Finance

Chinese business database Qichacha said Friday it passed a data export security assessment that allows the company to resume overseas operations.
The news signals an easing in China’s increasingly stringent government controls over data sharing due to national security concerns.

Chinese business database Qichacha said it passed a data export security assessment that allows the company to resume overseas operations.
Vcg | Visual China Group | Getty Images

BEIJING — Chinese business database Qichacha said Friday it passed a data export security assessment that allows the company to resume overseas operations.
The news signals an easing in China’s increasingly stringent government controls over data sharing due to national security concerns.

Earlier this year, Reuters reported, citing sources, that Qichacha and similar databases had closed access to offshore users for months.
Qichacha said in a press release on Friday that it is the first company to pass the Cyberspace Administration of China‘s data export security assessment for a platform providing inquiries into data around corporate creditworthiness.

The administration did not immediately respond to a CNBC request for comment.
In October, the cybersecurity regulator issued draft rules that eased restrictions on sending data outside of mainland China — an issue that had become a major challenge for foreign businesses in the country.

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Chinese startup Li Auto sold more cars than Tesla’s China business did in October, according to the China Passenger Car Association.
Unlike Tesla’s battery-only models, Li Auto’s vehicles — all SUVs — come with a fuel tank for charging the battery.
Li Auto also forecast it would keep delivering cars at a similar pace in the fourth quarter: Between 41,700 to 42,600 vehicles a month.

Chinese startup Li Auto sold more cars in October than Tesla’s China business did in October, according to the China Passenger Car Association.
Nurphoto | Getty Images

BEIJING — Chinese startup Li Auto sold more cars than Tesla’s China business did in October, according to the China Passenger Car Association.
The startup sold a record 40,422 cars in October, far more than Tesla did at 28,626, association data showed Thursday.

Li Auto also forecast it would keep delivering cars at a similar pace in the fourth quarter: Between 41,700 to 42,600 vehicles a month.
Unlike Tesla’s battery-only models, Li Auto’s vehicles — all SUVs — come with a fuel tank for charging the battery. That helps ease consumers’ concerns about driving range.
Li Auto plans to begin delivering its first battery-only model in February 2024, the MEGA multi-purpose vehicle. The company said it’s planning three more battery-only vehicles for launch in the second half of next year.

Li Auto’s cars currently sell for between 319,800 yuan ($43,910) to 459,800 yuan. The Model 3 and Model Y start at lower prices, 259,900 yuan and 263,900 yuan, respectively.
It’s unclear whether Li Auto will continue to sell more cars than Tesla going forward. In September, Tesla sold 43,507 cars while Li Auto sold 36,060, China Passenger Car Association data showed.

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Li Auto vs Tesla

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Li Auto on Thursday reported third-quarter earnings and revenue above FactSet estimates.
Unlike many local peers, the company has no immediate overseas expansion plans.
The startup, however, is looking at driver-assist tech as a way to compete in China’s hot electric car market.
The company plans to more than double the size of its research and development team for autonomous driving, from around 900 people to more than 2,500 by the end of 2025, President Donghui Ma said on an earnings call Thursday, according to a FactSet transcript. More

Fed Chair Jerome Powell said he and his colleagues remain steadfast in getting policy in line with their 2% inflation goal, but “we are not confident that we have achieved such a stance.”
He stressed the Fed nevertheless can be cautious as the risks between doing too much and too little have come into closer balance.

Federal Reserve Chairman Jerome Powell said Thursday that he and his fellow policymakers are encouraged by the slowing pace of inflation but are unsure whether they’ve done enough to keep the momentum going.
Speaking a little more than a week after the central bank voted to hold benchmark policy rates steady, Powell said in remarks for an International Monetary Fund audience in Washington, D.C., that more work could be ahead in the battle against high prices.

“The Federal Open Market Committee is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2 percent over time; we are not confident that we have achieved such a stance,” he said in his prepared speech.
For the second time in recent weeks, a public address from Powell was interrupted by climate protesters. He briefly left the stage before resuming.
The speech comes with inflation still well above the Fed’s long-standing goal but also considerably below its peak levels in the first half of 2022. In a series of 11 rate hikes that constituted the most aggressive policy tightening since the early 1980s, the committee took its benchmark rate from near zero to a target range of 5.25%-5.5%.
Those increases have coincided with the Fed’s preferred inflation gauge, the core personal consumption expenditures price index, to fall to an annual rate of 3.7%, from 5.3% in February 2022. The more widely followed consumer price index peaked above 9% in June of last year.
Powell said that inflation is “well above” where the Fed would like to see it while describing policy as “significantly restrictive.”

“My colleagues and I are gratified by this progress but expect that the process of getting inflation sustainably down to 2 percent has a long way to go,” he said. “We will keep at this until we succeed,” he later added, saying the Fed is focused on whether rates need to go higher and how long they need to stay elevated.
Stocks headed lower after the speech, with the Dow Jones Industrial Average down close to 200 points. Treasury yields lurched higher after declining for most of the past three weeks, propelled up in large part after a poorly received 30-year bond auction.
“Chairman Powell issued a warning to investors too giddy on the prospect of rate cuts next year,” said Jeffrey Roach, chief economist at LPL Financial. “The Fed will be true to its mandate and hike further should inflation reaccelerate.”
As he has in recent speeches, Powell stressed that the Fed nevertheless can be cautious as the risks between doing too much and too little have come into closer balance. He said the Fed is attuned to the rise in Treasury yields.
“If it becomes appropriate to tighten policy further, we will not hesitate to do so,” he said. “We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening.”
“Monetary policy is generally working the way we think it should work” Powell said during a discussion following his speech.
Markets are largely convinced the Fed is through hiking rates.
Futures pricing, according to the CME Group, indicates less than a 10% probability that the FOMC will approve a final rate hike at its Dec. 12-13 meeting, even though committee members in September penciled in an additional quarter percentage point rise before the end of the year.
Traders anticipate the Fed will start cutting next year, probably around June.
Powell noted the progress the economy has made. Gross domestic product accelerated at a “quite strong” 4.9% annualized pace in the third quarter, though Powell said the expectation is for growth to “moderate in coming quarters.” He described the economy as “just remarkable” in 2023 in the face of a broad consensus that a recession was inevitable.
Unemployment remains low, though the jobless rate has risen half a percentage point this year, a move commonly associated with recessions.
But Powell noted that the Fed is “attentive” that stronger-than-expected growth could undermine the fight against inflation and “warrant a response from monetary policy.”
He also pointed out that improvements in supply chains have helped ease inflation pressures, but “it is not clear how much more will be achieved by additional supply-side improvements. Going forward, it may be that a greater share of the progress in reducing inflation will have to come from tight monetary policy restraining the growth of aggregate demand.”
The remarks are part of a broader presentation he is giving to the Jacques Polak Annual Research Conference. One broad policy topic he addressed was the challenge posed by keeping rates anchored near zero, where they were before the inflation surge. Powell said it is “too soon” to say whether zero-rate challenges are “a thing of the past.”
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Warren Buffett reportedly traded stocks in his personal account that his conglomerate Berkshire Hathaway was buying and selling, a practice that he himself in the past deemed a conflict of interest, according to ProPublica on Thursday.
The nonprofit news outlet, citing a leak of confidential IRS data, alleged the “Oracle of Omaha” traded shares in his private account in the same quarter or the quarter before Berkshire bought or sold the same stocks, including shares of Wells Fargo, Johnson & Johnson and Walmart. The examples given were from 2009 and 2012.

Berkshire has not responded to CNBC’s request for comment outside of normal business hours.
The 93-year-old investor has been open about the fact that he has a personal account, separate from his company’s $300 billion equity portfolio. Berkshire is required to disclose its holdings quarterly to the Securities and Exchange Commission, but the holdings in Buffett’s account and size of it are largely a mystery.
Buffett has said publicly that he tries to steer clear of the investments Berkshire is involved in when it comes to his personal account.
“I try to stay away from anything that could conflict with Berkshire,” Buffett said during the company’s annual meeting in 2016.

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Berkshire Hathaway A shares

Berkshire Hathaway just reported a 40% jump in third-quarter operating earnings with Buffett still at the helm. The conglomerate has amassed a record cash pile of $157 billion and has been overall selling down shares that it owns. The shares hit a record in September.

— Click here to read the ProPublica story.
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Traders working at the New York Stock Exchange (NYSE), on Sept. 20th, 2023.

It’s quiet out there in IPO land — very quiet.
This is it: the weeks before Thanksgiving usually bring a spate of large IPOs eager to go public before the holiday season starts.

“Whatever you are going to get between now and the end of the year should be happening right now,” Don Short, head of venture equity at InvestX, told me.
Except, nothing is happening.
“The bad companies can’t go public, and the good companies don’t want to go public in a bad market,” Matt Kennedy from Renaissance Capital said.
A terrible performance for stocks in October, higher-for-longer interest rates, poor after-market performances from the recent spate of initial public offerings this summer and the prospects of dramatically lower valuations appear to be causing many IPO candidates to rethink or delay their debuts.
The steady rise in the 10-year Treasury yield was a particular deal killer.

“That was a big wet blanket” for the IPO market, Greg Martin from Rainmaker Securities told me.

Companies delaying IPOs

Waystar, which was considering launching its roadshow last week, is reportedly delaying its IPO until December or into 2024.
Last week, the Wall Street Journal reported that Panera Bread was laying off 17% of its corporate staff in advance of a possible IPO next year.
Others still interested in an IPO may have to take very large haircuts.
Buy now, pay later firm Klarna, another oft-mentioned IPO candidate, told CNBC it has no immediate plans to go public. The company last raised cash at a valuation of $6.7 billion, which marked a massive 85% haircut to its previous valuation of nearly $46 billion.
Chinese fast-fashion giant Shein has not made a decision on the timing or valuation of an IPO, but sources familar with the company’s plans told Bloomberg the company was targeting a valuation of $80 billion to $90 billion. However, the most recent funding round in May valued the company at $66 billion.
This is in stark contrast to most years, when big IPOs went public in November and December.
Rivian, the biggest IPO of 2021, priced on Nov. 9, 2021, and began trading the next day. Hertz raised $1.3 billion in November 2021. Braze raised $500 million the same month, Sweetgreen raised $364 million. Allbirds raised $303 billion.
Airbnb went public in December 2020 and raised $3.5 billion. The day before that, Doordash raised $3.4 billion. A month earlier, in November 2020, Sotera Health raised $1.1 billion, and Miravai Life Sciences raised $1.6 billion.
But the year-end IPO gold rush fizzled in 2022, and it’s fizzling again this year.
So far, 96 IPOs have raised $18.8 billion in 2023, according to Renaissance Capital. That’s following on 2022, when a measly $7.7 billion was raised, the worst year for IPOs in decades. By contrast, a normal year should see at least $50 billion raised.

Recent IPOs aren’t helping

It didn’t help that the recent spate of IPOs have not gone well.
“What I was hearing was that everyone that was lining up after Instacart went public [in September] pulled their deal and everything went a bit quiet,” Short told me.
Three of the biggest IPOs of the year are trading below their offering prices, and, a fourth, Arm, is trading near its debut price, after dipping below it in early trading Thursday.
Largest IPOs, 2023(from offering price)
Arm about flatKenvue down 13%Birkenstock down 8%Instacart down 10%Source: Renaissance Capital
Marketing automation company Klaviyo, which went public in September, is also trading 8% below its offering price of $30 after reporting earnings on Tuesday.
Restaurant chain Cava Group went public in June and at $31 is trading above its initial offering price of $22, but the stock was as high as $57 in the month after it went public, so at Wednesday’s price of $31 most of the original buyers of the stock after the open are under water.
The Renaissance Capital IPO ETF (IPO), a basket of roughly 60 of the largest IPOs in the past two years, is down 17% from its July peak to October trough, S&P wasn’t as bad but similar trajectory.

Some companies may still go public

The market is not completely closed.
“I wouldn’t discount December. If the latest rally continues, we could get more activity,” Kennedy said. “Companies want to go public when there is an expectation the market is going to trade up.”
There are some small firms still in the pipeline.
U.S. natural gas producer BKV, which filed for a $100 million IPO in November of last year, recently updated its prospectus, which is a sign they are still looking to go public.
Homebuilder Smith Douglas, which filed for a $100 million IPO in September, also updated its prospectus in mid-October.
American Healthcare REIT, which filed in September 2022, filed updated financials and announced an additional underwriter (Morgan Stanley) this week.

Here’s another problem: AI

So what happens to some of the older IPO candidates like Reddit or Stripe? As time goes on, they get less interesting.
“The excitement right now is in the AI space, but none of them are ready yet to go public,” Short said. “There are a lot of names still burning cash, but there’s not a lot of capital available for anything that isn’t AI right now.”
That is the main reason Arm is one of the few IPOs that isn’t down sharply.
“Anything associated with AI is a whole other category, and Arm is definitely getting a halo effect,” Short said. Arm reported its first earnings as a public company Wednesday night. Its shares were down about 7% in trading Thursday after offering a weak outlook.

Tough choices for IPO candidates

That leaves IPO candidates with three choices: 1) go public, likely with a substantial haircut, 2) stay private, also likely with a haircut, and hope that your venture capital source will continue to fund you, or 3) merge or go out of business.
Greg Martin from Rainmaker Securities runs one of the leading private platforms for trading pre-IPO companies. He told me the companies in the best position are those who could fund their operations from their own cash flow, but that is not a large group.
“The private financing markets are even worse than the public financing markets, so you really don’t want to be running out of cash right now,” Martin said, adding that he is seeing much lower prices for private sales of stock compared with two years ago.
That leaves many of the roughly 800 tech unicorns (those with valuations above $1 billion) in a precarious position.
“We are starting to see unicorns die,” Martin said. “There’s a lot of lower quality unicorns with negative EBIDTA [cash flow], and there’s not much demand for them in the public markets, so the M&A route is increasingly likely for a lot of companies.” More

China owes a lot to foreign investment. Long before Foxconn started making iPhones for Apple, manufacturers from Hong Kong tiptoed across the border to Guangdong in search of cheap labour. In 1982 Jetta, a toymaker, opened a spray-painting plant among the nearby lychee orchards of Dongguan, according to “Toy Town”, a book by Sarah Monks. Water for a shower was boiled in a wok; the plant was in a tin shack. At another firm, Ms Monks reports, the workers decided that Mickey Mouse’s nose should be red, not black.image: The EconomistBy the end of last year, the accumulated stock of direct investment in China amounted to almost $3.5trn. But in the third quarter of this year, something remarkable happened. The flow of fdi turned negative, for the first time since quarterly data began in 1998 (see chart 1). Foreign investors removed more money from the country than they put in, through a mixture of repatriated profits, repaid intra-firm loans and asset sales.This reversal may reflect foreign disillusionment with China’s economic prospects and policymaking. Although the country will most probably meet its official growth target of 5% this year, it could shrink in dollar terms, according to the imf’s latest forecasts. China’s government has unnerved many investors with its overbearing reaction to the covid-19 pandemic, its regulatory crackdown on technology companies and its investigations of foreign due-diligence firms, including Bain, Capvision and Mintz.Intensifying geopolitical rivalry has not helped either. It is becoming harder for foreign investors to find opportunities that are both commercially exciting and politically palatable in their home and host countries. In a survey of its members published in March, the American Chamber of Commerce in China found that 24% were considering relocating manufacturing out of China or had already begun to do so, up from only 14% the year before.But the sharp reversal in the third quarter may also reflect a technical calculation. As interest rates remain high in America and fall in China, multinational companies have an incentive to spirit spare cash out of the country and unwind any loans to their subsidiaries that can be replaced with Chinese funding. “Many firms can now borrow more cheaply in China and nearly all can earn a higher return on their financial reserves by moving them offshore,” points out Julian Evans-Pritchard of Capital Economics, a research firm.The combination of an interest-rate gap and a geopolitical gulf has, then, hurt one kind of globalisation. But it may be helping another kind: the embrace of China’s currency, the yuan (or “redback”, as it is sometimes called outside the country).In a report last month, China’s central bank pointed out that the cost of borrowing in yuan had fallen relative to other big economies. As a result, foreign firms had issued 106bn yuan ($15bn) worth of yuan-denominated “Panda bonds” in China during the first eight months of the year, an increase of 58% compared with the same period in 2022. Indeed, in September the yuan surpassed the euro to become the second-most-popular currency for trade financing, with 6% of lending, according to swift, a payments-messaging firm.image: The EconomistA meticulous new report on China’s overseas lending by AidData at William and Mary, an American university, also shows how government-owned lenders have made a “strategic pivot” away from the dollar in their lending to low- and middle-income countries (see chart 2). The share of new commitments in yuan soared from 6% in 2013 to 50% in 2021.Many of these loans were made by China’s central bank to countries that are in debt distress. The recipients were then able to use the yuan to repay Chinese creditors and the imf, preserving their scarce dollar reserves for other needs. The authors of the AidData report wonder if China’s rulers saw a chance to “kill several birds with one stone”—preventing defaults and encouraging the international use of the yuan at the same time.After all, countries that borrow in the yuan are more likely to use the currency for international payments, according to work by Saleem Bahaj of University College, London and Ricardo Reis of the London School of Economics. Forty economies have now signed a swap agreement with China’s central bank, which obliges it to temporarily exchange yuan for an equivalent amount of the other party’s currency. Signing such an agreement increases the yuan’s share in a country’s international payments by 1.3 percentage points, they find.The sanctions imposed on Russia by America and Europe have also helped the yuan. Indeed, more than half of mainland China’s transactions with the rest of the world are now settled in its own currency, points out Mr Evans-Pritchard. In the pioneering province of Guangdong the share is even higher, at over 54% in the first three quarters of this year. Guangdong’s workers never got Mickey to embrace a red nose. But the province has at least persuaded some foreigners to embrace the redback. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

No tradition is sacred—not even trick-or-treating. In recent Halloween festivities, many Americans switched to trunk-or-treating. Instead of going door-to-door on neighbourhood streets, children shuffled between cars in parking lots and collected candy from their open boots, which were bedecked by giant spiders and terrible ghouls. It was the latest demonstration of something that has long been true: cars have a remarkably tight grip on American life. America is far more car-reliant than any other big country, averaging roughly two vehicles per household. This, in turn, is linked to many ills: obesity, pollution, suburban sprawl and so on.Despite such horrors, more Americans than ever are consigning themselves to a car-defined existence by choosing to live in the suburbs. Census figures reveal that after decades of steady growth, a little more than half the American population is now based in the ‘burbs. It seems a classic case of elite opinions (cars and suburbs are awful) diverging from mass preferences (people quite enjoy them). For many, the main attractions of suburbia are lower housing costs and greater safety. Yet recent research sheds light on how cars are a crucial part of the equation, making America’s suburbs both impressively efficient and equitable.Start with convenience. It is well-known that American cities are configured for vehicles, a process that began in the 1920s with the Model T. Car-centric urban designs became dominant throughout the country, involving wide roads, ample access to expressways and parking galore. To varying degrees, other countries have copied that model. Yet America has come closest to perfecting it. In a paper released in August, supported by the World Bank, a group of economists examined road speeds in 152 countries. Unsurprisingly, wealthy countries outpace poor ones. And within the rich world, America is streets ahead: its traffic is about 27% faster than that of other members of the oecd club of mostly rich countries. Of the 20 fastest cities in the world, 19 are in America.It is not that American roads are better in and of themselves. Rather, speed is a testament to America’s love affair with both suburbia and smaller towns that feel suburban. Compared with those in other oecd countries, American cities are 24% less populous, cover 72% more area and have 67% more large roads. All this enables drivers to zip around. New York, the country’s densest city, is an outlier, as anyone who has sat in its gridlock knows. But most of American suburbia more closely resembles Wichita, Kansas, and Greensboro, North Carolina, where drivers rarely face jams.Driving speed shrinks distance. One fashionable concept among urban planners these days is the “15-minute city”, the goal of building neighbourhoods that let people get to work, school and recreation within 15 minutes by foot or bike. Many Americans may simply fail to see the need for this innovation, for they already live in 15-minute cities, so long, that is, as they get around by car. Most of the essentials—groceries, school, restaurants, parks, doctors and more—are a quick drive away for suburbanites.The car’s ubiquity has another rarely appreciated benefit. A recent study by Lucas Conwell of Yale University and colleagues examined urban regions in America and Europe. They calculated “accessibility zones”, defined as the area from which city centres can be readily reached. Although European cities have better public transport, American cities are on the whole more accessible. Consider the size of accessibility zones 15-30 minutes from city centres. If using public transport, the average is 34 square kilometres in America versus 63 square kilometres in Europe. If using private cars, the difference is much starker: 1,160 square kilometres in America versus 430 square kilometres in Europe.Just as it is easier to get into American city centres, so it is easier to get out of them. Over time that has sapped vibrancy from their downtown cores as people flee offices at the end of the day for far-flung homes. However, there is a more positive way of looking at this phenomenon: it is precisely such accessibility that has put larger homes and quieter streets within reach for a remarkably wide cross-section of the country. In his analysis of the census from 2020, William Frey of the Brookings Institution, a think-tank, showed that suburbia has become far more diverse over the years. In 1990 roughly 20% of suburbanites were non-white. That rose to 30% in 2000 and 45% in 2020.Not that cars are a panacea. Owning or renting one costs plenty of money, and is an especially big burden for the working poor. It is therefore common to hear laments in American cities about the sorry state of mass transit. Yet this general perception, though widespread, is not entirely accurate. Even if primarily built for private cars, roads are a shared resource and can be viewed as the “tracks” for buses. In their study Mr Conwell and his colleagues conclude that bus-based transportation in America is surprisingly effective: public-transit options between distant suburbia and city centres are roughly comparable in America and Europe. Although America could do more to improve its bus services within its urban cores, the crucial point is that cities designed for cars can also support mass transit.Honk for motorsToday some things are in flux. Younger Americans are driving less. More cities are building walkable neighbourhoods. New York may soon introduce congestion charging. It is, in short, possible to imagine an America that is less addicted to cars.At the same time, though, covid-19 has changed lifestyles in ways that may favour vehicles. People are venturing into offices less often. That has reduced demand and revenues for public transit while making roads less congested and thus more pleasant for drivers. If the rise of remote work enables families to drift ever deeper into suburbia, cars will become more indispensable. How will it all shake out? Given how ingrained cars are in American life, trunk-or-treating is probably here to stay. ■Read more from Free exchange, our column on economics:The Middle East’s economy is caught in the crossfire (Nov 2nd)Israel’s war economy is working—for the time being (Oct 26th)Do Amazon and Google lock out competition? (Oct 19th)For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter More