fortune--2020-07-30--U.S. GDP falls by a historic 32.9% as the pandemic ravages businesses and forces millions out of wor

U.S. GDP falls by a historic 32.9% as the pandemic ravages businesses and forces millions out of work

The coronavirus outbreak has hit the U.S. economy harder and faster than any event in the history of modern economic records.
That grim point was made official on Thursday when the U.S. Bureau of Economic Analysis announced that second quarter real GDP—from April to June—declined by 32.9% from the preceding period. It’s the largest single quarterly decline on record for data going back to 1947 and represents more than $1 trillion in economic output wiped out by the coronavirus pandemic. The figure comes in at three times worse than the previous record in 1958 when the economy saw a 10% quarterly drop.
No matter how you look at it, it’s a sum that’s likely to have huge implications in U.S. political circles with Election Day just over three months away.
That 32.9% decline follows a 5% decline in the first quarter, which only included the first few weeks of the pandemic.
The good news? Some economists believe the worst is over, and that the economy has already recovered some of the losses detailed in today’s report. Goldman Sachs projects third-quarter GDP will jump a record 25%, as the economy benefits from those states that were able to reopen.
Mark Zandi, Moody’s Analytics chief economist, believes the recession ended in May, and that we’ve since moved into recovery. Labor data backs that up. The jobless rate has fallen from its 14.7% peak in April to 11.1% in June. And state unemployment rolls are down from its record peak of 24.9 million in the week ending May 9 to 16.2 million as of July 11.
But third quarter GDP growth could be threatened by soaring COVID-19 cases in the South, West, and Midwest. Florida, a hot bed for the virus, led the nation in unemployment claims last week, another sign the virus could pull the economy backwards.
“The intensification of the virus is doing significant economic damage. Sales are reversing … business people are being more cautious,” Zandi said.
And Zandi believes that if Congress allows the extra $600 unemployment benefits to expire without an extension, it could hamper consumer spending and push the economy into a dreaded double-dip recession.


fortune--2020-07-30--Health experts on how to run errands safely during the coronavirus

Amazon ’ s second-quarter earnings results just showed why the online retail giant is soaring during COVID-19

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These days, it’s not your wallet you need to be worried about leaving at home—it’s your mask and hand sanitizer. Experts say the coronavirus spreads best in situations of close, person-to-person interactions, not unlike those that happen in stores. Now running a simple errand takes a lot more thought and planning. For consumers, browsing through a sales rack or examining an apple in the produce aisle comes with a whole new set of considerations.
But the reality is we all have to leave the house at some point. To help you get through your next snack run, Fortune asked public health and medical experts for their tips on safely running errands when things have to get done.
Their responses have been edited for length and clarity.
Dr. Norman Beatty, professor at the University of Florida College of Medicine: “We are in a pandemic with a virus that is primarily spread from person to person. When I’m deciding to go to the store for my family, I ask myself: How essential is this errand? Having four kids myself with pets at home, our family has undoubtedly needed to stock up on supplies and food as the pandemic has pressed on. We have started to shop more in bulk and plan our meals over one- to two-week periods to avoid going to the store too often. We also leave our kids at home and will plan trips later in the evening when I get home from work.
“The surfaces of your delivered groceries could potentially be contaminated by the virus. However, we’re still learning about what happens to the virus when it lands on a surface. One study has shown that the virus remains on cardboard for 24 hours and even 72 hours on plastic and stainless steel. Recently another study has shown that the virus is not detectable 72 hours after synthetic saliva containing the coronavirus was placed on various library materials, such as hardcover and paperback books, and even a DVD case.
“I would consider using an alcohol-based wipe on the objects that you may touch with your hands within a 72-hour period, like a cereal box or a can of soup. I would also wash your hands after handling and putting away your delivered goods, and give your groceries time to “quarantine” on their own, as it seems after 72 hours the virus would no longer be a threat.
“Is getting a haircut an essential errand? Well I thought to myself that it was not, and I told my son that we could just “buzz it,” but he was not having that idea. In his rebellion, he let his hair continue to grow, but when he started looking like Cousin Itt from The Addams Family, I knew it was time! He won that battle, and we went to go get a fresh cut. While we were at it, all the kids got haircuts. I did call the barbershop ahead of time to make sure they were enforcing best practices for preventing infection and that others were required to wear a face covering (including the barber) prior to going.
“Deeming what is essential and how to handle these errands is something to discuss between you and your family, but trying to minimize your errands will help avoid a potential exposure that may not have been necessary.”
Dr. Hugh Mighty, dean of Howard University’s College of Medicine: “Masks and distancing count. Prior to shopping, I would recommend making a list of the items that are needed. If public transportation is a must, then leave distance between you and the next person as much as possible. Wear your mask continuously. It is difficult to map the movement of others, so be patient when it seems many people are in a particular space, such as the fruit and vegetable area.
“If possible, use the same grocery store or merchants where you know which aisles contain which items, so that you can easily get in and out. When checking out, keep the distance of six feet or more between yourself and the person in front of you. Clean your hands when entering and leaving the store. Avoid touching your face until you have cleaned your hands. After putting items away at home, wash your hands.”
Dr. Robert Johnson, dean of the Rutgers New Jersey Medical School: “Here in New Jersey things have gotten quite a bit better, so it’s not so much of a problem. We’re not really afraid to go out anymore. My wife and I are both in our seventies, and we were having everything delivered in the beginning.
“I noticed that the supermarket I go to now has more things that are wrapped, especially in the produce areas. I buy a lot of brussels sprouts, and the stores have gone from brussels sprouts out on the table to now brussels sprouts in packaging, and that’s at least made me feel better. Take advantage of that. Now, I realized that I don’t know what was going on when they were being wrapped, but at least it gives me a little bit more security.
“It’s cherry season now, and we make sure we’re washing everything thoroughly. The next thing is to worry about the public coming in. You rely on the store to make sure that everyone who goes into the facility is properly masked, but then there’s the issue of people picking up items and putting them back. I don’t know if there’s any way around it.”
Nicolette Louissaint, executive director of Healthcare Ready in Washington, D.C.: “My parents are Caribbean, and they prefer to be able to pick their produce. It’s been really interesting having conversations with my mom about using Instacart to shop for things like yellow yam and green bananas. She says things like, “Your father can just go and make sure we get the good avocados,” so I haven’t been able to convince them.
“One thing that I’ve tried to remember even for myself is that once I pick up a product, I take it. I’m doing more of a visual examination. If you can, it’s good to bring wipes, but I think a lot of supermarkets have been great about providing disinfectant wipes and disinfecting grocery carts.
“When you’re loading up groceries into your car, just be mindful that it’s going from the cart to the car to your home. Make sure that before anything, you’re first cleaning your hands. When I get in the house, I’m taking off my shoes, and then I’m washing my hands first before I remove my facial covering. Then I’ll wash my hands again, and then unload everything. I always wipe down my groceries before I put them away.”


fortune--2020-07-30--The Big Tech hearing was a good day for democracy

This is the web version of Data Sheet, Fortune’s daily newsletter on the top tech news. To get it delivered daily to your in-box, sign up here.
Let’s talk first about video backgrounds. I liked Sundar Pichai’s the best by far. It was all smooth-credenza sleek, with a few for-show books and that funky chevron-patterned modern artwork on the wall. Jeff Bezos’s book case was nice. Mark Zuckerberg’s boring backdrop explained a man hellbent on domination, not a design aesthetic. Tim Cook’s almost equally boring choice was shocking only because Apple is easily more design-focused than Google, Amazon, or Facebook.
Oh, wait, you came here for analysis about the hearing, not its imagery.
I get that. Little surprised. I actually thought it was a good day for democracy, if not cordiality. Congressional investigators have shown they can dig up dirt on the behemoths that likely will be grist for more focused examiners at the Justice Department, the Federal Trade Commission, and in Brussels. But if mergers are to be undone or giants are to be punished for abusing their concentrated power, then Congress will need to write new antitrust laws. (I’d vote for them passing comprehensive immigration reform and universal health care first.) The president’s hollow, shallow, and meaningless threat to deal with Big Tech through an executive order can easily be ignored.
Why a good day for democracy? Because in the United States, no company is above the law, and no CEO is too rich or powerful to be condescended to by the people’s representatives. Some are better informed than others, of course. But that’s broadly true for the country too. It is a rare day when Pichai, Bezos, Zuckerberg, or Cook are summarily cut off before they’ve had a chance to finish speaking. My preference would be for civility, but rough treatment is probably a good thing for these guys from time to time.
So what was accomplished? The American people—and anyone with an Internet connection—got to see for themselves why elected officials believe Google, Amazon, Facebook, and Apple abuse their power. (And those companies got in their constitutionally guaranteed PR talking points about the good they do for humanity.)
***
A reader who’s a real killjoy but who also is right emailed to ask if we would correct Aaron’s clever subject line the other day, “The Zoom where it happens,” referring to Wednesday’s hearings. In fact, the witnesses appeared via Cisco’s Webex platform, not Zoom. [I’ll switch to: Everyone knows it’s Webex–Aaron]
***
Speaking of corrections, Lo Toney, the new Brainstorm Tech outside co-chair, graciously informs me I’m neither the first person, nor, he assumes, the last, to incorrectly write the name of his investment firm, Plexo Capital. I wrote “Plaxo,” which is the name of an early online-address book company that Comcast bought and ultimately shut down. Sorry, Lo.
Adam Lashinsky
@adamlashinsky
adam.lashinsky@fortune.com
This edition of Data Sheet was curated by Aaron Pressman.
NEWSWORTHY
Baseline. The middle of a hearing being watched by every tech reporter in the country is a good time to release not-great news. Snap used the opportunity to release its first-ever diversity report. The company's employees are just 16% women, including 7% of the tech team leadership. Black and Latino workers make up 4.1% and 6.8% of the workforce.
Anybody might have found it but his whisper came to me. NASA successfully launched the Perseverance rover on its journey to Mars. The rover and its helicopter drone, dubbed Ingenuity, are slated to arrive at the red planet on Feb. 18, 2021. Seventh-grader Alexander Mather, who won the contest to name the rover, and 11th-grader Vaneeza Rupani, who named the helicopter, were on site for the launch.
Tonight there's gonna be a jailbreak. Former Uber self-driving boss Anthony Levandowski could find himself in the pokey for a spell. After Levandowski pleaded guilty to stealing information from his previous employer, Alphabet's Waymo, prosecutors on Wednesday asked for a 27-month prison sentence plus restitution of $756,500. Levandowski's lawyers countered with 12 months of home confinement and a $95,000 fine.
Busting outta here. On Wall Street, the tech earnings news was almost as busy as the headlines from Capitol Hill. Qualcomm's revenue was unchanged from a year ago at $4.9 billion (after excluding a huge one-time payment from Apple last year), but the mobile chipmaker also announced a patent agreement with Huawei, which should enhance future revenue. Qualcomm's stock price, previously up just 5% in 2020, jumped 11% in pre-market trading on Thursday. At PayPal, the volume of payments on the company's platforms jumped 29% to $222 billion, the highest ever, and revenue increased 22% to $5.3 billion. Shares of PayPal, already up 71% in 2020, rose 3% in pre-market trading. And tax software developer Vertex raised $400 million in an initial public offering and its shares closed 29% higher on Wednesday.
Wonders never cease. I know Robert included a link yesterday, but QUIBI GOT 10 EMMY NOMINATIONS, which is more than ESPN, Showtime, National Geographic, CNN, TBS, Bravo, Nickelodeon, or USA. Let no one ever say again that Kberg has lost his mojo, at least with Hollywood's Emmy voters. Speaking of struggling streaming services, ViacomCBS says it's going to add a ton more shows to its CBS All Access service and change its name next year. I know Quibi is taken, but how about LonBi, for "long bites"?
FOOD FOR THOUGHT
Arguably no city on Earth has embraced futurism and new technology as deeply as Singapore. Writer and Singapore native Jerrine Tan explores the dark side of this strategy that favors growth over preservation in an essay for Wired.
Last year, Singapore opened the snaking Lornie Road Highway. Erecting its eight lanes required clearing vast forested areas as well as the Bukit Brown cemetery, which housed thousands of grave sites of early migrants, and possibly the bodies of victims of the Japanese Occupation. It had been placed on the World Monuments Watch list, and the United Nations special rapporteur for cultural rights had demanded it be preserved, to no avail. The old National Library, which served as an aid station for the British during the Japanese invasion, was also demolished to make way for a tunnel that would save commuters five minutes. Visiting home last December, I found that a beloved park near where I grew up had been butchered—one side of the hill carved open, the lily pond full of fish filled in. New expressway, I was told. As a foreigner, Gibson intimated that the absence of the past in Singapore incited psychic pain. As a citizen, watching a resolute obliteration of the past in progress, I am haunted by gaping fish.
IN CASE YOU MISSED IT
Can a seltzer-making company build a better device to help COVID patients breathe? SodaStream thinks so By Beth Kowitt
Expectations are low for Apple’s quarterly report By Aaron Pressman
Apple and Samsung have topped the smartphone market for 9 years. Now there’s a new leader By Eamon Barrett
‘An absolute necessity:’ Why this expert says China desperately needs a digital currency By Veta Chan
To recharge America’s job market, build a green electric grid By Saul Griffith and Alex Laskey
Joe Biden wants to end the era of big companies paying nothing in taxes By Rey Mashayekhi
Is gender diversity good for business? Another study makes the case By Claire Zillman and Emma Hinchliffe
(Some of these stories require a subscription to access. Thank you for supporting our journalism.)
BEFORE YOU GO
If you have never read Ray Bradbury's classic sci-fi story "A Sound of Thunder," you have surely witnessed its influence. In the story (spoiler alert), a person travels to the distant past and accidentally kills a butterfly, which then significantly alters events in the present time. The so-called butterfly effect has been a staple of the genre ever since. But scientists using an IBM quantum computer to simulate time travel say there is no butterfly effect. Damaged quantum bits sent to the past return unharmed. Okay, I'm ready to go dinosaur hunting.
Aaron Pressman
@ampressman
aaron.pressman@fortune.com


fortune--2020-07-30--The ‘Wall of Moms’ movement is spreading across the U.S.

This is the web version of the Broadsheet, Fortune’s daily newsletter for and about the world’s most powerful women. To get it delivered daily to your in-box, sign up here.
Good morning, Broadsheet readers! Congresswomen grill Big Tech CEOs, a new VC fund wants to back products for seniors, and activists are extending the ‘Wall of Moms.’ Have a terrific Thursday.
– More bricks in the wall. Have you been following Portland’s ‘Wall of Moms’ movement? A lot of people have been, it seems—the New York Times reports that new Wall of Moms collectives are starting to spring up in a number of other cities.
The group—which isn’t afraid to lean into the inevitable mom jokes, with protests signs that read, “Schedule: Bath time, Bed time, Fight fascists, Defend Black lives, Repeat”—nevertheless has a deadly serious agenda: amplifying and attempting to protect their fellow anti-racism protesters. Their very, well, momliness also makes them a rebuke to people who might otherwise try to write off protesters as violent troublemakers—and a very effective symbol. Activist Julianne Jackson told the NYT, “When you see a mom get tear-gassed, and they’re very clearly labeled a mom, they’re not starting trouble, they’re wearing high-waisted pants and trying to live their life — when you see that, it’s an incredible sight.”
Of course, implicit here is that most of the Wall of Moms members are white women. The group is cognizant that those racial dynamics play into how they’re perceived, noting that they’ve been able to capture attention—see this newsletter, for example!—in ways protest groups led by Black women have not. The group’s online tool for starting a Wall of Moms chapter, “stresses that groups should reach out to local Black Lives Matter and racial justice organizations,” reports the Times. “Wall of Moms members are directed to take cues from local activists: to not speak at protests unless they’re asked, and to donate any funds raised to Black-led organizations.”
And crucially, the story makes another importantly point, one that must not get lost in the chuckles over mom jeans and clever slogans: activism by mothers—and specifically Black mothers—is nothing new. The NYT calls out the Mothers of the Movement, Mothers Against Police Brutality, Mothers/Men Against Senseless Killings as some of the groups organized and led by Black moms. So, while it’s wonderful to see the Wall of Moms—many of whom are first-time protesters—join the fight, let’s not forget who started it.
As Jennifer Kristiansen, a Portland Wall of Moms member, tells Times: “Black moms are leading this. Moms didn’t just show up a couple nights ago. Black moms have always been there.”
Kristen Bellstrom
kristen.bellstrom@fortune.com
@kayelbee
Today’s Broadsheet was curated by Emma Hinchliffe.
ALSO IN THE HEADLINES
- Tech it out. In yesterday's Congressional hearing, members of Congress grilled Big Tech CEOs. Notable questioning came from Rep. Lucy McBath, who asked Jeff Bezos about Amazon's policies that she said threatened the livelihood of a bookseller; Rep. Pramila Jayapal, a strong critic of Amazon; and Rep. Val Demings, who called Google's breadth of user data "staggering." Washington Post
- Veepstakes. A group of Joe Biden's supporters are reportedly waging a "shadow campaign" to stop Biden from choosing Sen. Kamala Harris as his VP. Some of the senator's opponents have a familiar complaint: that Harris is "too ambitious" and would only be focused on becoming president. (We'd love to see a list of all the unambitious politicians!) CNBC
-Bailing out babies. Yesterday, the House passed a pair of bills that would provide a total of $220 billion over 10 years to bail out child care providers, who've been decimated by the pandemic. While the GOP-led Senate is unlikely to pass them, HuffPost reports that "there are signs that the party is coming around to the idea that child care is absolutely essential to a functioning economy." Huffington Post
- 40 over 40. Abby Levy, a former SVP at SoulCycle, has teamed up with 85-year-old veteran venture capitalist Alan Patricof for Primetime Partners, a new fund that will invest in companies related to aging and the needs of senior citizens. The pair also aim to back founders over the age of 40. Fortune
MOVERS AND SHAKERS: Teresa Sebastian, CEO of the Dominion Asset Group, joins the board of Juul. Telemundo promoted Mónica Gil to EVP, chief administrative and marketing officer, and Ana Siegel to EVP, general counsel. Fidelity Investments hired Wendy John as head of global diversity and inclusion. XPO Logistics hired LaQuenta Jacobs as its first-ever chief diversity officer. Annabel Chang is Waymo's new head of state policy and government affairs.
IN CASE YOU MISSED IT
- Abortion decision. Mexico's Supreme Court yesterday rejected a bid to decriminalize abortion. The case came from the state of Veracruz; abortion is legal in only two out of 32 Mexican states. BBC
- Page-turners. Oprah Winfrey is the patron saint of book clubs, and some Black women are following in her footsteps—with groups that cater more directly to readers of color. The rapper Noname started her book club last year: New York Times
- Hindsight in 2020. Some white women who voted for President Trump in 2016 now regret that decision. "I really failed my fellow American citizens,” says Trump voter Claudia Luckenbach-Boman. Another adds: "“I just want to apologize to the world." Guardian
ON MY RADAR
Alanis Morissette and Liz Phair talk songwriting during an apocalypse and rock-star self-care L.A. Times
Gisèle Halimi, trailblazing French feminist MP and lawyer, dies aged 93 Guardian
Netflix adds Moesha and six other classic Black sitcoms to its library LA Times
PARTING WORDS
"When in doubt, rely on hope."
-Michelle Obama, on the first episode of her new podcast


fortune--2020-07-30--U.S. CEOs now see a double-dip recession as more likely than a V-shaped recovery

White House economic adviser Larry Kudlow declared Sunday that the U.S. economy was experiencing a V-shaped recovery. But that bullish view is not shared by American chief executive officers.
The Conference Board provided Fortune an exclusive look at its survey of global CEOs and C-suite executives. Among the U.S. CEOs, 42% foresee a U-shaped recovery—that is, a more moderate rebound—while 26% expect the dreaded L-shaped recovery, and 23% a W-shaped recovery, or a double-dip recession. Only 9% of U.S. CEOs predict a V-shaped recovery, or when an economy rebounds nearly as quickly as it contracted.
But the rest of the world is a bit less pessimistic, finds the Conference Board’s survey of more than 1,300 CEOs around the world in June. In China, 64% of executives expect a V-shaped or U-shaped recovery, the two best possible outcomes. That number was 59% among European business heads, and 51% among U.S. CEOs.
Economic pessimism can translate into CEOs being less likely to pull the trigger on the business investments needed to drive the economy out of this crisis and generate growth within their firm.
Among U.S. CEOs, only 12% expect their company’s revenues to rebound before the end of 2020; 51% say in 2021, and 22% say 2022 or later. Only 17% of company chiefs in China and 14% in Europe foresee revenues recovering in 2022 or later.
Also in the survey, the U.S. has more companies that say the pandemic didn’t cause revenue to fall. Among CEOs in the U.S., 15% did not see their revenues decline during the crisis, compared to 10% in China and 8% in Europe.
How can it be that the U.S. is the region where both the highest share of firms were unaffected by the crisis, but that most corporate chiefs there now expect a recovery to drag out over multiple years? Many tech firms are actually benefiting from a pandemic that is speeding up digital transformations. And the U.S. is packed with these tech firms, like Adobe, which have seen their sales climb during the pandemic.
The Conference Board finds that 60% of European CEOs and 57% of their American counterparts say the accelerating digital transformation is the most important long-term impact resulting from the pandemic. That number is 40% among CEOs in China.
“CEOs and C-suite executives see opportunity to transform their organizations into digitally driven enterprises that will be leaner and more agile in a post-COVID-19 world. At the same time, they see a long-term strategic opportunity to cut costs,” wrote researchers at the Conference Board in the report.


fortune--2020-07-30--Expectations are low for Apple’s quarterly report

No one on Wall Street seems to think Apple had a good quarter, which could set the iPhone maker up to surprise analysts.
The COVID-19 pandemic has forced Apple to shutter many of its stores, sometimes more than once, and convinced consumers and businesses to cut back on their phone buying. Analysts expect Apple’s report on Thursday after the market closes will show that the company brought in $52.6 billion of revenue for the three months ending June 30, the company’s third fiscal quarter of 2020, and earnings per share of $2.07. That would represent about a 2% drop in sales and 5% decline in earnings.
The U.S. smartphone market contracted 25% overall in the last quarter, according to research firm Counterpoint. But in many parts of the world, consumer shopping has improved since the worst of the shutdowns in the early spring. And Apple has a robust e-commerce operation selling phones online.
“Our channel checks on Apple indicate weaker iPhone shipments for the quarter but not as weak as we had originally expected,” Goldman Sachs analyst Rod Hall wrote in a report last week. “We believe that Apple performed relatively well in the smartphone market due to its strong online presence aided by short term stimulus and the economic rebound from COVID-19 lows.”
Apple has also been expanding its services offerings like Apple TV+ and Apple News, which bring in monthly subscription fee revenue that can be steadier than sales of phones and other devices. Strong sales of services, which should grow 17% to 19% from a year ago, will bolster Apple, says analyst Angelo Zino at CFRA Research.
“Apple diversification [will] be in full display, which investors should reward,” Zino wrote in a research report previewing the quarterly results. “We think investors are taking more notice [of] Apple’s ability to continue to sustain elevated profitability amid a prolonged period of iPhone unit declines.”
Still, even if Apple posts better than expected results, that might not help its stock price, which has already been a strong performer this year. Apple shares closed at $380.26 on Wednesday and have gained 29% this year compared to a 16% gain for Dell and an 17% loss for Hewlett Packard. The S&P 500 Index is up just 1% on the year.
The big gain in 2020 prompted Goldman analyst Hall to call the rally in Apple’s stock price “unsustainable.” He recommends that investors avoid the stock and expects the price to drop $299 in 12 months.
Even other big tech companies that exceeded expectations have seen their stock prices fall, as investors instead focus on concerns about future problems resulting from the pandemic. Microsoft, for example, reported better sales and profits than Wall Street expected in its July 22 report, but its stock has declined 1% since.
The next big challenge ahead for Apple is the debut of the 2020 upgrades of the iPhone. The iPhone 12 is rumored to include as many as four different size models, all with 5G capabilities.
“Investors are increasingly bullish on the upside potential of the upcoming 5G iPhone launch,” Morgan Stanley analyst Katy Huberty wrote last week. “This is why we continue to view Apple as a top pick,” she added.
Apple CEO Tim Cook, who will be fresh off of his congressional testimony on Wednesday, doesn’t usually offer much information about future product releases. But analysts will try to glean as much they can from Cook and CFO Luca Maestri about the possibility that Apple may push back the usual September introduction of new iPhone by a month.
Either way, it shouldn’t matter much to the stock market, notes J.P. Morgan analyst Samik Chatterjee.
“We see limited headwinds to the investment thesis on a potential 1-month delay to iPhone launch timing, and expect investors will be using any weakness from further newsflow around launch timing as an opportunity to participate in the longer-term upside,” he wrote.


fortune--2020-07-30--Have U.S.-China relations reached the ‘point of no return’?

This is the web version of Eastworld, Fortune’s newsletter focused on business and technology in Asia. Subscribe here to get future editions in your inbox.
Wednesday’s New York Times‘ “The Daily” podcast features a fascinating discussion of recent Trump administration policies aimed at “confronting China.” It’s a conversation with Edward Wong, formerly the Times‘ Beijing bureau chief and now a Washington-based diplomatic correspondent, who elaborates on a July 25 analysis he co-wrote.
Both podcast and the analysis are worth careful study. They rehearse the by-now familiar narrative of a White House divided into warring China factions: one a “confrontational” camp led by trade advisor Peter Navarro, special trade representative Robert Lightheizer, and Secretary of State Mike Pompeo; and the other a “cooperative” camp led by Treasury Secretary Steven Mnuchin.
In Wong’s account, Trump himself vacillates between the two, depending on his mood, the latest headline, or his standing in the polls. The president may bash China at one moment, then say nice things about Chinese President Xi Jinping the next. But, as Wong tells it, Trump isn’t much interested in reports that Xi’s government might be herding Muslims in Xinjiang province into concentration camps or mobilizing to silence Hong Kong’s pro-democracy protesters. Rather, his main focus has been on closing a trade deal to boost Chinese purchases of U.S. agricultural products, which he sees as crucial to his re-election.
That depiction hews closely to the assessment offered by Trump’s former national security adviser John Bolton in his recent memoir, and also to accounts in Superpower Showdown, by Wall Street Journal reporters, and Schism, by former Washington Post trade correspondent Paul Blustein.
But Wong’s narrative brings us up to the present. He describes how the global pandemic, combined with Beijing’s new national security law in Hong Kong, shifted the balance of power inside the White House decisively in favor of the China hawks. He explains how Trump’s mishandling of the pandemic and the subsequent collapse in his poll numbers have emboldened advisers to recommend demonizing China as a campaign strategy.
“The pandemic really empowers the hawks in the administration to say, ‘we really have to go after China’,” Wong tells The Daily. “‘Look at how their misgovernance, how their political system led us to this point — led America into an economic crisis that’s been the worst since the Great Depression.’ And even the people in the cooperation camp are starting to change their minds a bit.”
What’s extraordinary about Wong’s account is the suggestion that Trump has now capitulated to the confrontationists, who seem intent on doing so much damage to the U.S.-China relationship in the final months before the election that no one will be able to repair it.
Wong sees U.S. closure of the Chinese embassy in Houston as the defining moment in a slash-and-burn campaign that has included revoking Hong Kong’s special trade status, imposing new visa restrictions on some Chinese students, and a proposal to block all 92 million members of the Chinese Communist Party and their family members from the U.S.
And things may be about to get even worse. On Wednesday, Mnuchin said the Treasury would advise Trump this week on what to do about TikTok, the Chinese-owned video-sharing app that has become hugely popular in the U.S. TikTok has come under fire in the U.S. for censoring videos about Xinjiang and Hong Kong. The U.S. Committee on Foreign Investment has raised questions about its parent Beijing-based ByteDance, one of the world’s most valuable startups. A group of U.S. senators, citing privacy and national security risks, is pressuring Trump to curtail or ban the app. A consortium of U.S. investors led by Sequoia and General Atlantic has urged ByteDance to sell them a majority stake in the company to allay U.S. government concerns, but the leading Senate critics insist on full Chinese divestment.
TikTok CEO Kevin Mayer, a former Disney executive, is scrambling to convince regulators that TikTok is an American business that operates independently from its Chinese owner. On Wednesday, he blasted Facebook CEO Mark Zuckerberg for warning in his testimony before Congress of the dangers of allowing Chinese companies to dominate the Internet. “Let’s focus our energies on fair and open competition in service of our consumers, rather than maligning attacks by our competitor—namely Facebook—disguised as patriotism and designed to put an end to our very presence in the U.S.,” Mayer said in a blog post.
But it probably didn’t help that, at a briefing for foreign media in Beijing yesterday, Chinese foreign ministry spokesman Wang Wenbin explicitly defended TikTok as a Chinese company.
This week’s Eastworld Spotlight conversation is with Lucy Gazamarian, co-chair of the blockchain committee of the FinTech Association of Hong Kong. She explains why the People’s Bank of China wants to become the first major central bank in the world to roll out a centralized digital currency.
More Eastworld news below.
Clay Chandler
clay.chandler@fortune.com
This edition of Eastworld was curated and produced by Grady McGregor. Reach him at grady.mcgregor@fortune.com.
Eastworld news
A new reality
Beijing’s new national security law in Hong Kong is showing its teeth. On Wednesday, Hong Kong police arrested four students, ranging from 16 to 21 years old, suspected of violating the new law. Police allege that the students advocated for Hong Kong independence via social media posts, an act that is punishable with lengthy prison sentences under the new law. Earlier this week, Hong Kong University fired prominent pro-democracy activist Benny Tai from his position as a tenured law professor at the university for “misconduct.” Tai said that the arrest marked the “end of academic freedom” in Hong Kong. And on Friday, the Hong Kong government barred 12 pro-democracy figures from running for the city's legislature in upcoming September elections. South China Morning Post
The NBA and China: Part 2
Last fall, Houston Rockets general manager Daryl Morey tweeted support for the Hong Kong protests, sending the NBA’s relationship with China into a tailspin that cost the league roughly $400 million in lost sponsorship and streaming revenue. A new ESPN investigation reveals that the league’s problems in China may run much deeper. The report found that coaches in NBA’s youth development programs in China have physically abused teenage athletes. Last week, the NBA also announced the league would sever ties with its training facility in Xinjiang, a region where the U.S. government has denounced China for its suppression of the ethnic Uyghur population. ESPN
A 1MDB Reckoning
On Tuesday, Malaysia's former prime minister Najib Razak was sentenced to 12 years in prison and fined nearly $50 million for his role in 1MDB, one of the world's largest-ever financial scandals. The verdict against Razak is only the first in a string of cases alleging that he siphoned hundreds of millions in state funds from his country's sovereign wealth fund. Led by mastermind Low Taek Jho, the 1MDB fund is accused of grafting over $4 billion in state funds for private use. Earlier this week, the U.S. bank Goldman Sachs agreed to pay the Malaysian government $3.9 billion in exchange for authorities dropping criminal charges for the bank's role in the alleged corruption. Fortune
A holy hack
A state-backed group of Chinese hackers have carried out a series of cyberattacks on the Vatican, breaching internal Catholic Church networks in the lead-up to planned talks between Beijing and the Vatican in September. In a new report, the cybersecurity firm Recorded Future claims hackers targeted the Vatican itself along with other missions in Hong Kong and Italy. Vatican and Chinese officials declined to comment on the report, but Recorded Future says the Chinese government is attempting to gather intelligence and gain an upper hand for the upcoming talks. New York Times
Unicorns no more
COVID-19 has put a damper on Southeast Asia’s once-booming startup ecosystem. From the region's darling unicorns—Singapore-based ride-hailer Grab, Indonesian multi-service platform Gojek—to smaller, ambitious startups, tech companies are struggling to stay afloat amid the pandemic. For the last few years, global investors have flocked to Southeast Asia's startup scene, hoping to grab a foothold in economies growing at double-digit annual rates. However, amid lockdowns and an uncertain economic atmosphere, investors have suddenly gone cold, leaving startups across the region in survival-mode. Nikkei Asian Review
Coronavirus by country
Vietnam
In May, Eastworld called Vietnam an “unheralded success story” of the pandemic. While the country remains the largest country in the world yet to record a coronavirus death, it is now dealing with its first local outbreak since the middle of April. In the last week, the eastern city of Danang has reported dozens of new COVID-19 cases and authorities have yet to trace the source of the outbreak. Vietnam’s economy and society have been open for much of the last few months, but the outbreak comes as a surprise since the country still has a ban on foreign nationals entering its borders as well as strict quarantine measures on Vietnamese nationals returning home. In Asia, Vietnam is just one example of COVID-19 poking new holes in previously successful pandemic responses. Hong Kong, South Korea, Japan and Australia are all among those battling to contain new waves of the virus. Fortune
Markets and movers
Li Auto Inc – The Chinese electric vehicle maker is set to raise $1.1 billion at a $10 billion valuation when it debuts on Nasdaq on Thursday. The company’s better-than-expected debut in New York comes amid heightened scrutiny of Chinese-listed firms on U.S. exchanges. Deal Street Asia
Tokyo Gas – Japan’s largest gas supplier is investing $657 million to take a 70% stake in U.S. shale gas operator Castleton Resources, Tokyo Gas announced on Wednesday. In a separate deal, Tokyo Gas announced that it will purchase a solar plant project in Texas from the renewable energy firm Hectate Energy for $467 million. Reuters
Qualcomm – The U.S. chip maker said it resolved a licensing dispute with Chinese tech giant Huawei, which has agreed to pay Qualcomm $1.8 billion as part of a multi-year licensing deal. The agreement will allow Huawei to use Qualcomm’s technology and cover Huawei’s previously unpaid fees. Wall Street Journal
Uber – The American ride-hailing giant reversed course on Thursday, announcing it will not go ahead with plans to shift its Asia base from Singapore to Hong Kong. The company said it will remain in Singapore until 2022, citing a lack of support for ride-hailing regulation reform from the Hong Kong government. Channel News Asia
Final figure
46%
As Huawei fights to survive globally, the Chinese tech giant is becoming increasingly dominant in its home market. In the second quarter of 2020, Huawei sold 46% of all new smartphones in the China, up from 39% in the first quarter, according to a new report from Counterpoint Research. The report also showed that Huawei now dominates the market for 5G-enabled phones, representing 60% of 5G device sales in the second quarter. In a separate report, the market research firm Canalys found that Huawei surpassed Samsung in the second quarter to become the world’s largest smartphone company based on shipments. Fortune


fortune--2020-07-30--Why J&J wants its workers back in the workplace as soon as that’s safe

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
I spent some time yesterday speaking with three chief human resource officers–Diane Gherson of IBM, Peter Fasolo of J&J and Michael Fraccaro of Mastercard–to further probe how the pandemic may change the future of work. They agreed the last five months have shown the power of working virtually, and have had some significant benefits—such as creating a more inclusive environment for decision-making, and bringing down silos.
But the lockdown also has exposed the shortcomings of work-from-home—chief among them is its effects on collaboration and innovation. Fasolo was the most pointed on this. He says Johnson & Johnson has made clear to employees that “when it is safe to do so, we want you to return to the workplace. We believe collaboration and innovation is fueled in large part by the connections of people.” Gherson referred to the “bank of trust we all build when we work together physically. It doesn’t have to be five days a week, but it sure needs to be once a month, or one day a week.”
All agreed that attention to employee well-being, heightened by the pandemic, will continue once it has passed. “The blurring of lines of work and home life–that’s a challenge,” said Fraccaro. “We are working through what we can do to help employees from physical and psychological and emotional standpoint.”
But the most interesting takeaway was their views on the effect the pandemic has had on the fundamental nature of the corporation, and the leadership needed to run it. “Hierarchies have flattened,” Gherson said. “Everyone has access to the same information, everyone is more digitally connected. You can’t micromanage anymore. You aren’t managing by walking around. You have to focus on outcomes, not inputs.” The result: “You have to, as a leader, focus on team collaboration.”
“The way that leaders will lead in the future absolutely is going to be different,” Fraccaro agreed. “During this period they have had to adapt to working virtually and continue motivating their workers. There also has been a change in their level of vulnerability. It has brought out a human side. For the most part leaders have stepped up.” In addition, “leaders will need to think about how they need to engage around other societal issues as well.”
More news below, including the tech leaders’ drubbing on Capitol Hill.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Tech grilling
Google and Apple's CEOs may also have been there, but members of Congress yesterday directed their antitrust-related fire mostly at Facebook and Amazon. Facebook was accused of cloning competitors' products, and Mark Zuckerberg agreed the firm has "certainly adapted features that others have led in." Jeff Bezos was tackled over Amazon's treatment of rivals and access to third-party-seller data. Fortune
Apple complaint
The makers of messaging and microblogging app Telegram have filed a formal antitrust complaint against Apple in the EU, arguing that Apple should allow users to download software from outside the App Store. Spotify and Rakuten have also previously complained to the European Commission about Apple's use of its "monopoly power" on iPhones and the like. Financial Times
Fed concern
The Federal Reserve sees the current economic downturn as the most severe "in our lifetime", per Chair Jerome Powell. That means leaving interest rates near zero and using all the Fed's tools for as long as necessary. Powell: "Even if the reopening goes well–and many, many people go back to work–it is still going to take a fairly long time for parts of the economy that involve lots of people getting together in close proximity…Those people are going to need support." Bloomberg
Huawei success
Huawei has overtaken Samsung as the world's biggest shipper of smartphones, on a quarterly basis (it already achieved the feat on a monthly basis earlier this year, twice.) Not bad considering U.S. sanctions have forced Huawei to forego Google services and fall back on its own Harmony operating system. Fortune
AROUND THE WATER COOLER
Samsung profits
Samsung may no longer be the world's smartphone champion, but its Q2 profits were up 23% due to strong demand for its memory chips. Samsung's explanation: "The Memory Business saw robust demand for cloud applications related to remote working and online education as the impact from COVID-19 continued, while demand for mobile was relatively weak." BBC
GE loss
GE lost around $2 billion in the June quarter, with revenues down 24% due to the aviation slump – airlines are delaying their orders with Boeing and Airbus, so GE's engine unit had to cut production and jobs. Nonetheless, GE and analyst had expected a far bigger quarterly loss. CEO Larry Culp: "Based on what we see today and the actions we’ve taken, sequential improvement in earnings and cash in the second half of the year is achievable." Wall Street Journal
Cash death
PayPal's record revenues ($5.26 billion for Q2) are, the company claims, a result of "the death of cash" becoming a real thing. CEO Dan Schulman: "Consumers no longer want to handle cash or any forms of payment that require physical touch at checkout." Fortune
Buffett and Friedman
What could Milton Friedman and Warren Buffett teach us about the current market exuberance that seems to defy the grim economic reality lying beneath? Fortune's Shawn Tully dives into that question with this conclusion: "The scenario that many on Wall Street are selling, that the S&P has plenty of room to rise from here, runs headlong into both the Buffett Indicator and the Friedman earnings-to-GDP metric. It gets an F on both tests…A reckoning is coming." Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-07-30--Global markets sink as investors brace for a GDP report that could be downright brutal

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning.
Ugliest ever. That’s the assessment for today’s Q2 GDP report, which lands at 8:30 a.m. ET. U.S. futures have been ticking lower and lower all morning. The Fed’s Jerome Powell warning yesterday that the “economic downturn is the most severe in our lifetimes” is weighing over global markets. That’s despite a few surprise earnings beats.
Let’s spin the globe, and see what’s moving markets.
Markets update
Asia
The major Asia indexes fell in afternoon trade with the Hang Seng down 0.7% .
fell in afternoon trade with the Hang Seng down . Samsung issued a big earnings beat on Thursday, forecasting a surge in demand for memory chips in the second half of the year.
issued a big on Thursday, forecasting a surge in demand for memory chips in the second half of the year. But it’s not all good news for the Korean tech giant. Huawei surpassed it as the world’s largest smartphone maker, thanks to its dominance in China.
Europe
An hour into trading, the European bourses were in the red with Germany’s DAX down 2% .
were in the red with Germany’s DAX down . It’s the busiest day of the year for European corporate results. Among the surprise beats are from AB InBev and Royal Dutch Shell . Shares in the brewer were up 0.7% ; the oil giant’s shares were down 0.1% 30 minutes into the trading session.
for European corporate results. Among the surprise beats are from and . Shares in the brewer were up ; the oil giant’s shares were down 30 minutes into the trading session. Airbus, like its chief rival Boeing, had mostly bad news for investors. It’s cutting back production on its workhorse A350 aircraft. It also warned restructuring costs will climb. Shares were down 2.6% at the open.
U.S.
Elsewhere
Gold is flat, a hair below $1,950 an ounce.
is flat, a hair below an ounce. The dollar is trading a tick higher.
is trading a tick higher. Crude is off slightly.
***
Fed up
It’s the virus, stupid.
That’s the key to economic recovery, Fed Chair Jerome Powell told us in his “worst in our lifetime” address yesterday. The Biden and Trump campaigns would be wise to adapt their strategies accordingly.
Don’t believe me. Cast your eyes on this chart (courtesy of the economists at Berenberg). The red team hasn’t quite grokked this point, you might say.
We’ve long known that a strong economy wins elections. And the only chance of that is flattening the curve and restoring consumer confidence that it’s safe to get out of the house and spend—and, that it’s safe for employers to hire back staff and re-invest in operations.
That’s easier said than done. As UBS economist Paul Donovan wrote in an investor note this morning, “the path of the economy depends on the path of fear of the virus.”
The Fed knows this. And so it’s telling the markets it’s committed to keeping companies solvent amid the downturn by keeping the credit taps flowing. The central bank’s biggest move this week was to extend by three months most of the emergency loan programs through year-end. That commitment sent markets higher yesterday.
The hard part will be boosting the fortunes of Main Street.
Despite yesterday’s rally, there are dark clouds on the horizon. One is the real fear of a double-dip recession, says Danielle DiMartino Booth, CEO and chief strategist of Quill Intelligence in Dallas, and a former advisor to the Dallas Fed.
He presents a scenario that’s getting more air play these days. And that is: Does “whatever it takes” mean the Fed will buy—gasp!—equities? You’ll hear this debate more and more in the coming weeks should the economic data—not to mention the COVID data—prove to be really bad, and if Washington fails to act on a meaningful round of stimulus.
“The reality of a double-dip recession,”DiMartino Booth says, “will push the Fed’s hand in the coming weeks ahead of the critical September meeting. Worsening economic data and heightened election uncertainty strengthens the case for the Fed to step in and buy stocks.”
Remember: in an election year, anything’s possible.
“Rather than negative interest rates,” she continues, “this preferred path is what the markets should price in if the stock market corrects in reaction to persistently high COVID-19 cases and rising fatalities.”
It’s important to note that the Fed doesn’t have the authority to straight-up buy stocks. It would need Congressional approval for that. But it has been buying corporate bond ETFs in the open market since March.
Incidentally, I joked with an analyst back then that a true stimulus plan would be to forego stimulus checks and instead give American families shares in S&P-tied ETFs.
I repeat, I was joking.
The Fed isn’t.
***
Have a nice day, everyone. I’ll see you here tomorrow.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.
Today's reads
Cash is dead. I'm old enough to remember when was "king." PayPal shares are climbing in pre-market trading today after the company announced after the bell on Wednesday a record top-line performance. As Fortune's Jeff John Roberts writes, "PayPal executives said society has reached an 'inflection point' when it comes to the 'death of cash,' and noted that 70% of consumers now fear for their health when it comes to paying in stores."
The great share-price disconnect. Warren Buffett and the late Milton Friedman have a preferred metric to value stocks. That measure is way out of whack, writes Fortune's Shawn Tully, and that doesn't bode well for investors.
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Market candy
$600
As in the great $600 question: Did the extra 600 bucks-per-week in unemployment benefits act as a disincentive that kept laid-off Americans from going out and finding more work? That's become a popular theory among fiscal hawks. Kate Davidson at the Wall Street Journal runs the numbers, and finds the theory doesn't quite add up.


fortune--2020-07-30--How parts of India inadvertently achieved herd immunity

Around 57% of people across parts of India’s financial hub of Mumbai have coronavirus antibodies, a July study found, indicating that the population may have inadvertently achieved the controversial ‘herd immunity’ protection from the coronavirus.
A survey of 6,936 people living in three Mumbai districts found that 57% of the people tested positive for coronavirus antibodies, the proteins produced by the body’s immune system to fight off disease and an indicator that a person has been infected by and recovered from COVID-19, the disease caused by the coronavirus.
The surveyed areas included some of India’s biggest slums, including one slum, Dharavi, where one million people reside and the population density is more than 10 times that of Manhattan.
According to the survey results, the death rate in the surveyed areas, where the population skews young, is between 0.05% and 0.1%. Mumbai’s overall death rate is currently around 5.6%, with over 110,000 confirmed cases and 6,180 recorded deaths.
“Mumbai’s slums may have reached herd immunity,” said Jayaprakash Muliyil, chairman of the Scientific Advisory Committee of India’s National Institute of Epidemiology.
Herd immunity is an approach to the coronavirus pandemic where, instead of instituting lockdowns and other restrictions to slow infections, authorities allow daily life to go on as normal, letting the disease spread. In theory, enough people will become infected, recover, and gain immunity that the spread will slow on its own and people who are not immune will be protected by the immunity of those who are.
University of Chicago researchers estimated in a paper published in May that achieving herd immunity from COVID-19 would require 67% of people to be immune to the disease. Mayo Clinic estimates 70% of the U.S. population will need to be immune for the U.S. to achieve herd immunity, which can also be achieved by vaccinating that proportion of a population.
The high level of immunity in the surveyed areas in Mumbai was not by design. People in Dharavi, for example, live in extremely close quarters where social distancing is often functionally impossible—families of eight live together in 100-square-foot rooms and up to 80 people share use of a single toilet.
Deliberate herd immunity is a controversial approach because it puts people most vulnerable to COVID-19—the elderly and immunocompromised—at a greater risk of death. The U.K. government considered the strategy in March, but changed tack when the country’s death toll started climbing, drawing public criticism.
Sweden chose to pursue the strategy, and it’s recorded a higher death rate than neighboring countries that imposed lockdowns. Around 14% of people in Sweden’s capital, Stockholm, had coronavirus antibodies in May, much lower than the share recorded by the Mumbai survey, which was conducted by municipal authorities and the Tata Institute of Fundamental Research, a public research university in Mumbai.
Coronavirus cases in India are currently growing at a faster rate than anywhere else in the world, but the slums where the survey was conducted have recorded steep drops in infection numbers in the last few weeks. Separate surveys of people in New Delhi and Mumbai recently have estimated that around a quarter of the total population of each city may have coronavirus antibodies.
Some parts of New York City may have reached levels of immunity similar to those recorded in the Mumbai survey. Over 68% of people at a clinic in one Queens neighborhood had coronavirus antibodies. It’s still unknown how those antibody levels will affect infection rates in the event of a second wave in New York.


fortune--2020-07-30--Apple and Samsung have topped the smartphone market for 9 years. Now there’s a new leader

China’s Huawei Technologies toppled Samsung in the second quarter to become the world’s largest smartphone company based on shipments, according to a report from Canalys, a market research firm. Huawei had already surpassed Samsung in monthly sales in April and June, but its Q2 results mark the first time in nine years that neither Apple nor Samsung have held the top spot.
“Our business has demonstrated exceptional resilience in these difficult times,” Huawei said in a statement. “Amidst a period of unprecedented global economic slowdown and challenges, we’ve continued to grow and further our leadership position by providing innovative products and experience to consumers.”
In fact, Huawei clinching the top spot has more to do with decline than growth. According to Canalys, Huawei shipped 55.8 million devices in the second quarter, down 5% from the same period last year. Samsung sales, however, plunged 30% over last year to 53.7 million units.
“If it wasn’t for COVID-19, it wouldn’t have happened. Huawei has taken full advantage of the Chinese economic recovery to reignite its smartphone business,” says Canalys Senior Analyst Ben Stanton. Huawei sales in China—the first global economy to enter post-pandemic recovery—increased 8% in Q2 while its international shipments dropped 27%.
Huawei is still facing major headwinds from the U.S. that have dampened the brand’s international sales. Since 2019, the Commerce Department has prevented Google from providing Android services to Huawei, forcing Huawei to ship models that run without Google apps.
The loss of Google has made Huawei smartphones less appealing in Europe and other international markets. Back home—where Google was never a factor—Huawei’s 8% growth actually bucked the national trend. China smartphone sales fell 17% year-on-year in the second quarter, according to market analysts Counterpoint, although sales did rise 9% quarter-on-quarter.
In the months from April to June, Huawei captured 46% of the China market—its highest share to date—and an even larger 60% of total 5G phone sales. Counterpoint says a third of all China’s smartphone sales in Q2 were 5G-enabled.
If the rest of the world is able to escape the worst days of the pandemic, the Chinese telecom manufacturer will likely struggle to maintain its position as global market leader. Apple’s 5G-enabled iPhone 12 is due for launch this year, which might pose a challenge to Huawei’s dominance, despite Huawei passing Apple as the world’s second largest smartphone supplier in 2019.
This article was updated to show Huawei shipped smartphones without Google apps. A previous version incorrectly said the phones ran on Harmony OS.


fortune--2020-07-30--‘An absolute necessity:’ Why this expert says China desperately needs a digital currency

China has been pushing forward its plans to launch a digital yuan, with the aim of becoming the first country in the world to offer a digital sovereign currency.
After launching trials of the Centralized Bank Digital Currency, or CBDC, in four Chinese cities—Shenzhen, Suzhou, Chengdu and Xiong’an—in May, China’s central bank, the People’s Bank of China, is now in talks with private companies to expand its test run. Major firms such as China’s largest ride-hailing company Didi Chuxing and food delivery giant Meituan Dianping are among the candidates to roll out the digital yuan on a large scale through their wide-reaching platforms.
“Trial needs to be underway,” said Lucy Gazamarian, an expert on mobile payments and co-chair of the blockchain committee of the FinTech Association of Hong Kong. Thorough testing of the digital currency is key, she says, because financial stability is at stake.
“You’re looking at rolling out a new digital currency, it’s a leap in innovation,” she said. “[I]t’s the first time we’re going to have money that we program to do things automatically; that has functionality.”
In an Eastworld Spotlight conversation with Fortune’s Clay Chandler, Gazmararian discusses Beijing’s digital yuan ambition and the challenges presented by the initiative, as well as the CBDC’s potential to elevate the renminbi to a reserve currency. The conversation below has been edited for length and clarity.
Fortune: What is DCEP and what has triggered the development of the Centralized Bank Digital Currency?
Lucy Gazararian: The DCEP, Digital Currency Electronic Payment, is China’s version of the CBDC. Many central banks have been looking at this for over five years. China was the first mover into this space [in 2013]. They’ve acknowledged themselves that it was the rise of Bitcoin that spurred a call to action to really take control of the money supply and different currencies that were coming into our world. That was a real trigger because central banks realized and appreciated that the technology that underpinned Bitcoin, for example, could be modified for the fiat world. Central banks have appreciated that this is an exceptional new innovation; that it’s a very exciting pool payments and payment systems [that has] the ability to really upgrade our payments infrastructure.
Tell us a bit about the trials in China.
It’s entirely reasonable that [Beijing] should be conducting pilot programs. You’re looking at rolling out a new digital currency, it’s a leap in innovation. It’s the first time we’re going to have money that we program to do things automatically; that has functionality. It’s natural that you [will] want to test that out very rigorously because you don’t want to roll out a digital currency that fails when you’re talking about financial stability of the whole country. But let’s not forget there are 680-plus cities in China. We’re talking about four [in the pilot], so it’s a way to go.
PBOC is taking a step back and looking at companies like DiDi. It got 90% of the ride-hailing business in China and has hundreds of millions of customers. Didi is an example of these Internet giants that China is so famous for—[such as] Alibaba and Tencent—that have incredible ecosystems that offers a whole range of products and services. You could order a taxi, get food delivery, send a parcel, book theatre tickets, go on a holiday, it’s all in one space, it’s a platform.
The trial needs to be underway. There’s a whole digital wallet integration that needs to be thought through…They are making sure they’re optimizing the functionality and ensuring integration.
Why is Beijing pushing for digital currency development? What can the government obtain from this?
It’s become, as China itself has said, a technical inevitability. It’s not about whether they should embark on this undertaking, it’s an absolute necessity. And it makes sense because look at our lives, increasingly we live our lives online. We have tech-enabled lives and are moving towards a digital economy; a digital economy which includes tokenization.
The new digital economy needs digital money. It needs fiat money in a digital format. Otherwise you’re having the threat of Bitcoin or Libra coins, or other coins that have the technology that can integrate into the new digital economy. So it’s an absolute necessity that China, as well as every other central bank, upgrades their currency.
When will we see a large-scale roll out of CBDC?
As I said earlier, we know about testing in four cities, and you know arguably there’s still 600 to go. Whether they’re gonna need to test it right across, or they will then just roll out, let’s wait and see. But we are expecting certainly phase one of this rollout to happen, I would say before the end of this year or certainly next year.
How will data be used by central banks and how will the central bank reassure people about the privacy of their data?
The data you are going to collect, there are two sides to it. On one side, the data that they’re going to collect, given they are going to be able to engage the complete economic activity of a country in realtime, that data will be recorded on a blockchain-type network, distributed ledger, we don’t know exactly. So the government will have access to all of that. On the [other] hand, it will enable the central bank to do their job more effectively. Because rather than having a lag in economic data, they’re monitoring all the spending, the transactions, money supply, inflation implications, all in realtime… Tracking where people go in the world, because CBDC will be available to Chinese as they do business in other countries. It’s almost a sort of a way to track an individual. So there are big alarming questions that need to be properly considered when it comes to privacy and anonymity.
The technology is there to enforce anonymity, but it’s a question of are they going to implement it? Is that something that they’re going to build into their currency? Time will only tell if different central banks come up with their versions of digital currency, as they say there is no one-size-fits-all, they’re all going to be different and likely to reflect the values and culture of their citizens. Are we just going to accept that all governments get to have this data like we’ve kind of accepted with tech giants like Facebook? No one has really done anything about it.
Could renminbi rise up as the world’s reserve currency through CBDC?
If [China] wants its currency to flow more freely outside of its own borders, it has the technological capability to do that. There’s so much trade happening in the Belt and Road [Initiative], 60-plus cities, and there is not a universal currency. The U.S. dollar is still the currency that needs to be translated, most huge transactions need to flow through the U.S. dollar. So there is a case for the CBDC to become a universal payment instrument in emerging countries as part of the Belt and Road, then [maybe] it could rise up as the world’s reserve currency for emerging countries.
We are [still] so early in this journey. At the end of the day, user adoption of any currency is going to take time. We need all these currencies to be developed and launched. It’s very difficult to say that a digital currency from China is going to be the new world reserve currency because the others have not launched yet. The U.S. dollar has dominated global trade since the end of World War II. It is so integral to our world economy, I don’t see that changing anytime soon.
The U.S. now has a digital dollar project; they are very aware of what is necessary. They know for a digital economy, you need a digital currency. So it’s a matter of time.
Does the pandemic in a way provide a kind of boost to the effort to move to a digital currency?
Absolutely. In the U.S., [House Speaker] Nancy Pelosi mentioned the digital dollar in her speech, and it was sadly tied to coronavirus, COVID-19. Suddenly, there was an absolute apparent use case. How do you get money immediately overnight into the hands of those that most need it? It is not by posting checks in the mail, it’s really not. If [people] had a digital wallet, they wouldn’t even need a bank account. They just need to use their smartphone and the Fed could theoretically directly deposit funds into their digital wallet. And that was so powerful.
I think for America, it was Libra and coronavirus that really triggered action [to develop CBDC]. And China, they’ve said it themselves, it was the threat of Bitcoin.
This story is part of Eastworld Spotlight, a series of conversations on matters of business, tech, and finance with executives, experts, entrepreneurs, and investors in Asia. Subscribe to Fortune’s Eastworld newsletter to get them in your inbox.


fortune--2020-07-31--Four ways health systems can start to address social disparities

U.S. pledges $ 2.1 billion for up to 600 doses of Sanofi , GlaxoSmithKline vaccine

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It’s always been a challenge for the health care system that much of what affects a person’s health happens outside the doctor’s office—and beyond the reach of even the most attentive physician.
Those hard-to-manage factors are many, from behavioral ones (a person’s eating, exercise habits) to socially-determined ones (like whether the individual has access to fresh, healthy food, a walkable neighborhood, or a safe home) to matters of mental health. And they can be costly, both in terms of their human toll and in terms of health care dollars that go towards managing chronic disease, which accounts for the vast majority of America’s health care spending.
“As a physician you might have the best hospital set-up, or healthcare set-up, or outpatient practice set-up, but if your patients are facing what seem to be these insurmountable social challenges sometimes it can be paralyzing,” said Kate Mascitti, an infectious disease specialist based in Bethlehem, Penn. with the St. Luke’s University Health Network. “How can I fix this diabetic foot ulcer infection if my patient weighs 400 pounds and they can’t afford their insulin, and they have no one to help care for them at home? It’s challenging.”
How can health systems better care for patients given these challenges and the social disparities that underlie many health problems? Mascitti, along with several other expert panelists speaking at a Fortune virtual event on what it takes to reinvent hospitals offered four starting points.
Measurement
How well do we measure health outside the hospital and the factors (or social determinants of health, as they’ve often called) that drive population health?
“We have an abundance of data. We have no agreement on which data set to use,” said Georges Benjamin, executive director of the American Public Health Association. “We could start with a small meaningful subset of data and grow it over time to make sure it’s uniform so we’re all looking at the same numbers and interpreting it the same way.”
Mascitti thinks more pointed data measurement on social determinants of health would make addressing them more of a focus for health systems: “Just shining a spotlight on it, making it a measure of quality—then I think people are able to focus on it, do research around it.”
Engaging the broader community
“In order to really improve the health and wellbeing of whole community, you have to engage a range of other actors who don’t necessarily see health as their primary level responsibility,” said Benjamin, who mentioned that includes school boards as well local business, housing, and transportation communities. He points to the number of school-age children who were unable to participate in virtual school this spring—something that experts say is a development and health-bearing issue—because they lack access to broadband internet. Finding solutions requires a partnership across multiple sectors.
To make such partnerships happen, he encourages health care providers to show up as “unanticipated messengers” to meetings and policy-making settings where they may not be expected to influence conversation and make health a focus for the broader community.
“If you really want to deal with lead exposure in kids, you have to show up at zoning hearings, at meetings of the real estate board. You have to show up to places where the law not being enforced,” said Benjamin.
Creative, out-of-the-hospital solutions
To provide free dental care, vision checks and eye glass fittings to kids who needed them, Mascitti’s employer—St. Luke’s University Health Network—sends mobile health vans to schools. During the COVID-19 outbreak as patients missed critical visits to their doctors for fear of catching the coronavirus, the system, like many others, turned to telemedicine. But, inspired by the success of its drive-through COVID testing operation, it also decided to offer drive-through vaccinations to ensure COVID concerns didn’t keep parents from immunizing their children, says Mascitti, who added that thinking more creatively about how to serve the population is key to addressing some of the out-of-the-hospital health challenges.
Building trust by better reflecting the communities serves
As the pandemic has made clear, it’s hard to deliver good, effective, and equal health care when the patient doesn’t trust the provider, the system, or science in general. Whether due to the day’s politics, historical wrongs and inequalities, or just the complicated, non-transparent ways of American health care, distrust in the system is often exacerbated by the fact that providers are often not representative of the populations they’re serving.
“Our nation has been struggling to increase the number of African-American and Hispanic physicians in our society. No matter what we do, the rug keeps getting pulled from under those efforts,” said Benjamin, who added that aside from prioritizing those initiatives, an effort should be made to train all physicians to be more “culturally competent.”
Kyu Rhee, chief health officer for IBM agreed. “This issue of communication and trust, cultural competency is so essential and foundational to everything in health,” he noted, adding that from his own experience as a physician, team members who reflect the community often play an important trust-brokering role.
Adrienne Kennedy, a board member of the National Alliance on Mental Illness (NAMI), explained the organization was very intentional about representation for that reason.
“We have young people speaking out about the emergence of their own mental health issues. We want to make sure they are culturally competent,” she said. “If they’re going to a Black or brown community, that they are Black or brown themselves with that kind of range of understanding [is important].”
She noted it’s also important to think about community representation when the health care system is devising solutions for populations. “It’s so important to have the lived experience voices involved in the mix,” she said. “What people will offer once they get engaged—this trust factor is so important.”


fortune--2020-07-31--Europe plunges into a deep recession as COVID-battered economies brace for a second wave

The euro area economy plunged into an unprecedented slump in the second quarter, putting it in a deep hole from which it may take years to fully recover.
Spain took the biggest hit, shrinking 18.5%, while French and Italian output also dropped by double digits. The 19-member region as a whole saw a 12.1% contraction. The declines in activity reflect the effect of strict quarantines measures on businesses and consumer spending, and a slump in tourism in some countries.
The health crisis was most severe in the region’s least economically resilient members, leaving them with little firepower to support households and businesses. That forced European Union leaders to overcome longstanding differences on joint borrowing and agree an historic €750 billion ($889 billion) rescue fund this month.
National governments have already stretched their budgets to deal with the crisis, and the European Central Bank launched a €1.35 trillion bond emergency program to contain the economic shock.
“I don’t think anybody really realistically should think that levels of GDP by the end of 2021 will be back at the pre-crisis levels,” Erik Nielsen, UniCredit Group chief economist, told Bloomberg TV’s Francine Lacqua and Tom Keene. “Monetary policy will keep the pedal to the metal.”
The euro was trading at $1.1853 as of 11:54 a.m. in Frankfurt, little changed on the day. It had earlier risen above $1.19.
Vulnerable Southern Europe
The ECB’s actions have particularly targeted southern Europe after bond yields in Italy spiked early in the crisis because of investor worries that huge health spending could cripple the the country’s already-weak finances.
While the economy’s second-quarter slump was less than in Spain or France, it’s in a particularly vulnerable position because of its debt burden and sluggish long-term growth.
Overall, the rebound in Europe is under threat from a surge in new outbreaks that’s emerging across the globe. Governments are reluctant to impose strict national lockdowns, but economies could suffer anyway if fear of infection alters consumer behavior, stops people going to stores, bars and restaurants.
That puts countries such as Italy, Spain and Greece—all of which have huge tourism sectors—under the spotlight. Spain’s already bad summer seasontook a turn for the worse last weekend when the U.K. announced that holidaymakers returning from the country would have to quarantine because of an uptick in coronavirus cases in some regions.
The other major risk is long-term damage to the labor market. Government support programs in Europe prevented unemployment from surging as it has in the U.S., but they may only be delaying rather than preventing devastating layoffs.
All eyes on the ECB
With the outlook so uncertain, economists expect the ECB to increase its bond-purchase program again before the end of the year to revive growth and bring inflation closer to its target of just under 2%. Data Friday showed euro-zone consumer prices grew 0.4% in July.
Euro-area unemployment is already slowly creeping higher, and job losses are mounting as companies across the continent respond to weak demand and a dramatically changed global backdrop, particularly for travel and tourism.
Airlines have announced thousands of job cuts, while France’s Airbus SEcould eliminate 11% of its global payroll. Its plans to reduce headcount in Spain — where unemployment is already high — sparked demonstrations earlier this month.
High frequency data and surveys show that activity has so far bounced back from its trough in April and May. The sustainability of that is in question, however, particularly amid growing concern about fresh virus outbreaks.
Germany, where the economy shrank 10% in the second quarter, has already sounded the alarm over rising infection rates.
“We observed a slight recovery in sentiment and certain soft indicators. So we can say in Europe we have the first signs of recovery,” ECB Governing Council member Yannis Stournaras said in a Bloomberg interview this week. “Still, the risks are on the downside.”


fortune--2020-07-31--One bright spot in U.S.-China relations? China’s enormous corn-buying spree

The U.S.-China relations are at a low point, but China on Thursday made its biggest-ever U.S. corn order, putting a small dent in the roughly $10 billion in agricultural purchases it owes the U.S. as part of the trade deal.
On Thursday, the U.S. Department of Agriculture reported its largest-ever daily corn selloff to China, recording that China had purchased 1.94 million tonnes of corn in a single day. It marked the third-largest one-day U.S. corn purchase from any country since 1977, overtaking China’s previous record purchase of 1.86 million tonnes, which it made two weeks ago.
China is on an American corn-buying spree at a time when China’s agricultural purchases from the U.S. could help smooth over what’s an otherwise rocky relationship between the two powers that are feuding over the coronavirus, human rights, and territorial claims in the South China Sea.
In January, the U.S. and China signed the Phase 1 trade deal, an agreement that sought to initiate an end the two-year-long trade war. As part of the deal, China agreed to purchase $36.6 billion in agricultural goods from the U.S. in 2020.
On July 28, the Peterson Institute for International Economics published a study indicating that through June, China lagged far behind in its crop-buying commitment. PIIE found that China had imported $8.7 billion worth of agricultural imports from the U.S., far below the roughly $18 billion it would have needed to stay on pace to meet its year-end target.
The United States Department of Agriculture did not specify how much China paid for its Thursday purchase; recent export prices peg the cost of 1.94 million tonnes of corn at nearly $300 million.
China’s recent corn splurges represent progress toward its 2020 goal, but the purchases may have as much to do with meeting domestic demand as they do with fulfilling the trade deal.
In China, domestic corn prices are climbing, a delayed effect of China’s 2016 decision to cut a farming subsidy program, the Wall Street Journal reports. That year, the Chinese government ended its price-guarantee program for corn farmers, which propped up the industry and allowed farmers to stockpile large quantities of corn.
China’s corn supply now appears to be running out just as demand for it is on the rise.
Beginning in 2018, an outbreak of African Swine Fever devastated China’s hog population, killing roughly half of all pigs. Now, hog stocks appear to be bouncing back. Chinese state media reports that Chinese farms have more than 5 million more pigs than they had at the beginning of the year. In total, Xinhua, a media outlet, estimates hog stocks in China are now at 81% of pre-swine fever levels. The increase in pigs means a rising demand for corn, which is used as feed.
In the U.S., China’s corn orders are what matters, regardless of the rationale. U.S. farmers, who represent a vital voting base for President Donald Trump and were hard hit by the trade war, are on the receiving end of those purchases. In that regard, China’s corn orders reflect well on Trump and his administration, even if he escalates his anti-China rhetoric elsewhere.


fortune--2020-07-31--Global markets power back as Big Tech drowns out the coronavirus and GDP gloom

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Happy Friday, Bull Sheeters. The U.S. futures look set to pop, closing out the week (and the month) on a high note. That’s thanks to the heroics of Big Tech.
Let’s check in on the action.
Markets update
Asia
The major indexes are mostly lower, with Japan’s Nikkei down more than 2% in afternoon trade.
down more than in afternoon trade. In Apple’s impressive earnings call yesterday it singled out stellar China results, with regional revenues topping $9.3 billion and record iPad sales.
and record iPad sales. Chinese electric vehicle start-up Li Auto made its Nasdaq debut yesterday and promptly soared 43%. Its biggest backers are TikTok owner Bytedance and ecommerce group Meituan Dianping.
Europe
The European bourses were in the green at the open—that’s despite a batch of rough GDP numbers .
were in the green at the open—that’s despite a batch of rough . The German economy , the engine of the euro zone, shrunk by 10.1% in Q2, the worst showing in half a century. That’s a quarter-over-quarter number, unlike the annualized measure preferred in the U.S.
, the engine of the euro zone, shrunk by in Q2, the worst showing in half a century. That’s a quarter-over-quarter number, unlike the annualized measure preferred in the U.S. In a surprise announcement, the U.K. government reimposed lockdown measures on Northern England, including the Greater Manchester area, as coronavirus cases there climb. It comes after new data shows England has had the highest COVID mortality rate in Europe.
U.S.
The U.S. futures point to a positive close-out to the week. The Nasdaq in particular looks set for a big rally after the Fab Four of tech— Google parent Alphabet, Amazon, Apple, and Facebook—posted knockout earnings in a quarter when much of the planet was confined to home.
point to a positive close-out to the week. The in particular looks set for a big rally after the Fab Four of tech— Google parent Alphabet, Amazon, Apple, and Facebook—posted knockout earnings in a quarter when much of the planet was confined to home. If only the U.S. economy was doing so well. A record GDP collapse and more lousy unemployment figures show an economy in deep trouble. Overwhelmingly, CEOs of American companies fear a double-dip recession ; you can forget talk of the V-shaped recovery .
and more lousy show an economy in deep trouble. Overwhelmingly, CEOs of American companies fear a ; you can forget talk of the . The worst economic data in anybody’s memory failed to move Congress into action. There’s increasing concern lawmakers will not reach a deal on a new stimulus package, which would include extending the expiring 600-buck unemployment benefits supplement.
Elsewhere
Gold is up. Again
is up. Again The dollar is down. Again.
is down. Again. Crude is ticking higher, with Brent trading above $43.50/barrel.
By the Numbers
19 straight. For the nineteenth consecutive time, weekly jobless claims came in yesterday above 1 million. It’s an incomprehensible streak with huge social costs. What’s particularly worrying is the tally over the past two weeks. The data is getting worse, not better—we’re four months into this pandemic crisis and more and more Americans are losing their jobs. No economist predicted it would get this bad. Yesterday’s official number of jobless claims was 1.43 million, confirming the rebound will be a painfully protracted one. “We’re expecting a longer and slower climb from the bottom unfortunately, and here the virus will dictate the terms,” Beth Ann Bovino, U.S. chief economist at S&P Global Ratings, told the Wall Street Journal. That will have huge implications for Election Day, just around the corner.
250 billion. Shares in Alphabet, Amazon, Apple, and Facebook soared in after-market trading, adding a cool $250 billion to their market caps, following knockout earnings reports after the bell yesterday. It seems like just yesterday—okay, it was Wednesday—that these very companies were defending themselves in front of House antitrust inquisitors. In the last quarter, the Big Four posted a combined $206 billion in revenues, adding a cumulative $29 billion to their bottom lines. They’re not just dominating the business world, they’ve become a force in the markets, accounting for, by one measure, nearly 40% of the S&P. Here’s another data point for you: Goldman Sachs has upped its 12-month price target on Amazon to $4,200 a share.
40%. What’s bigger than Big Tech? The Fed, you could argue. Its balance sheet, according to Bank of America, is approaching 40% of U.S. GDP. By year-end, the balance sheet is supposed to climb to nearly 50%. That’s a lot of corporate debt.
***
Postscript
In a few hours, I’ll be closing up Bull Sheet’s Licata news bureau and heading back up North—back to the Continent, as the Sicilians say.
This was the view this morning.
The view from Bull Sheet’s Licata news bureau. Original photo: Bernhard Warner.
I have to admit to writing parts of Bull Sheet this week in drippy swim trunks. I also read more than one analyst report on tech earnings and Fed policy under that left-leaning, shady tree there.
When we first got here two weeks ago, my first action was to step out onto the beach and take in the view. At which point a local sidled up to me and started to make small-talk. When he heard my accent, he inquired: “Americano?”
I nodded, and he proceeded to give me a history lesson. The stretch of beach we were admiring was the site of one of the most famous invasions of World War 2, he started. It’s true. Between the coast of Licata and Gela, just to the East of where we’ve been staying, is where the American Seventh Army came ashore in July, 1943.
All of you World War 2 buffs remember the rest: The Battle of Sicily went under the code name Operation Husky, one of the largest Allied invasions of the war. The Allied commanders chose this stretch of coastline as the topography would allow the Seventh Army, under the command of Lt. Gen. George S. Patton Jr., once it took command of the beach head, to drive quickly inland and roll towards Messina in the Northeast corner. The idea was the Brits, under Gen. Bernard “Monty” Montgomery, would come up from the South and also converge on Messina, squeezing the Germans and Italians into that corner.
The plan was going fairly smoothly until Patton pulled one of the most puzzling and controversial moves of the war. He ordered his troops instead to march on Palermo in the Northwest. It would be the equivalent of taking a major detour out of the way of your final destination. Here’s the military map to give you an idea. The objective is the upper right-hand corner: Messina. Patton went up, and then took a hard left. To Palermo.
It turns out, Patton’s battle instincts were largely correct. The Seventh Army quickly conquered Palermo with ease. Still, Allied commanders were furious. What’s that hot head doing way over in Palermo?!, they fumed. The conquest of Palermo set in motion a domino effect that knocked Mussolini from power, and the Italians out of the war.
Historians still debate the significance of Patton’s impetuous move. Those who study leadership dynamics also look closely at Patton’s Summer of ’43 in Sicily. Some times, hot heads get stuff done. Quickly. But if their actions go wrong…yikes.
We too will be heading to Messina. There will be detours. It’s Sicily.
Have a nice weekend, everyone.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
***
Correction: Yesterday’s Bull Sheet contained a small, but regrettable error. On second reference, I referred to Danielle DiMartino Booth as “he.” My sincere apologies.
Today's read
Just in time for hurricane season. The world's coastlines are in serious danger from climate change, and that could wipe 20% off global GDP over the coming decades. Which parts of the world are most vulnerable? The East coast of the United States and Northwest Europe, which includes the Southeast of England, Fortune's Katherine Dunn reports.
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Market candy
About those mystery seeds
You may have heard that thousands of Americans have received in the mail packets of seeds from a mysterious source, believed to be in China. The packages arrive unsolicited, and that's got federal officials alarmed. Fortune's Jeff John Roberts is on the case. He says all evidence points to it being part of an elaborate "brushing" scam. What's brushing?


fortune--2020-07-31--Don’t forget the climate crisis, CEOs say

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
The climate crisis has been crowded out in recent months by the health crisis, the economic crisis and the racial justice crisis. (Too many crises.) But needless to say, it hasn’t gone away. Fortune assembled a group of members of its CEO Initiative yesterday, led by Dow CEO Jim Fitterling and Nestle CEO Mark Schneider, to talk about strategies for addressing the problem.
The conversation was held under Chatham House rules, so I can’t report individual comments. What was striking to me about the conversation, though, is this: Until a dozen years ago, the climate change discussion was all about government policy. Indeed, in 2008, the U.S. had two presidential candidates–Barack Obama and John McCain–who both favored a national cap on carbon emissions. Business, at least in the U.S., was then fairly new to the conversation, having only recently been organized by leaders like GE CEO Jeff Immelt and Duke Power CEO Jim Rogers, under the auspices of USCAP. “If we are not at the table, we will be on the menu,” Rogers said, giving the defensive rationale for corporate engagement.
In yesterday’s discussion, however, government policy was barely discussed. The CEOs focused their efforts on what the private sector can do to meet the U.N.’s ambitious targets for reducing carbon emissions and to sharply reduce plastic waste. Meeting such goals would clearly be easier with coherent government policies. But as one CEO put it, solutions that require government policy “will lead us down a rabbit hole.” Today, business feels it must lead on climate–if only because government is not.
Separately, Fortune analytics released some new numbers on work-from-home yesterday, based on a survey of Americans in collaboration with SurveyMonkey. The takeaways:
46% of U.S. workers say they’ve been able to work remotely during the pandemic.
29% of remote workers say they feel less productive since the pandemic began, while only 24% say they feel more productive. The rest say they are “equally productive.”
41% of remote workers say they would choose to exclusively work from home this fall if the decision were up to them.
One person clearly benefitting from the work-from-home trend is Twilio CEO Jeff Lawson, whose stock has risen 150% since the start of the pandemic, giving the cloud-based communications company a $37 billion market value. Lawson told me yesterday that a survey conducted by Twilio found that “on average, (businesses) say their digital road maps were accelerated by five years during the crisis… The sentiment I’ve heard is: Last year, digital transformation was led by the CIO. This year, it is led by COVID-19.”
More news below. And if you would like to get Fortune Analytics on a regular basis, sign up for Fortune Premium here.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
U.S. GDP
The U.S. economy shrank by almost a third in the second quarter, when measured on an annualized basis. It was the biggest quarterly decline on record (i.e. since 1947.) Labor data suggests the U.S. is in a recovery now, but let's see how new surges of the coronavirus affect Q3's GDP growth. Fortune
European GDPs
France's GDP took a 13.8% hit in Q2 and Spain's contracted by 18.5%. (Those measures were on a quarter-on-quarter basis). ADM Investor Services chief economist Marc Ostwald: "All the growth in GDP seen in the 2010-2019 decade has been wiped out in five months." The French constriction industry was particularly hard-hit, and household spending fell by 11%. Associated Press
Facebook results
Facebook may be under scrutiny on multiple fronts (antitrust, content moderation) but in terms of results, it's doing just fine. Analysts expected $17.4 billion in Q2 revenues, and Facebook delivered $18.69 billion, representing an 11% year-on-year increase. Daily active users were up 15% to 2.47 billion. Analysts believe Instagram is a major contributor to Facebook's current success. Fortune
Li Auto
Li Auto raised $1.1 billion in a Nasdaq IPO yesterday. It's not the only Chinese electric-car maker to list in the U.S.–Nio did so a couple years ago, and Xpeng plans to follow later this year. The timing is curious given antipathy from Capitol Hill, where lawmakers want to boost accountability for Chinese firms floating on U.S. exchanges. Li Auto's own SEC filing concedes that the SEC cannot currently inspect its audits, and it may have to delist if those lawmakers get their way. Fortune
AROUND THE WATER COOLER
British Airways
British Airways parent IAG will raise almost $3.3 billion to shore up its finances, following a stunning 98% drop in passenger numbers during Q2. The company lost a record $1.62 billion during that quarter. IAG has already secured the support of Qatar Airways, its biggest shareholders, in its quest to get investors to give it more cash. Guardian
KLM cuts
The Dutch carrier KLM will cut 1,500 more jobs, after reporting a $1.8 billion operating loss for Q2. That means its 33,000-strong pre-pandemic workforce will be 20% smaller by 2022. KLM is half of Air France-KLM, which collectively has $16.85 billion in liquidity or credit lines to "weather the crisis," thanks to French and Dutch government bailouts. Reuters
COVID kids
Children under five who contract COVID-19 may show milder symptoms than many adults, but they appear to have higher concentrations of the novel coronavirus, according to researchers at Lurie Children's Hospital of Chicago and Northwestern University. However, the researchers did not test how contagious such kids are, so it's not clear what the implications are for day-care reopenings. Fortune
Big Tech
Jeffrey Sonnenfeld, the Lester Crown professor of leadership studies at Yale's School of Management, writes for Fortune that the tech CEOs who testified before Congress Wednesday were–somehow, given their platoons of attorneys and ample prep time–underprepared. "Each of the tech CEOs’ opening scripts celebrated patriotic, American Dream talking points featuring givebacks to smaller enterprises," he writes. "What they did not provide is any acknowledgement of genuine problems which followed from their success." Fortune
This edition of CEO Daily was edited by David Meyer.