The Fortune Global Forum wrapped up this morning in Guangzhou. You can read full coverage of the last four days here. I leave China with two big takeaways:
First, there is remarkable cutting-edge innovation happening here, and Western businesses ignore it at their peril. Whether it’s Alibaba Chairman Jack Ma’s $15 billion investment in R&D, Tencent CEO Pony Ma’s commitment to developing artificial intelligence, Haier Group CEO Zhang Ruimin’s innovative management methods and investment in the Internet of Things, or the interesting products of the five start-ups that won Fortune’s first China Innovation Awards, there are things happening here that are at the very forefront of business development. China may have built its economy by copying the West, but it is now vying for leadership in a number of key areas.
Second, government is helping drive that innovation. This is the part of the equation that is hardest for Americans to get our heads around. We tend to see government as a drag on business innovation. And even in China, if you look at the state-owned enterprises that still control the majority of economic activity, the government’s heavy hand is clearly retarding change.
But government leaders, like those in Guangzhou, now recognize that the future is being created by innovative startups, not by state-owned enterprises, and they are giving those start-ups money, help and attention. One of the most impressive moments of the conference came Thursday night, when drone company eHang, with the encouragement and support of the Guangzhou government, sent more than 1000 brightly lit drones into the sky over the city for a spectacular, computer coordinated light show, celebrating both Guangzhou and the Fortune Global Forum.
Chinese innovation has two big things going for it, said Zhou Wei, a former Kleiner Perkins partner who now runs his own VC firm in China. “The first is government, which wants to help startups. The second is 1.4 billion consumers, who want to try new things. Together, they create the world’s largest laboratory for learning.”
More news below – and enjoy the weekend.
• Stocks Surge on Brexit Deal
Global stocks rallied after the EU and U.K. agreed a compromise wording on their divorce settlement that should allow talks on future trading arrangements to start early in the new year (barring any last-minute dramas at next week’s EU summit). The biggest danger to the agreement is revolt from the U.K. Conservative Party’s right wing, which is upset about the concessions made on money and court jurisdictions. A lengthy transition/implementation phase, during which time the U.K. will still have something close to full access to the Single Market, now looks likelier. The cliff edge has receded from view, accordingly.
• ‘Basel 4’ Rules Cut U.S. Banks a Break
The U.S. achieved a notable victory in the arcane world of international banking regulation. The Basel Committee on Banking Supervision agreed new rules on capital that will affect largely European banks, and give everyone more time to implement stricter rules on calculating risk in their trading books (a key demand from Wall Street). While it seems optimistic to believe that the next financial crisis will be stopped in Basel, the agreement does at least remove a significant source of regulatory risk for the sector.
FT, metered access
There was more evidence that the creation of futures contracts on Bitcoin will be the moment that allows significant numbers of people to lose significant amounts of money. Bitcoin prices on the Coinbase exchange, the most popular U.S. trading hub for virtual currencies, spiked some 40% to over $19,000, before retreating almost as sharply. Coinbase and other exchanges all struggled with the sheer volume of orders to be processed.
• GE Swings the Axe at Power Unit
General Electric said it will cut 12,000 jobs, about 4% of its global workforce, from its power division as it tries, once again, to deal with the issue of global overcapacity. These are tough times for makers of fossil fuel generators. While stagnation in developed markets is axiomatic, the emerging markets that had been expected to be an endless source of demand long into the future are also shifting ever more quickly to cleaner sources of energy.
Around the Water Cooler
• In 2017, They Don’t Let You Do It If You’re Famous Any More
Democratic Sen. Al Franken and Republican Rep. Trent Franks both stated their intention to resign amid sexual harassment allegations, both asserting their essential innocence and good conscience. They follow veteran Democrat John Conyers, who also resigned his house seat earlier this week. Franken made no attempt to hide his bitterness, contrasting his fate with that of President Donald Trump and Ray Moore, the Republicans’ candidate in next week’s special Senate election in Alabama.
• It Wasn’t Broke, But Caterpillar Fixed It All the Same
United Industries LLC, a Caterpillar unit, admitted cheating customers by making unnecessary repairs to railcars and hiding evidence of its manipulations. While the fine and restitution payments of $25 million are small beer, it’s another unwelcome blow to Caterpillar’s reputation, which is also in ongoing talks with the IRS over its tax issues.
WSJ, subscription required
• LafargeHolcim ex-CEO Charged With Funding Terrorism in Syria
Eric Olsen, the former CEO of cement giant LafargeHolcim, was charged in France with funding terrorism in Syria, eight months after an internal investigation found it had paid money to various armed groups to keep a big Lafarge plant in Syria running. At least some of the money ended up with Islamic State. Current chairman Bruno Lafont was also interrogated by French authorities earlier this week.
• Oh Lord, Please Don’t Be Misunderstood
Pope Francis has approved a change to the wording of a line in the Lord’s Prayer, to make it clearer that it’s not God’s fault if we fall into temptation. The move, which revolves around St. Jerome’s 4th century translation into Latin of the ancient Greek ‘eisenenkes’, endorses a change already underway in the Catholic church in many countries. It also inevitably calls to mind old jokes about a former pontiff agreeing to adopt the line “Give us this day our daily Kellogg’s,” while informing the college of Cardinals that “Regrettably, this means giving up the General Mills account…”
Summaries by Geoffrey Smith; firstname.lastname@example.org