Monday 09/12/19

1. In MACRO NEWS, China exports falter and Greece cracks down on tax evasion
2. In TECH NEWS, China orders a clear-out of foreign PCs and software while Amazon and Facebook expand in New York
3. In RETAIL NEWS, UK shopper numbers fall and Tesco considers the sale of its Asia business
4. In OTHER NEWS, I show you how to improve your karaoke skills…

So China exports weaken and Greece tries to address rife tax evasion…

Sliding exports increase pressure on China (The Times, Callum Jones) cites the latest official state figures which show that Chinese exports have fallen for the fourth month in a row as the ongoing US-China trade war continues to bite. Shipments overall fell by 1.1% in November, but dropped by 23% to the US over the same time period. Although Trump disappointed investors by saying last week that it was possible that a trade deal wouldn’t be hammered out until after next year’s presidential election, he went on to say that current talks were going “very well”. As things stand, Trump has threatened to impose tariffs of 15% on an additional $160bn-worth of Chinese products – with a particular focus mobile phones, laptops, games consoles and toys. * SO WHAT? * Although Trump said in the past that trade wars are “good, and easy to win”, they have been damaging for both sides. I would have thought that Trump will be trying to find a way to get some kind of deal done in a reasonable time frame because if he doesn’t, tariffs will have time to filter down to prices to the consumer in the run-up to the presidential election next

year – and that’s not going to be universally popular with voters. The negotiations continue…

Greece goes digital in crackdown on rampant tax evasion (Daily Telegraph, Tom Rees) heralds a bold move by the new regime which says that Greeks will be hit by a big fine if they don’t spend at least 30% of their income electronically. If they don’t, they will be hit by a 22% fine on the difference. The government has projected that it will be able to raise over €500m per annum via this initiative in the world’s biggest shadow economy. * SO WHAT? * Tax evasion is (and has been for a very long time) rife in Greece. Many workers are paid in cash and the country also has one of the lowest rates of internet usage in the EU at 72%, meaning that some will find it difficult to meet the 30% threshold, even though they will be able to use debit cards, credit cards and ecommerce for their transactions. Tax evasion was estimated in 2016 to cost Greece up to €16bn every year via VAT or income tax fraud – so it will be interesting to see what happens. Surely, everyone will just under-report their earnings, no? It’ll be interesting to see how this goes – but if the government can get its people to actually pay the taxes that they are supposed to, then that would be a start. New PM Kyriakos Mitsotakis is simultaneously trying to cut taxes to workers and businesses, so I guess what he is taking with one hand he is trying to give with the other.

China orders an IT crackdown and Amazon and Facebook sign up to New York office space…

In Beijing orders state offices to replace foreign PCs and software (Financial Times, Yuan Yang and Nian Liu) we see that Beijing has sent a directive to all government offices and public institutions to take out all non-Chinese computer equipment and software within three years, echoing similar moves by the US and others. The directive specified that the tech swaps to domestic equivalents should take place to the following timetable: 30% in 2020, 50% in 2021 and 20% in 2022, hence the policy’s nickname of “3-5-2” (perhaps snappier than 30-50-20??). This is all part of a plan for government agencies and critical infrastructure to use “secure and controllable” tech, as per the Cyber Security Law of 2017. * SO WHAT? * This will be a big blow to the likes of HP, Dell and Microsoft who generate, according to Jefferies analysts, around $150bn of revenues per year from China – although it has to be said that the lion’s share of this is from private companies, not state entities. Having said that, many say that it will be difficult for local alternatives to replace what’s currently on offer but I guess that the incentive to change that has just got one hell of a lot bigger. Local operating systems like Kylin OS, are pretty limited and it’s also trickier than you’d

think to define “domestically made” as Lenovo, for instance, is Chinese-0wned and assembles a lot of its products in China, but its processing chips are made by Intel and its hard drives by Samsung. You do wonder what the longer-term implications will be, however, and whether the directive will spread to the private sector. Can you imagine the nightmare of transferring over all those excel spreadsheets en masse?? There must be a business opportunity there…

Amazon leases new Manhattan office space, less than a year after HQ2 pullout (Wall Street Journal, Keiko Morris) heralds a big move by tech giants Amazon and Facebook, who have signed up for new office space in New York City less than a year after Amazon abandoned much-hyped plans to build its second major HQ there (a project known as “HQ2”). Amazon has signed a new lease for 335,000 square feet and Facebook is in talks to lease almost double that nearby. * SO WHAT? * This is a particularly interesting move by Amazon considering that there are no special tax credits or inducements involved. The company was offered up to $3bn in tax incentives to create up to 25,000 new jobs in the “HQ2” project, which it subsequently abandoned. Tech, advertising and media companies have taken a big share of Manhattan office leasing space this year, according to real estate services firm Newmark Group. Given that the average annual tech sector professionals earn way over $100,000 a year, their influx is expected to boost jobs in real estate, restaurant and personal services (e.g. dog walkers, fitness trainers etc.) sectors.

UK shoppers numbers weaken and Tesco considers selling its Asian business…

Rainy November adds to high street gloom as shopper numbers fall (The Guardian, Jasper Jolly) cites the latest figures from data company Springboard which says that the number of high street visitors fell by 4.3% last month versus November 2018. This is twice as big a fall as that experienced at retail parks, who are trying to stem the decline by doing things like adding more restaurants to their spaces. Traditional retailers with actual shops continue to suffer, although the British Retail Consortium published figures last week that showed a small uptick in sales. Fun fact: online retail sales made up 19.2% of all retail sales in October 2019, according to the Office for National statistics – and it continues to rise.

Tesco mulls sale of Asian empire for up to $9bn (The Times, Callum Jones, Ashley Armstrong) highlights the possibility of Tesco offloading its Thai and Malaysian

businesses “following inbound interest” although the company reiterated it was only in the early stages. To give you an idea of the scale of a potential sale, J Sainsbury and Wm Morrison are valued at about £4.9bn each. * SO WHAT? * If a sale did go ahead, it would signal the latest retreat from its international business as it has withdrawn from the US, South Korea and Japan in the last ten years. Having said that, it has been operating for about twenty years in Thailand via its ownership of the Lotus chain of hypermarkets and convenience stores and Tesco execs recently expressed hopes for expansion. Having said that, there is always a price for everything so this may yet prove to be outgoing (as in, he is leaving – not that he’s a fun guy 😁) chief exec Dave Lewis’ most lucrative disposal yet. FWIW, I tend to think that overseas businesses of UK supermarkets tend to over-promise and under-deliver and get disposed of at some point down the line as supermarkets are always a competitive area pretty much wherever you go. If Tesco DID sell up, though, what would it do with the money? I think it should invest in making its domestic business more compelling as $9bn is a decent chunk of change but I’m sure investors will whinge on and appeal for share buybacks. Maybe a bit of both, perhaps, to keep everyone happy?

And finally, in other news…

We are well and truly in the midst of office Christmas party season at the moment, so I thought I’d try to help you by giving you the official low-down in How to improve your singing at karaoke with a deceivingly simple trick (SoraNews24, Eli Pang https://tinyurl.com/v5qrfvf). This is advice from NHK (Japan’s equivalent of the BBC) so you know it’s going to be good 😜