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The World
Chinese police question employees at Bain’s Shanghai office: Chinese police have visited the Shanghai offices of Bain & Company and questioned employees at the US management consulting group, in the latest case of heightened scrutiny of foreign businesses in China as tensions between Beijing and Washington rise. Six people familiar with the situation said Chinese police had made a surprise visit two weeks ago. Police took away computers and phones but did not detain any team members, according to two people briefed on the incident. Three of the people said police made more than one visit to the offices in the Chinese financial center. (Financial Times)
Taiwan's annual military drills this year take into account China's recent war games and focus on breaking a blockade, the defense ministry said, as a senior security official said Taiwan now had a "Five Eyes" intelligence link. Taiwan's defense ministry said the "Han Kuang" exercises would be split into two parts - tabletop drills from May 15 to 19, and forces mobilized from July 24 to 28 in live-fire exercises. The focus will be on combat forces "preservation" and "maritime interception", it said. (Reuters)
South Korea and the U.S. reached an agreement under which Seoul will not develop nuclear weapons in exchange for gaining a greater voice on a potential American nuclear response to a North Korean attack. Nuclear weapons would still remain under U.S. control and the Biden administration is not planning to deploy any weapons to the Korean peninsula. (Wall Street Journal)
South Korea, US to share nuclear planning to deter North Korean threat. (Reuters)
North Korean nuclear attack would result in 'end' of regime: Biden. (Nikkei Asia Review)
China to send special envoy to Ukraine after Xi Jinping holds phone call with Volodymyr Zelensky: In the nearly hour-long phone call, Xi told Zelensky that “talks and negotiation” were the “only way out” of the war between Russia and Ukraine, which has already led to direct casualties of more than 350,000 soldiers in all. Xi stressed that China has always stood “on the side of peace”, according to Chinese state broadcaster CCTV. (South China Morning Post)
American Companies Risk Boycotts in China if Biden Bans TikTok: A majority of Chinese adults are paying attention to news about legislation that would ban TikTok in the United States unless the app is sold by its Chinese parent company. While U.S. legislators have argued that Chinese ownership of the app poses a national security risk, Chinese adults are suspicious of the U.S. government’s motives. When asked about these motives, respondents are more likely to cite America’s desire to constrain China than its concerns about data privacy or national security. Chinese adults also see U.S. bias against China as a potential driver. While enforcing a ban on TikTok would face steep hurdles, passing such legislation could still lead to significant backlash against U.S. brands from Chinese consumers: Nearly two-thirds (65%) said they would likely boycott U.S. tech companies in retaliation. (Morning Consult)
Disney Sues Ron DeSantis After Oversight Board Voids Theme-Park Agreements: The suit alleges violations of several provisions of the U.S. Constitution and names the five DeSantis-appointed board members and other officials. It says the board’s action Wednesday was the latest strike against the company. “This government action was patently retaliatory, patently antibusiness, and patently unconstitutional,” the complaint reads. “But the Governor and his allies have made clear they do not care and will not stop.” (Wall Street Journal)
An Oregon City Banned Natural Gas. The Gas Company Fought Back: A culture war over gas stoves in the US erupted earlier this year after a federal agency said a ban was on the table. At the local level, city and state-led efforts to restrict gas hookups in new construction sites have also been embroiled in conflict, with pushback from conservative lawmakers who decry government overreach. An early battleground is Eugene, Oregon, where an ordinance banning natural gas hookups in new low-rise construction was set to be the state’s first. That was, until allies of a Portland-based utility company launched a $1 million campaign to force a public vote undoing the legislation. What happens in the college town will be closely watched, as it could foreshadow tactics the fossil fuel industry may use to defeat other cities’ efforts to cut emissions. (City Lab)
Megaprojects have been growing larger globally and many of them have recently centered on the Arab Gulf Region. Construction software company 1Build estimates that before the end of the decade, the world will see the first construction megaproject with a cost estimation exceeding $1 trillion. Right now, there are several projects underway that exceed the size of $100 billion - despite the fact that $10 billion construction proposals were considered to be megaproject just some years ago. Out of all nine ongoing megaprojects identified by 1Build, International Construction Magazine and Construction Review to cost $100 billion or more, four were being built in Arab Gulf States. This includes the ambitious project of Neom City, actually a collection of futuristic towns and cities which are being built in Northwestern Saudi Arabia and are expected to house 450,000 people by 2026. One of the developments, The Line, has received the most attention for being planned as a completely enclosed city 170 km in length, 200 meters in width and 500 meters in height. (Statista)
Economy
SPACs Delivered Easy Money, but Now Companies Are Running Out: Businesses are burning through cash raised in SPAC deals with few ways to fill the gap. More than 100 companies, are running out of cash, according to a Wall Street Journal analysis of the companies’ cash and cash flow from operations data disclosed in regulatory filings. Many of these businesses were worth billions when they hit the market and drew in small investors excited at the prospects of space tourism, cryptocurrencies and electric cars. Companies that went public this way have since collectively lost more than $100 billion in market value. (Wall Street Journal)
Goldman says Chinese fund managers lack confidence, fear policy tightening amid slide in onshore stocks. Onshore money managers are worried about risks to growth from the drag of the property sector and the future path of income recovery: ‘Concerns on near-term policy tightening came up in almost all of our conversations with local clients,’ Goldman says. (South China Morning Post)
Samsung’s profit plunged 95% amid weak memory chip demand. (CNBC)
First Republic Bank is in a fight for its survival. The past few weeks have been brutal for the San Francisco-based lender. Now, some analysts say a collapse of the bank is imminent. “It’s becoming clearer each day” that First Republic is “toast,” said Don Bilson at Gordon Haskett, in a note Wednesday. “The only question that really needs to be answered is whether the [Federal Deposit Insurance Corporation] moves in before the weekend or during the weekend, which is when it usually does its thing.” The bank reported on Monday that its total deposits fell 41% in the first quarter, sending its stock to record lows. Shares fell by nearly 30% on Wednesday after plunging by 49% on Tuesday. The stock’s trading was halted numerous times on Tuesday and Wednesday as its rapid decline triggered volatility-triggered timeouts by the New York Stock Exchange. (CNN)
Miami’s Luxury Rent Surge Means Your Money Goes Half as Far. Renting luxury space in Miami, Dubai and Singapore has gotten a lot more expensive in the past three years. In 2019, it was possible to rent a 4,430-square-foot prime apartment in Miami for $2,000 a week. By the end of 2022, the same amount of money would get you 2,200 square feet, or about 50% less space. (Bloomberg)
NYC Leisure, Hotel Revenue on Pace to Exceed Pre-Pandemic Levels: In the first three quarters of the year that ended in February, taxable sales in the leisure and hospitality industries grew by 52.2% compared with the year earlier. (City Lab)
Small cities in the Midwest topped The Wall Street Journal/Realtor[dot]com Emerging Housing Markets Index in 1Q23, a sign that buyer demand for affordable homes remains robust even as activity in the broader market slows. Lafayette, Ind., led the index for the second consecutive quarter, followed by Bloomington, Ill.; Elkhart, Ind.; Lebanon, Pa., and Fort Wayne, Ind. The index identifies the top metro areas for home buyers seeking an appreciating housing market, a strong local economy and appealing lifestyle amenities. (Wall Street Journal)
Technology
PricewaterhouseCoopers LLP plans to invest $1 billion in generative artificial intelligence technology in its U.S. operations over the next three years, working with Microsoft Corp. and ChatGPT-maker OpenAI to automate aspects of its tax, audit and consulting services. The accounting and consulting giant said the multiyear investment includes funding to recruit more AI workers and train existing staff in AI capabilities, while targeting AI software makers for potential acquisitions. For PwC, the goal isn’t only to develop and embed generative AI into its own technology stack and client-services platforms, but also advising other companies on how best to use generative AI, while helping them build those tools. (Wall Street Journal)
Harvey, which builds generative AI tools for law firms, raised a $21M Series A led by Sequoia with participation from the OpenAI Startup Fund and others. (Reuters)
Britain’s top competition regulator moved to block Microsoft’s acquisition of video game publisher Activision Blizzard. The measure marks a major blow for the U.S. tech giant, as it seeks to convince authorities that the deal will benefit competition. Microsoft said it plans to appeal the decision. The U.K. Competition and Markets Authority said it opposed the deal as it raises competition concerns in the nascent cloud gaming market. (CNBC)
Without Activision, Microsoft would be left with few comparable acquisition opportunities. Outside of China, just a handful of game companies have multibillion-dollar valuations and large portfolios, such as Electronic Arts Inc., Take-Two Interactive Software Inc. and Ubisoft Entertainment SA. Microsoft would likely face similar regulatory hurdles if it tried to acquire any of them. Microsoft could seek out smaller acquisition targets, analysts said, though that might not provide the large portfolio of hit games it needs to thrive in cloud gaming. If the Activision deal collapses, it would “push back a broader adoption of cloud gaming by a few years, but it would be a delay, not a cancellation,” said Joost van Dreunen, who teaches the business of videogames at New York University’s Stern School of Business. “I don’t think Microsoft is going to give up easily on that.” (Wall Street Journal)
Meta Platforms reported 1Q23 results after the close that blew away expectations, while the company also raised its forecast for the current quarter and lowered its expense forecast. The Facebook and Instagram parent company saw shares surge as much as 11%, to their highest level since January 2022, in after-hours trading. Meta, which has touted 2023 as its "Year of Efficiency" said in the release that it has "substantially completed" its 2022 layoffs, though it will continue to conduct layoffs this year. (Yahoo! Finance)
DraftKings Inc. is planning to launch its own streaming video service, the latest evidence that sports betting and media are converging. The service is expected to be free and supported by advertising, people with knowledge of the matter said. The shows will be videos of podcasts the company sponsors and are expected to debut in coming weeks. (Bloomberg)
How drug companies are using ChatGPT: Biotech companies are using artificial intelligence (AI) text-generation engines such as ChatGPT for drug discovery. The chatbots provide a way for scientists to interact with their other AI and machine-learning tools, making data more accessible and interactive. Some companies are training large language models on biological data (rather than text gleaned from the Internet) to suggest sequences for proteins that might make good drug targets. “The same methods that allow ChatGPT to write sentences could potentially provide the perfect solution for new molecule design,” says computational chemist Lurong Pan. (Nature)
Live Event, 5 pm ET: “Can ChatGPT diagnose me?” How large language models will transform clinical care. (Stanford University)
Smart Links
Amazon has decided to shutter its health-focused Halo division. (The Verge)
Maryland pushes first-of-its-kind bill to promote alternatives to animals in biomedical research. (STAT News)
Senators unveil bipartisan legislation to ban kids under 13 from joining social media platforms. (CNN)
Tough Times for Australian Wine as Exports to UK and US Tumble. (Bloomberg)