Finance

China is famous, even infamous, for hard graft. Prodigious amounts of toil and elbow grease helped the country become the workshop of the world. More than 175m migrant workers labour in cities far from home, often leaving their children in the care of relatives. And the sacrifices are not confined to the poor. Even some of China’s more sophisticated firms are known for their “996” office culture, encouraging unfortunate employees to work from 9am to 9pm, six days a week. More

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Chinese tech company Baidu on Thursday reported better-than-expected revenue and profit for the third quarter.
Baidu noted a 12% surge in its non-online marketing revenue to the equivalent of $1.1 billion, mainly driven by its artificial intelligence cloud business.

Baidu on Nov. 12, 2024, unveiled a pair of glasses with a built-in AI assistant, putting up a Chinese rival to the Meta Ray-Bans that have proven a rare success in AI-powered hardware. 
Bloomberg | Bloomberg | Getty Images

BEIJING — Chinese tech giant Baidu on Thursday posted a 3% annual drop in third-quarter revenue, nevertheless beating market expectations amid AI cloud growth.
The revenue print came in at $4.78 billion for the quarter ending on Sept. 30. Net income for the period rose by 14% to $1.09 billion.

Baidu noted a 12% surge in its non-online marketing revenue to the equivalent of $1.1 billion, mainly driven by its artificial intelligence cloud business.
The company’s U.S.-traded shares fell nearly 4% in premarket trading following the release of its results.
Here’s what analysts expected the company to report for the quarter, according to LSEG estimates:

Revenue: $4.63 billion
Net income: $857.17 million

Baidu had reported revenue of 34.45 billion yuan ($4.75 billion) and net income of 6.68 billion yuan for the third quarter of 2023.
Beijing-based Baidu operates one of the major web browser search engines in China, along with a frequently used maps app. The company also sells cloud computing services. Online marketing drives a significant portion of the firm’s revenue.

The growth in the AI cloud business offset “ongoing weakness” in Baidu’s online marketing stream, CEO Robin Li said in the earnings release, also commenting on the performance of the company’s Ernie generative AI model and chatbot.
“Our strong AI capabilities are gaining broader market recognition, as evidenced by increasing adoption of Ernie,” he said.
Baidu has promoted its Ernie chatbot as a local alternative to OpenAI’s ChatGPT, which isn’t available in China. Ernie bot now has 430 million users, and programs access its underlying AI model around 1.5 billion times a day, more than double the 600 million rate in August, Baidu said last week.
“Despite the near-term pressures, we remain steadfast in our AI-focused strategy and are confident in our long-term trajectory,” Li said Thursday. “As we further scale AI, we are emboldened to find how it can drive innovations and create value for consumers, enterprises and society at large.”
The company this month also announced that its Xiaodu AI Glasses will begin sales in the first half of next year. The wearable has at least one camera and uses Ernie’s AI capabilities and Baidu’s maps and search functions. While Baidu hasn’t revealed a price, the product is widely expected to be a Chinese alternative to Meta’s popular Ray-Ban smart glasses.
Baidu announced a management rotation last month, with Junjie He, previously head of the mobile ecosystem group, becoming the company’s interim Chief Financial Officer, while former CFO Rong Luo assumed leadership of the mobile division.
“AI Cloud continued to show healthy and sustainable development in the third quarter,” he said in the earnings release. “Meanwhile, Apollo Go continued to make operational strides, underpinning our confidence in the validity of the fully autonomous ride hailing business model.”
Apollo Go, which operates Baidu’s robotaxi business, reported a 20% year-on-year surge in rides in the third quarter. The average number of rides a month rose to 329,333 during the third quarter, up from 287,500 in the first half of the year, according to CNBC calculations. More

The big mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries.Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of dozens of academic studies. For those who take their fast food more seriously, we also calculate a gourmet version of the index.The GDP-adjusted index addresses the criticism that you would expect average burger prices to be cheaper in poor countries than in rich ones because labour costs are lower. PPP signals where exchange rates should be heading in the long run, as a country like China gets richer, but it says little about today’s equilibrium rate. The relationship between prices and GDP per person may be a better guide to the current fair value of a currency.In July 2022 we updated the Big Mac index to use a McDonalds-provided price for the United States. We also changed our methodology for how we calculate the GDP-adjusted index, the full history of which will now be adjusted whenever the IMF’s historical GDP series are updated. The previously published versions of both indices are available in our archive.Read more about the Big Mac index in “What Donald Trump can learn from the Big Mac index”. You can also download the data or read the methodology behind the Big Mac index here.Note: The GDP-adjusted index was updated in January 2021 to include more countries.Correction (January 26th 2023): An earlier version of the index had the wrong Big Mac price for China in January 2024. Sorry. More

Demand for capital in the U.S. is surging amid massive government spending and an “industrial renaissance,” Apollo Global’s Marc Rowan said.
Other panelists said normalization of economic conditions and growth in the data center and energy sectors were also leading to a rebound in fundraising activity.

Jonathan Gray, president and chief operating officer of Blackstone Inc., from left, Ron O’Hanley, chief executive officer of State Street Corp., Ted Pick, chief executive officer of Morgan Stanley, Marc Rowan, chief executive officer of Apollo Global Management LLC, and David Solomon, chief executive officer of Goldman Sachs Group Inc., during the Global Financial Leaders’ Investment Summit in Hong Kong, China, on Tuesday, Nov. 19, 2024. 
Bloomberg | Bloomberg | Getty Images

An “industrial renaissance” in the U.S. is fueling demand for capital, Marc Rowan, CEO of Apollo Global Management said at the Global Financial Leaders’ Investment Summit in Hong Kong.
“There is so much demand for capital, [including through debt and equity] … What’s going on is nothing short of extraordinary,” Rowan said on Tuesday during a panel discussion. 

This demand has been supported by massive government spending, particularly on infrastructure, the semiconductor industry and projects under the Inflation Reduction Act, said the asset manager, who is reportedly in the running for Treasury Secretary position under President-elect Donald Trump.
“What we’re watching is this incredible demand for capital happening against a backdrop of a U.S. government that is running significant deficits. And so the capital raising business, I think that’s going to be a good business,” he said. 
Industrial policies, including the CHIPS and Science Act and the 2021 infrastructure legislation, warrant billions in spending.
Rowan added that the U.S. has been the largest recipient of foreign direct investment over the past three years and is expected to stay at the top spot this year as well.
Rowan and other panelists also identified energy and data centers — needed for artificial intelligence and digitization — as growth sectors requiring more capital. 

Blackstone President and COO Jonathan Gray told the panel that data centers were the biggest theme across his entire firm, with the company employing billions on their development.
“We’re doing it in equity, we’re doing it financing … this is a space we like a lot, and we will continue to be all in as it relates to digital infrastructure.”

Fundraising and M&A recovery

Other panelists at the summit organized by the Hong Kong Monetary Authority said that capital raising was well-positioned to recover from a recent slowdown. 
According to David Solomon, chairman and CEO of Goldman Sachs, capital raising activity had reached peak levels in 2020 and 2021 amid massive Covid-era stimulus but later became muted amid the war in Ukraine, inflation pressures and tighter regulation from the Federal Trade Commission. 
There has been a recent pick up in activity as conditions have normalized, along with expectations of friendlier regulation on dealmaking from the FTC under the incoming Donald Trump administration, Solomon said. 
While there remains an inflationary backdrop and other risks in the current environment, Ted Pick, CEO of Morgan Stanley said that the consumer and corporate community are “by in large, in good shape” as the economy continues to grow. 
“This environment has been one where, if you are in the business of allocating capital, it’s been great,” he said, adding that the group was now gearing up to get into “raising capital mode.” 
“That is [the] hallmark of a growing and thriving economy, which is where the classic underwriting and mergers and acquisitions businesses take hold,” he said. 
Solomon predicted that these trends would see “more robust” capital raising and M&A activity in 2025. More

The Senate Judiciary Committee convened on Tuesday for a hearing on an alleged Visa-Mastercard “duopoly.”
Both “the most conservative and the most liberal members” agree that high swipe fees, which plague retailers and small businesses, needs to be addressed, committee Chair Sen. Dick Durbin said.
Durbin, along with Sen. Roger Marshall, is a co-sponsor of the bipartisan Credit Card Competition Act, which takes aim at the Visa-Mastercard swipe fees by giving retailers more choice in payment networks they can use.
In a letter ahead of the hearing, the National Retail Federation told the committee that high credit card swipe fees add “inflationary pressure” to the U.S. economy.

(L-R) Bill Sheedy, senior advisor to the CEO at Visa, and Linda Kirkpatrick, President of the Americas at Mastercard, are sworn in during a Senate Judiciary Committee hearing entitled “Breaking the Visa-Mastercard Duopoly: Bringing Competition and Lower Fees to the Credit Card System” on Capitol Hill in Washington, DC, on November 19, 2024. 
Roberto Schmidt | Afp | Getty Images

The Senate Judiciary Committee convened on Tuesday for a hearing on the alleged Visa-Mastercard “duopoly,” which committee members from both sides of the aisle say has left retailers and other small businesses with no ability to negotiate interchange fees on credit card transactions.
“This is an odd grouping. The most conservative and the most liberal members happen to agree that we have to do something about this situation,” committee chair and Democratic Illinois Sen. Dick Durbin said.

Interchange fees, also known as swipe fees, are paid from a merchant’s bank account to the cardholder’s bank, whenever a customer uses a credit card in a retail purchase. Visa and Mastercard have a combined market cap of more than $1 trillion, and control 80% of the market.
“In 2023 alone, Visa and Mastercard charged merchants more than $100 billion in credit card fees, mostly in the form of interchange fees,” Durbin told the committee.
Durbin, along with Republican Kansas Sen. Roger Marshall, have co-sponsored the bipartisan Credit Card Competition Act, which takes aim at Visa and Mastercard’s market dominance by requiring banks with more than $100 billion in assets to offer at least one other payment network on their cards, besides Visa and Mastercard.
“This way, small businesses would finally have a real choice: they can route credit card transactions on the Visa or Mastercard network and continue to pay interchange fees that often rank as their second or biggest expense, or they could select a lower cost alternative,” Durbin told the committee.
Visa and Mastercard, however, stand by their swipe fees.

“We consider them incentives, some people might consider them penalties. But if you can adopt new technology that reduces the risk and takes fraud out of the system and improves streamlined processing, then you would qualify for lower interchange rates,” said Bill Sheedy, senior advisor to Visa CEO Ryan McInerney. “It’s very expensive to issue a product and to provide payment guarantee and online customer service, zero liability. All of those things, and many more, senator, get factored into interchange [fees].”
The executives also warned against the Credit Card Competition Act, with Sheedy claiming that it “would remove consumer control over their own payment decisions, reduce competition, impose technology sharing mandates and pick winners and losers by favoring certain competitors over others.”
“Why do we know this? Because we’ve seen it before,” Mastercard President of Americas Linda Kirkpatrick said, in reference to the Durbin amendment to the 2010 Dodd-Frank Act, which required the Fed to limit fees on retailers for transactions using debit cards. “Since debit regulation took hold, debit rewards were eliminated, fees went up, access to capital diminished, and competition was stifled.”
But the current high credit card swipe fees for retailers translate to higher prices for consumers, the National Retail Federation told the committee in a letter ahead of the hearing. The Credit Card Competition Act, the retail industry’s largest trade association wrote, will deliver “fairness and transparency to the payment system and relief to American business and consumers.”
“When we think of consumer spending, credit card swipe fees are not the first thing that comes to mind, yet those fees are a surprisingly large part of consumer spending,” Notre Dame University law professor Roger Alford said. “Last year, the average American spent $1,100 in swipe fees, more than they spent on pets, coffee or alcohol.”
Visa and Mastercard agreed to a $30 billion settlement in March meant to reduce their swipe fees by four basis points for three years, but a federal judge rejected the settlement in June, saying they could afford to pay more.
Visa is also battling a Justice Department lawsuit filed in September. The payment network is accused of maintaining an illegal monopoly over debit card payment networks, which has affected “the price of nearly everything,” according to Attorney General Merrick Garland. More

Buy now, pay later firm Klarna’s decision to go public in the U.S. drew speculation from fintech insiders about whether the move might ignite a resurgence in big fintech IPOs.
That doesn’t appear to be the case for now but founders will be watching Klarna’s debut, eyeing share pricing and performance closely.
CEOs and co-founders of major fintech unicorns said going public isn’t a major priority — but there are signs pointing toward a more favorable IPO market in the next two years.

Hiroki Takeuchi, co-founder and CEO of GoCardless. 
Zed Jameson | Bloomberg | Getty Images

LISBON, Portugal — Financial technology unicorns aren’t in a rush to go public after buy now, pay later firm Klarna filed for a U.S. IPO — but they’re keeping a watchful eye on it for signs of when the market will open up again.
Last week, Klarna made a confidential filing to go public in the U.S., ending months of speculation over where the Swedish digital payments firm would list. Timing of the IPO is still unclear, and Klarna has yet to decide on pricing or the number of shares it’ll issue to the public.

Still, the development drew buzz from fintech circles with market watchers asking if the move marks the start of a resurgence in big fintech IPOs. For now, that doesn’t appear to be the case — however, founders say they’ll be watching the IPO market, eyeing pricing and eventually stock performance.

Hiroki Takeuchi, CEO of online payments startup GoCardless, said last week that it’s not yet time for his company to fire the starting gun on an IPO. He views listing as more of a milestone on a journey than an end goal.
“The markets have been challenging over the last few years,” Takeuchi, whose business GoCardless was last valued at over $2 billion, said in a CNBC-moderated panel at the Web Summit tech conference in Lisbon, Portugal.
“We need to be focused on building a better business,” Takeuchi added, noting that “the rest will follow” if the startup gets that right. GoCardless specializes in recurring payments, transactions that come out of a consumer’s bank account in a routine fashion — such as a monthly donation to charity.
Lucy Liu, co-founder of cross-border payments firm Airwallex, agreed with Takeuchi and said it’s also not the right time for Airwallex to go public. In a separate interview, Liu directed CNBC to what her fellow Airwallex co-founder and CEO Jack Zhang has said previously — that the firm expects to be “IPO-ready” by 2026.

“Every company is different,” Liu said onstage, sat alongside Takeuchi on the same panel. Airwallex is more focused on becoming the best it can be at solving friction in global cross-border payments, she said.
An IPO is a goal in the company’s trajectory — but it’s not the final milestone, according to Liu. “We’re constantly in conversations with our investors shareholders,” she said, adding that will change “when the time is right.”

‘Stars aligning’ for fintech IPOs

One thing’s for sure, though — analysts are much more optimistic about the outlook for fintech IPOs now than they were before.

“We outlined five handles to open the [IPO] window, and I think those stars are aligning in terms of the macro, interest rates, politics, the elections are out the way, volatility,” Navina Rajan, senior research analyst at private market data firm PitchBook, told CNBC.
“It’s definitely in a better place, but at the end of the day, we don’t know what’s going to happen, there’s a new president in the U.S.,” Rajan continued. “It will be interesting to see the timing of the IPO and also the valuation.”
Fintech companies have raised around 6.2 billion euros ($6.6 billion) in venture capital from the beginning of the year through Oct. 30, according to PitchBook data.
Jaidev Janardana, CEO and co-founder of British digital bank Zopa, told CNBC that an IPO is not an immediate priority for his firm.
“To be honest, it’s not the top of mind for me,” Janardana told CNBC. “I think we continue to be lucky to have supportive and long-term shareholders who support future growth as well.”
He implied private markets are currently still the most accommodative place to be able to build a technology business that’s focused on investing in growth.
However, Zopa’s CEO added that he’s seeing signs pointing toward a more favorable IPO market in the next couple of years, with the U.S. likely opening up in 2025.
That should mean that Europe becomes more open to IPOs happening the following year, according to Janardana. He didn’t disclose where Zopa is looking to go public. More

Chinese gaming giant Tencent is betting on a rise in female players worldwide for its mobile game Honor of Kings, which rolled out in the U.S. and other countries in June.
Women prefer to play games on their smartphones, creating a growth opportunity in an industry otherwise dominated by men, analysts said.
Over the weekend, Honor of Kings drew a record 33,000 fans to a stadium in Beijing to watch two teams compete for a $3 million grand prize.

Tencent’s Honor of Kings mobile game drew a record 33,000 fans to watch a final competition in Beijing on Nov. 16, 2024.
CNBC | Evelyn Cheng

BEIJING — Chinese gaming giant Tencent is betting on a rise in female players worldwide for its mobile game Honor of Kings, which rolled out to the U.S. and other countries in June.
Already a hit in China, the game drew a record 33,000 fans to a Beijing stadium on Saturday to watch two teams compete for a $3 million grand prize.

Many in the crowd were young women, reflecting how interest in mobile games has broadened out from the stereotypical male player in the days of console and PC gaming.
Launched in China in November 2015, the game’s appeal lies in its easy learning curve and relatively short sessions of around 15 minutes. Anyone with a smartphone can play for free in real time, on the go.
“Honor of Kings became an important way for me to socialize,” said Tianyun Gao, according to CNBC’s translation of her spoken Mandarin. She started playing the game in 2017 as a sophomore in college and became a professional commentator for the game’s competitions a year later.
Gao, an English major from Shanghai, has moderated Honor of Kings’ competitions in two languages, including an international event held in Riyadh, the capital of Saudi Arabia, in August. She said her hope is to see esports become as mainstream as traditional sports, and noted that one of her inspirations is a Chinese soccer commentator.

Tencent ramped up its global expansion plans for Honor of Kings this year, with its subsidiary, Level Infinite, in February announcing a $15 million investment in developing the game’s tournament worldwide.

An international version of the game has been available since 2016 under different names such as Arena of Valor, but the latest global push for Honor of Kings began in 2022. The game didn’t reach the Middle East until earlier this year and only launched in the key markets of North America, Europe and Japan in June.
Less than a month later, the game topped 50 million downloads outside China, according to the company.

Overwhelmingly mobile-focused

Growth in gaming among women stems largely from their preference in playing on their smartphones, without having to invest in consoles and other technology.
“Nearly half of female players play only on mobile platforms so we have a huge addressable audience,” said Jackie Huang, head of the Honor of Kings global esports division within Tencent Games’ TiMi L1 Studio. “Women make up a significant part of our player base but we want to see this continue growing.”
He said that 45% of gamers globally are women, and that the gender composition of Honor of Kings’ users is “relatively balanced. “We strive to provide users, no matter how they identify, with [a] high quality gaming experience,” Huang said.
Gaming is Tencent’s biggest revenue driver, with international games accounting for around 28% of the its overall gaming business in the third quarter.
The company also owns Riot Games, a developer whose PC-based League of Legends has become one of the most popular names in global esports with its own annual competition. Honor of Kings, which claims 100 million players a day, uses a similar format with two teams of five players each.
Such multiplayer games are the second-most popular category for female gamers, behind puzzles, said Xiaofeng Zeng, China-based vice president at gaming research firm Niko Partners. His analysis found that 95% of women prefer mobile games.
If Honor of Kings can hold first place in China, and achieve that position overseas, then Tencent can generate half its revenue from international markets, Zeng said. He said the game’s top overseas markets by revenue are the U.S., India, Malaysia, and Indonesia.
And in the key market of Southeast Asia, Zeng said that due to a low base, female players are growing two to three times more quickly than male gamers. A newly branded Honor of Kings global championship was held last month in Jakarta, Indonesia’s capital, with Malaysian team Black Shrew Esports winning the $300,000 first prize.

Early stages

For now, no matter how popular Honor of Kings may be among women, the competitions remain dominated by men. The two teams competing in Beijing on Saturday consisted only of male players.
Huang pointed out that the global championship this year featured a female player from France’s Team Vitality, which is also managed and coached by women.
He attributed the Honor of King’s popularity among women to the game’s playable characters that are also female. Many of the figures, each with different powers, are based on Chinese historical or mythological figures.
In 2021, organizers of the Honor of Kings competition in China also launched a tournament for female players. This year’s womens finals are set to take place in December, with a prize of around $41,000 for the winning team.
“The pandemic was a large accelerator of females into the games space and we have continued to see increased engagement from female gamers,” said Chirag Ambwani, SVP, gaming and entertainment, at SensorTower, which focuses on mobile games.
Reasons include specialized and easy to access content, he said, adding that gaming participation grew overall.
As for Honor of Kings’ global expansion, Ambwani said SensorTower research showed “healthy growth,” with average revenue of more than $5 per user in the U.S. and Canada. More