World

Club Med owner Fosun, one of China’s largest private-sector conglomerates, saw billions wiped off its value on Wednesday as jittery investors reacted to a media report that the group was under regulatory scrutiny.

There has been growing concern about the debts of Chinese companies, particularly after a run of high-profile defaults in the property sector last year that rippled through the wider economy.

Bloomberg News on Tuesday cited unnamed sources as saying that regulators, including China’s banking watchdog and the local commission overseeing state investments, have told large lenders and state-owned enterprises to closely examine their exposure to Fosun.

Shares in Fosun International Limited, the conglomerate’s flagship company, slid as much as 9.6 percent in Hong Kong to HK$4.41 on Wednesday, the lowest level since November 2012.

Fosun’s Chief Financial Officer Alex Gong rejected the Bloomberg report as “completely false”.

“Neither the China Banking and Insurance Regulatory Commission (CBIRC) nor the Shanghai Banking and Insurance Regulatory Commission have asked commercial banks to find out about Fosun’s financial exposure, and those institutions have not received any notice of this,” Gong told the South China Morning Post.

The public had a “one-sided interpretation” of Fosun’s recent reductions in shareholdings and divestments and failed to see that they were part of a long-term financial strategy, the Shanghai-based company added in a statement.

– Circus and football –

Co-founded by tycoon Guo Guangchang in 1992 during the heady days of China’s initial “reform and opening” period, Fosun started off in pharmaceuticals and real estate but has since built a sprawling business empire that includes tourism and finance. 

A prolific buyer of global assets, Fosun owns French brand Club Med and has a controlling stake in the fashion house Lanvin.

It owns English Premier League football club Wolverhampton Wanderers and has a major stake in Canadian circus producer Cirque du Soleil.

In 2020, Fosun struck a deal with Germany’s BioNTech to manufacture its coronavirus vaccine in China and later became its exclusive distributor to the Greater China region.

Chinese companies have faced growing scrutiny over their debt exposure, especially those in the property sector. 

Multiple construction giants, including Evergrande, have defaulted on debts and been forced into major restructuring.

Beijing has also launched regulatory investigations in multiple sectors, including education and technology businesses, clipping their growth.

In recent months China’s economy has been reeling from a debt crisis in its massive property sector, mortgage boycotts, as well as disruptions from coronavirus lockdowns in finance and manufacturing hubs.

Fosun faces as much as $8 billion in bond repayments through 2023, according to Bloomberg News.

The CBIRC’s request to banks to check their exposure to Fosun debt does not mean it wants lenders to change their financing, and the regulator’s move may not result in any action, Bloomberg reported.

The Beijing branch of the State-owned Assets Supervision and Administration Commission was also among the regulators who asked institutions it oversees for closer scrutiny regarding Fosun, the report added.

Fosun’s debt stood at 261 billion yuan ($37.7 billion) as of June 30, up from 237 billion yuan at the end of last year, according to an earnings report last month.

Moody’s last month downgraded Fosun, citing weak liquidity and a weakening portfolio amid asset sales.

South Korea has fined Google and Meta more than $71 million collectively for gathering users’ personal information without consent for tailored ads, regulators said Wednesday, the country’s highest-ever data protection fines.

Investigations into the two US tech giants found they had been “collecting and analysing” data on their users, and monitoring their use of websites and applications, the Personal Information Protection Commission said.

The data was used to “infer the users’ interests or used for customised online advertisements”, it said, adding that neither Google nor Meta had clearly informed South Korean users of this practice or obtained their consent in advance.

As a result, Google was fined 69.2 billion won ($49.7 million) and Meta 30.8 billion won ($22.1 million).

“It is the largest fine for the violation of the Personal Information Protection Act,” the commission said in a statement.

Regulators said the majority of the users in South Korea — 82 percent for Google and 98 percent for Meta — had unknowingly allowed them to collect data on their online use.

“It can be said that the possibility and the risk of infringement of the rights of the users are high,” the statement said.

Last year, South Korea fined Google nearly $180 million for abusing its dominance in the mobile operating systems and app markets, saying it was hampering market competition.

Giant US tech companies are regularly criticised for dominating markets by elbowing out rivals, with multiple governments globally seeking to rein them in.

The European Union has slammed Google with record antitrust penalties, and also gone after Apple and Microsoft.

Japan’s central bank on Wednesday conducted an operation often seen as a precursor to currency intervention, local media said, as the yen continues to crater against a strengthening dollar.

The financial daily Nikkei and other local media said the Bank of Japan (BoJ) carried out a “rate check”. A Bank spokesman contacted by AFP declined to comment.

A rate check involves asking market participants about their foreign exchange trading, said Toshikazu Horiuchi of IwaiCosmo Securities.

“Basically it’s a warning, which is the next best thing to an intervention when the exchange rate is fluctuating,” he told AFP.

The yen has tumbled from around 115 per dollar in March to lower than 140 in recent weeks, as the BoJ maintains its monetary easing policies despite sometimes sharp rate hikes elsewhere, including from the Federal Reserve, to tackle inflation.

In early Tokyo trade, a dollar fetched 144.94 yen, after worse-than-expected US inflation data raised the prospect of even steeper US rate hikes to tame prices.

The rate check reports saw the yen strengthen quickly, with the dollar touching a low of 143.53 within an hour.

Earlier Wednesday, Japanese government officials sought to calm the waters by insisting they were monitoring the currency swings and would not rule out any option to prevent further falls.

Masato Kanda, vice finance minister for international affairs, told reporters that the yen’s move was “rapid” and “concerning”.

“When a rate check is conducted, sometimes it evolves into an intervention, so that’s why the market reacts very sensitively,” Horiuchi said.

“But its actual impact hinges on whether an intervention is really possible.”

A weaker yen can help Japanese companies to sell products overseas, but the levels seen in recent weeks are starting to put pressure on households and businesses due to higher import prices.

Inflation more broadly has risen to seven-year highs in Japan, partly due to the impact of the war in Ukraine on energy prices, though it is still less severe than in many major economies.

Japan’s central bank has been in no hurry to shift course on its ultra-loose monetary policy, viewing the measures as necessary to achieve its long-standing goal of sustained two percent inflation.

The bank sees recent price increases as temporary, and linked to exceptional factors like the Ukraine conflict and pandemic-related supply chain issues.

Fresh off of recent legislative triumphs aimed at supporting US manufacturing, President Joe Biden is set for an upbeat appearance Wednesday at the first Detroit Auto Show since the pandemic.

After months of inaction in Congress, Biden capped the summer by signing into law major new investments in semiconductor production and combatting climate change, lending the US president’s Democratic Party some momentum heading into the November midterm elections.

But not far below the celebratory surface, the auto industry is grumbling over a change in the consumer EV tax credit policy that industry officials warn could slow the transition to emission-free vehicles.

At issue are sourcing requirements in the recently passed Inflation Reduction Act meant to prod automakers into using EV batteries produced in North America as well as critical materials sourced from North America or countries with which the United States has a free trade agreement.

The restrictions come as Washington seeks to wean its economic dependence on Russia and China, and as pandemic-induced shortages underscored the vulnerability of having far-flung supply chains.

But auto industry officials and EV experts worry the measure — which affects a consumer tax credit of up to $7,500 on EVs — will slow their adoption in the United States.

“You’re going to see a stalling in the rate of growth,” said John Eichberger, executive director of the Fuels Institute, a nonprofit research group which is funded by a range of energy and transportation companies but does not engage in policy advocacy.

– ‘Missed opportunity’ –

A self-professed “car guy,” Biden has made previous presidential visits to tour General Motors and Ford plants in Michigan — a key electoral swing state.

Biden’s appearance Wednesday at the Detroit Auto Show lends some shine to the revived event following a three-year pandemic hiatus.

Since the last show in 2019, Detroit’s “Big 3” — GM, Ford and Chrysler (now called Stellantis) — have announced tens of billions of dollars in EV investment and unveiled numerous new offerings.

Last Thursday, GM unveiled the Equinox EV, a model with a starting price of $30,000, less than half the average price of EVs now available in the market.

On the same day, Stellantis brand Jeep showed images of two new electric SUVs and confirmed that its all-electric SUV for Europe would launch in 2023. 

The arrival of EV versions of popular models like the Ford F-150 has meant that EV sales in the United States surged more than 66 percent in the second quarter compared with the period a year ago, according to Cox Automotive. 

EVs comprised 5.6 percent of the total US market, according to Cox.

Still, a meaningful transition to EVs from the internal combustion engine faces several challenges, including shortfalls of lithium and other key battery materials and doubts over consumer demand, in part because of lofty price tags — something the $7,500 tax credit aims to combat.

The Alliance for Automotive Innovation, a Washington trade group representing big automakers, highlighted fine print around the tax credit that it said would derail EV growth.

One of those is the requirement that automakers gradually increase minimum levels for choice materials through 2026.

The alliance praised tax credits in the bill for EV manufacturing plants, but said they were offset by the consumer provisions.

– ‘A bumpy road’ –

“Unfortunately, the EV tax credit requirements will make most vehicles immediately ineligible for the incentive,” said John Bozzella, president of the lobby group.

“That’s a missed opportunity at a crucial time and a change that will surprise and disappoint customers in the market for a new vehicle,” he added.

Alan Amici, chief executive of the Center for Automotive Research in Ann Arbor, Michigan, said the industry sees economic benefits to sourcing locally in light of the issues that surfaced during the pandemic.

But it takes time to adjust supply chains, he said.

“The industry needs to figure that out,” said Amici, adding that companies are studying the measure and hoped Washington officials might show flexibility in implementing the policy.

Eichberger cited analysis showing that, in certain years, only a few EV models would qualify for the credit under the standard.

He warned that a leveling off or decline in EV sales in the next couple of years could kill momentum for a transition that remains at an early stage.

“It’s going to be a bumpy road, and this is another bump,” Eichberger said.

France’s favourite condiment, Dijon mustard, is hard to find these days, with signs on supermarket shelves warning the lucky few who spot jars that they can only take one home.

A heatwave across the ocean in Canada, the world’s top mustard seed producer, is to blame for the drastic shortage that has dragged on for months in France.

Canada supplies around 80 percent of the mustard seeds used by French makers of the spicy condiment, the rest coming mostly from Burgundy, the region that surrounds Dijon.

But a drought slashed the Canadian harvest by half in 2021.

Now French mustard makers are aiming to boost production at home in Burgundy.

“It’s very important to increase that share so we can face weather risks that differ from one country to the other,” Luc Vandermaesen, president of the Burgundy Mustard Association, an industry group, told AFP.

“We can’t put all our eggs in one basket,” said Vandermaesen, who is also the chief executive of France’s third biggest mustard maker, Reine de Dijon (Queen of Dijon).

– Double the price –

The Dijon region has been famous for its mustard seeds since the Middle Ages, but production has been decimated by pests as chemicals used to kill them have been banned.

Output was divided by three between 2017 and 2021, falling from 12,000 tonnes to 4,000 tonnes.

In June, local producers were urged to more than double the area planted with mustard seeds to 10,000 hectares.

“The Canadian problems revived the importance of the Burgundy sector,” said Fabrice Genin, president of the Association of Mustard Seeds Producers of Burgundy.

As an incentive, mustard makers agreed to pay 2,000 euros ($2,008) per tonne for Burgundy seeds in 2023, up from 1,300 euros last year and more than double what they paid in 2021. 

The appeal appears to have worked, with 10,000 hectares planned for mustard seeds, said Jerome Gervais, a mustard expert at the chamber of agriculture in Burgundy’s Cote d’Or department. 

The number of seed producers jumped from 160 to more than 500, he added. 

“It’s more than hoped,” Gervais said.

– ‘Revenge’ –

Francois Detain, a farmer in Agencourt, gave up mustard seed production in 2019 after his fields were wrecked by a dry spring and an insect infestation.

But the price offered for mustard seeds allowed him to bring them back, even though Russia’s invasion of Ukraine has made fertilisers more expensive.

A drop in the prices of grains and oilseeds has also made mustard seeds more attractive.

“It’s sort of a revenge for us to be able to replant a local crop,” Detain said.

Shipping costs — which have soared due to supply chain bottlenecks since Covid pandemic lockdowns were lifted — have also given an edge to Burgundy seeds over those from Canada.

By next year, Burgundy should be producing 15,000 tonnes of mustard seeds, meeting 40 percent of the needs of mustard makers, Gervais said.

“(Store) shelves should be replenished in October,” Vandermaesen said. 

“The shortage will be completely over in early 2023. We are very confident for Christmas.”