sales in 2019 to almost a quarter by 2025.

Live-streaming has boomed as covid-19 confined Chinese to their living rooms while many captivating alternatives, like Netflix, remained banned in the country. For people on relatively low salaries, the discounts on some of the merchandise are worth time spent glued to a live-stream. According to Elijah Whaley, marketing chief of PARKLU, one of a booming cottage industry of influencer agencies, Western brands shipped unsold products to China, where live-streams offered a way to flog them. Ms Rochet says L’Oréal’s boss in China was flooded with emojis, likes and questions when he live-streamed a recent sales event. It included “lucky charms” that gave a few fortunate shoppers big discounts.
Many bargains are available for bulk purchases. This is where the social networks come in. Pinduoduo, founded in 2015 and now worth $175bn, enables groups, often formed via WeChat, to haggle with merchants, especially on groceries. It still makes a loss and burns cash. But its revenues are soaring, by almost 90% year on year in the third quarter. Seven-year-old Xiaohongshu, or Little Red Book, is already one of China’s most popular apps for cross-border commerce, with an estimated 85m users, according to Tenba Group, a consultancy. Its customers, most of whom are young women, exchange shopping experiences via text, images and video. Tenba calls it a Chinese mix of Instagram and Pinterest, two American photo-sharing apps.
The second pillar of China’s great digital mall is familiar to Western retailers as “omnichannel”. Like social commerce, it too has boomed amid pandemic lockdowns and shop closures. In China the biggest e-emporia have their own supermarket businesses, such as Alibaba’s Freshippo and JD.com’s 7Fresh grocery chain. JD.com also has what it calls a “new-markets” business, which works with some of China’s 6.8m local grocery stores. It ships them branded goods, delivers what is already on their shelves to local buyers, and feeds them data to optimise their operations.
Some physical retailers, for their part, offer digital coupons to encourage customers to pay a visit, as well as using live-streaming to generate buzz and, hopefully, foot traffic. Others offer “grab-and-go” shopping, including staffless stores and smart vending machines where payments are made by scanning QR codes.

Alibaba says that its hybrid sales more than doubled in the 12 months to March 2020, year on year, to 86bn yuan. They rose from 11% of its main retail revenues to 17%. Sales from JD.com’s supermarket business grew by 48% year on year in the third quarter. Meituan has broadened its speedy deliveries from takeaway meals to groceries. Mini-warehouses built by startups such as Missfresh, which promises 30-minutes grocery deliveries, are mushrooming in Chinese cities.
Before 2020 both social commerce and hybrid shopping provoked mostly bemusement in the West. Covid-19 has led to a swift reappraisal. As George Lee, Facebook’s head of product, puts it, the pandemic was a “call to action”. The social network caters to the 160m businesses, mostly small and medium-sized, that use its apps and had to shift online as authorities ordered many physical shops to shut.
In May it introduced Facebook Shops, enabling businesses to set up a single online store on its core social network and its sister app, Instagram. In November Instagram redesigned its home screen for the first time in years, introducing tabs called Reels and Shop, which promote short videos, as well as online retail. Facebook’s messenger apps, including WhatsApp, can be used to communicate with businesses on its platforms and may eventually be used for sales. Facebook Live also does streaming. In December Walmart, America’s largest supermarket chain, held what it called a “Holiday Shop-Along Spectacular” on TikTok, with which it has formed a partnership. It allowed viewers to buy some of its fashion items exhibited by celebrities directly via the video app, apeing what Douyin has been doing in China.
Vishal Shah of Instagram makes a distinction between “buying” and “shopping” to describe Facebook’s aim—in other words, turning a utilitarian process into a more personal experience. Other social-media firms are moving in the same direction. Since 2020 Snapchat users can try on make-up and shoes virtually, bolstering what the app calls “shopability”. Shopify has enlisted TikTok to enable its 1m-plus merchants to market their wares by video.
In omnichannel sales, as in most things e-commercial, Amazon is ahead of the pack. It owns almost 500 Whole Foods Market stores and has opened some Amazon Fresh grocers in America that offer free same-day delivery to some members of its Prime subscription service. But big-box retailers like Walmart and Target, whose in-store pickups on online purchases have been a hit with covid-wary shoppers fearful of crowded aisles, have made huge strides.
Not everyone thinks that America will follow the trail blazed by China. Bain says that recent inroads notwithstanding, social commerce accounts for a much smaller share of total retail sales in America than in China. Russell Grandinetti, Amazon’s head of international retail, says consumers want different things at different times. Sometimes they just want to buy stuff quickly and cheaply, not be wowed by celebrities. He says Amazon pioneered certain browsing techniques, such as online book reviews and tips that “people who bought this also bought that”. He notes that Prime Video and Twitch, Amazon’s gaming platform, have attracted “millions of customers” primarily interested in entertainment to its free shipment of goods. As for live-streaming, “It just hasn’t taken off in the West the same way it has in China.”
It will do eventually, Mr Grandinetti thinks. Other observers point out that the sheer size of America’s physical retail presence makes the logistics of weaving offline and online cheaper—which may encourage more hybrid shopping models. In other ways America will chart its own path. Pricier labour than in China may lead to faster automation of online fulfilment. Greater concern over privacy relative to convenience may dampen shoppers’ appetite for sharing their spending habits with friends on social media.
And China’s retail razzmatazz could yet lose its vim. An ageing population will eventually reduce supply of cheap warehouse workers and delivery drivers. That may mean higher delivery fees, longer waiting times, perhaps even unions demanding better working conditions, further raising costs. Trust in influencers, particularly those paid big money to promote brands, is waning. Those making less may lose patience and stick to their day jobs. “The top 1% make a killing. The rest are starving artists,” says PARKLU’s Mr Whaley.

Perhaps the main reason Western firms have been slow to emulate Chinese e-commerce is not its inherent flaws but their overspecialisation. From Amazon’s home in Seattle and Facebook’s in Silicon Valley to Walmart’s in Bentonville, American companies have tended to focus on their core business—be it e-commerce, social media or supermarkets. Only recently have they begun to invade each other’s turf. In time that may lead to more blurring of business boundaries. As Eric Feng, Facebook’s head of commerce incubations, summed it up at a recent virtual panel, tongue only slightly in cheek: “China, you are the light that will show us the way.” ■
This article appeared in the Business section of the print edition under the headline “The great mall of China” More

IF AT THE start of 2020 you asked chief executives what kept them up at night, they would trot out the usual list: how to adapt their business models to a changing world, reconfigure supply chains amid geopolitical squabbles, not fall behind technologically, attract the brightest employees and not alienate consumers and investors increasingly concerned about things like social justice or climate change. How, in other words, to ensure their company joins—or remains among—the ranks of superstar firms that increasingly dominate the corporate landscape, rather than the long tail of also-rans.
Pose the same question now, as the most turbulent year in living memory draws to a close, and bosses’ answers will be pretty much the same—only more so. The pandemic did change some things. Companies embarked on a giant experiment in whether they could switch to mass remote working (they can, more or less) and whether global supply chains could withstand widespread disruption (ditto). Bosses had to learn to run their businesses from their studies and their crisis-management skills were tested. Human-resources chiefs rose in stature.

But the coronavirus mostly simply sped up changes to the business world that were already taking place (as it has done in most dimensions of everyday life). By doing so it has widened three rifts in the world’s corporate landscape.
The first is to make big, powerful firms mightier—often because those firms provide products and services on which the self-isolation experiment relied. What used to be a convenience—Amazon’s home delivery, Microsoft’s cloud-based office software, Zoom’s video calls, an evening with Netflix—became a necessity, for remote work during the day and a tolerable life afterwards. Weak companies—or ones that looked strong only thanks to book-cooking—were exposed for what there were, and fell by the wayside.
Investors, flush with cash and starved for returns in a world of near-zero interest rates, ploughed a record $3.6trn of new capital into non-financial firms with a chance of outliving the pandemic. Money flowed to companies even in industries which covid-19 threatened to sink, such as cruise ships and air travel—so long as those companies had a shot at entrenching their pre-pandemic dominance. In April Carnival Cruise Lines raised $6.25bn in debt and equity, despite being a covid petri dish of a business, and Boeing sold bonds worth $25bn in May, never mind that its bestselling 737 MAX jetliner was still grounded after two tragic crashes in 2018 and 2019. Dollars flooded into a frenzy of initial public offerings reminiscent of 1999, rekindling memories of the dotcom bust that followed.
This helped exacerbate another divergence: between exuberant Wall Street, where stock indices rebounded from a crash in March to an all-time high, and Main Street, filled with rows of boarded-up businesses. The tech-fuelled stockmarket rally pushed Apple’s market capitalisation above $2trn and allowed Tesla’s market value to overtake one giant carmaking rival after another, ultimately leaving all of them in the dust.

The third rift—between Western and Chinese technospheres—would have grown wider even in the absence of covid-19. America’s outgoing president, Donald Trump, has been trying to hobble Chinese tech titans almost since taking office in 2016—successfully in the case of Huawei (which makes 5G telecoms gear and is perceived by American spies as a threat to national security), less so when it came to TikTok (which makes teenagers giggle by serving up silly videos). His successor, Joe Biden, may tone down Mr Trump’s anti-China bile, but not suspicion of the Communist regime. As geopolitics continues to rend technology supply chains asunder in 2021, companies that have served both Western and Chinese markets will increasingly be forced to pick sides. They include Taiwan’s semiconductor firms, energy supermajors or ASML, a Dutch firm with a monopoly in abstruse chipmaking equipment which this year overtook Siemens to become Europe’s biggest industrial concern. CEOs should not count on restful slumber. More

ABOVE THE din of chat-shows, dramas and documentaries streamed to blaring voice-activated speakers, a louder sound can be heard: ker-ching. On December 29th Spotify, an audio-streaming service, aired the first in a series of exclusive podcasts by Prince Harry and Meghan Markle. A few weeks earlier the Wall Street Journal reported that Amazon was in talks to buy Wondery, a producer of popular podcasts including “Dirty John” and “Dr Death”, for $300m. The tech giant, which got into podcasting only in September, has also signed up expensive stars such as Will Smith and DJ Khaled.
The deals are the latest in an industry-wide spree. Last year Daniel Ek, Spotify’s boss, declared that “audio—not just music—would be the future” of his firm. Since then Spotify has been on a billion-dollar podcasting binge, acquiring production and ad-tech firms such as Gimlet, Anchor and Megaphone, as well as shows; in May it paid $100m for “The Joe Rogan Experience”. Apple, the biggest podcast distributor, has bought Scout FM, a podcasting app, and signed up stars like Oprah Winfrey.

Podcasting makes most of its money through ads, which last year generated revenue of just $1.3bn, according to Omdia, a data firm—equal to 6% or so of the recorded-music industry’s sales, or the box-office takings of one Hollywood blockbuster. Why the big noise about a small business?
One reason is growth. Global podcast listeners will exceed 2bn by 2025, Omdia reckons, from 800m in 2019. Ad sales may nearly treble, to $3.5bn. As giants hoover up shows, advertisers put off by fragmentation can buy many spots in one place.
Second, podcasts give audio-streamers a chance to own content, which they cannot do with music. Most of the world’s tunes are owned by three record labels, which skim off about 70% of the streamers’ revenues. No matter how much they grow, firms like Spotify find their costs grow with them. The fixed cost of acquiring a podcast means that growth can boost margins.
Last, the ability to own podcasts gives streaming services a way to differentiate themselves. Unlike video-streamers, which compete on content, Spotify, Amazon and Apple offer roughly the same library of 40m songs. Artists, who see streaming mainly as a way to promote their more profitable live shows, have little incentive to be exclusive to one service. Original podcasts are a way to lure fans.

If their valuation model for podcasts is based on music catalogues, the streamers may be overpaying for some of them. Will Page, a former Spotify chief economist, notes that whereas back catalogues like Bob Dylan’s, recently sold to Universal Music Group, are valuable because the songs are replayed for years, podcasts are perishable. “A podcast about Dylan is of its time; a Dylan song is timeless,” he says.
Spotify’s move into podcasting has helped its share price double this year. But rivals like Apple and Amazon, which offer bundles of audio, video, gaming and more, can attract stars with promises of a spin-off TV show or game. Tech giants can also lean on hardware: iPhones come with Apple’s podcast app and Amazon’s speakers default to Amazon Music. The battle for consumers’ ears is only likely to get noisier. More

“ACTING ON INFORMATION, China’s State Administration for Market Regulation [SAMR] has started investigation [into] Alibaba Group for alleged monopoly conduct including implementing an ‘exclusive dealing agreement’.” This brief note, posted by Xinhua, the state news agency, on December 24th, was all it took to cut China’s mightiest online titan down to size. Not even the announcement three days later of an additional $6bn in share buy-backs arrested the slide in its share price. By December 28th it had fallen by 13%, wiping $91bn off the firm’s market capitalisation. American regulators, whose detailed charge-sheets against tech giants such as Facebook and Google in recent weeks elicited a yawn from investors, must have looked on with envy.
The Alibaba probe marks the first one of its kind into Chinese e-commerce. Its timing—a month after authorities suddenly halted the $37bn initial public offering (IPO) of Alibaba’s fintech affiliate, Ant Group, and days before another regulator told Ant to curtail its lucrative lending and wealth-management activities—has fuelled speculation that it is Beijing’s way of chastening the two firms’ flamboyant co-founder, Jack Ma.

Mr Ma’s provocations probably played a role; Ant’s IPO was suspended soon after the tycoon likened China’s state banks to pawn shops. Chinese watchdogs often launch lightning regulatory strikes, seeking to make an example of bad behaviour as a deterrent to others, says Angela Zhang, an antitrust expert at the University of Hong Kong. But the investigation also signals growing concerns over the online economy, which is effervescent but also increasingly concentrated. As investors parsed the Xinhua statement, share prices of other internet giants, such as Tencent and Meituan-Dianping, fell nearly as steeply as Alibaba’s.
The complaint against Alibaba seems to centre on the practice of having merchants or brands sign contracts to sell products exclusively on its platform. Those that do not, and stick with other marketplaces, risk having internet traffic diverted from their online shopfronts on Alibaba’s Tmall emporium to other sellers.
Such arrangements are not new. In 2015 JD.com, a smaller e-emporium backed by Tencent, filed a legal claim against Alibaba over a similar issue. Nor are they unique to Mr Ma’s firm, which launched a competing complaint against JD.com the same year. These complaints, and others which various parties have brought regularly since, have been largely ignored by regulators. So why the about-turn?
In the past Chinese trustbusters were hesitant to hobble an industry in which China was seen to be world-beating, and which enjoyed explicit support from the country’s Communist leaders. Now, like their Western counterparts, they are anxious about a handful of giant firms controlling a growing range of increasingly indispensable services—e-commerce, logistics, payments, ride-hailing, food delivery, social media, messaging. Common practices, such as selling products below cost to lure customers, look more troubling in an industry where the top three firms control over 90% of the market than they might have in a less concentrated one. In November SAMR said price discrimination, whereby individual shoppers are offered different prices based on their spending power, divined from user data, may be unlawful.
Another reason for China’s newfound regulatory zeal (Mr Ma’s jibes aside), is greater trustbusting capacity. SAMR was formed only in 2018, by combining the offices of three separate regulators. It still struggles to keep up with the fast-changing online market; most of its staff are busy assessing domestic mergers and acquisitions. But it has more know-how and manpower than it used to—and looks eager to deploy them. More