It remains to be seen whether Democratic voters will embrace Mike Bloomberg now that he is officially a 2020 candidate. But his late entry should be welcome news to Chinese leaders.
The billionaire and former New York City mayor is likely the field’s most Beijing-friendly candidate. He's argued against the U.S.-China trade war, maintained investments in China, hosted a conference there and frequently speaks up on behalf of its regime. His approach has drawn criticism from conservatives — but it also represents a vulnerability in a Democratic race that has embraced a more confrontational posture toward the Chinese government.
It’s an issue Bloomberg is wrestling with in real time. Just last week, as he prepared to jump into the race, he canceled a planned appearance in Beijing at the New Economy Forum, a conference hosted by his company, Bloomberg LP, and attended by top Chinese officials.
He tapped former treasury secretary Hank Paulson to open the event in his stead. “My good friend Michael Bloomberg asked Henry Kissinger and me to represent him here today, because, as you all know, he's made a decision to serve his country,” Paulson said, name-checking the former Secretary of State who has long worked to promote ties between the United States and China.
Bloomberg’s view of China’s authoritarian government has elicited closer scrutiny since he began signaling an interest in a bid he’d sworn off earlier this year. In particular, he faced blowback for defending Chinese President Xi Jinping in a September interview with PBS’s “Firing Line.” “The Communist Party wants to stay in power in China, and they listen to the public,” Bloomberg said on the show. “Xi Jinping is not a dictator. He has to satisfy his constituents or he’s not going to survive.”
Pressed by host Margaret Hoover on whether he really believes Xi is not a dictator, Bloomberg emphasized his point. “No, he has a constituency to answer to,” Bloomberg said. “No government survives without the will of the majority of its people, okay? The Chinese Communist Party looks at Russia and they look for where the Communist Party is and they don’t find it anymore. And they don’t want that to happen. So, they really are responsive.” This is a stark contrast to the situation on the ground, where over a million Muslim Uighurs have been forced into detention camps and pro-democracy protests in Hong Kong face live rounds and tear gas.
The claim flies in the face of a spate of Chinese crackdowns, including the forcing of over a million Musliim Uighurs into detention camps and the use of live rounds and tear gas on pro-democracy protesters in Hong Kong.
The exchange prompted Washington Post columnist Josh Rogin to write that Bloomberg’s “record on China shows he is the wrong person to guide our country in confronting this historic challenge.”
Rogin went on to detail Bloomberg’s extensive financial interest in the country:
“Bloomberg LP doesn’t make money in China only by selling terminals. Through its massive Bloomberg Barclays Global Aggregate Bond Index, Bloomberg LP is helping finance Chinese companies by sending billions of U.S. investor dollars into the Chinese bond market.
This year, the index began a 20-month plan to support 364 Chinese firms by directing an estimated $150 billion into their bond offerings, including 159 controlled directly by the Chinese government. Bloomberg, along with other Wall Street firms, is effectively supporting the Chinese government’s efforts to resist the U.S. government’s economic pressure, while exposing American investors to increased risk.”
Rogin argued that there is nothing inherently wrong with Bloomberg's business activities in China — it is, after all, a common practice on Wall Street. “But if Bloomberg really believes what he says, his misreading of the Chinese government’s character and ambitions could be devastating for U.S. national security and foreign policy,” he wrote. “He would be advocating for a naive policy of engagement and wishful thinking that has already been tried and failed.”
Bloomberg’s accommodating approach to China has extended to his media company. Bloomberg News in 2013 killed news stories that could have angered Chinese leaders, the New York Times reported. The outlet’s top editor at the time denied the story.
As President Trump ramped up his trade war with Beijing last year, the former mayor called for another path forward. Speaking at Bloomberg’s New York headquarters at a conference co-hosted China General Chamber of Commerce USA, he said the U.S. and China must “find ways to work together. Other countries around the world, again, including China, are responding with their tariffs and we don’t need a trade war.”
The other Democratic contenders have staked out a range of positions on China. But the consensus in the field holds the U.S. needs to confront Chinese trading abuses. That view reflects popular opinion, which has turned heavily unfavorable toward China.
— Investors stay bullish, ignoring threats. WSJ's Ira Iosebashvili: "Investors are looking past weak data and trade snags that would have roiled markets just months ago, convinced that easing by central banks and a deal between the U.S. and China will keep stocks marching higher.
"In recent sessions, markets have shrugged off the biggest drop in U.S. industrial production in nearly a year and a half, a dismal fourth-quarter economic outlook from the Federal Reserve Bank of Atlanta, disappointing data from Europe and Asia and reports that the U.S. and China are unlikely to reach a trade deal before year-end. Investors will have a look at a batch of U.S. economic data this week, including reports on consumer confidence, new-home sales and durable-goods orders."
- More ammo for bulls: China says it will enforce IP protections. WSJ's Caitlin Ostroff: "Global stocks rose Monday after China said it would step up intellectual property protection and enforcement, a move that investors hope may address one of the key concerns for U.S. negotiators on the trade deal. Futures linked to the Dow Jones Industrial Average edged up 0.3%, while the Shanghai Composite Index ended the day up higher 0.7%... China’s government called for speeding up the introduction on penalties and punitive action for infringement of patents and copyrights in a document released Sunday."
— Business investment slides. WSJ's Theo Francis and Thomas Gryta: "Many of the biggest U.S. companies are moderating their spending on equipment and other capital investment, as an uncertain business environment prompts some to postpone or shelve otherwise promising projects. That could pose a continuing drag on economic growth.
"The pullback began as trade tensions escalated last fall, leaving companies unsure about their supply chains, pricing and profits. It has continued amid signs of slowing global growth and increasing consumer concerns about the future. Household names like Harley-Davidson Inc., AT&T Inc. and Target Corp. are joining small businesses in putting the brakes on investment. Some companies have warned it could continue into next year, when the presidential and congressional election is expected to add even more uncertainty to business decision-making."
— "Phase one" deal isn't close. Reuters's Heather Timmons and Andrea Shalal: An ambitious “phase two” trade deal between the United States and China is looking less likely as the two countries struggle to strike a preliminary “phase one” agreement, according to U.S. and Beijing officials, lawmakers and trade experts... The November 2020 U.S. presidential election, the difficulties in getting the first-stage done, combined with the White House’s reluctance to work with other countries to pressure Beijing are dimming hopes for anything more ambitious in the near future, the sources said...
"Officials in Beijing say they don’t anticipate sitting down to discuss a phase two deal before the U.S. election, in part because they want to wait to see if Trump wins a second term. 'It’s Trump who wants to sign these deals, not us. We can wait,' one Chinese official told Reuters."
— Novartis buys biotech company for $9.7 billion: “Novartis AG is buying U.S. biotechnology company The Medicines Co for about $9.7 billion, the Swiss drugmaker said … as it seeks to expand its portfolio of medicines against cardiovascular disease,” Reuters’s Silke Koltrowitz and John Miller report.
“The deal is expected to help to shore up the company’s growth threatened by patent expirations. Novartis is paying $85 per share in cash, an approximately 24% premium over The Medicines Co.’s closing share price of $68.55 on Nov. 22.”
— HP reiterates refusal of Xerox’s offer: “HP Inc repeated “its rejection of Xerox Holdings Corp’s $33.5 billion cash-and-stock offer for the company, adding that the proposal ‘significantly undervalues HP,’ ” Reuters’s Rama Venkat reports.
“ ‘We reiterate that we reject Xerox’s proposal as it significantly undervalues HP,’ the company said in a letter to Xerox.”
— That will buy a lot of breakfasts: “Bulgari owner LVMH has reached a deal to buy Tiffany & Co. at $135 a share in cash, or $16.3 billion, according to sources familiar with the matter,” CNBC’s Emma Newburger reports.
“The boards of the luxury firms have been discussing a potential deal since last month, and will meet on Sunday to approve the deal, sources tell CNBC’s David Faber. An agreement could be announced as soon as Monday. Shares of Tiffany, the iconic New York-based jeweler, have risen over hopes of a higher priced deal. Shares closed on Friday at $125.51. They had traded at about $140 in the middle of last year.”
— Boomers are looking to sell their homes, but that might be a challenge: “The U.S. is at the beginning of a tidal wave of homes hitting the market on the scale of the housing bubble in the mid-2000s. This time it won’t be driven by overbuilding, easy credit or irrational exuberance, but by an inevitable fact of life: the passing of the baby boomer generation,” the Wall Street Journal’s Laura Kusisto and Cassidy Araiza report.
“On the face of it, this doesn’t sound all bad. Dying homeowners have always needed to be replaced by younger ones and the U.S. has for a number of years suffered from a shortage of housing, a development that has dampened recent home sales activity and kept many millennials stuck in rentals. But the buyers coming behind the baby boomers, the Gen Xers, are a smaller and more financially precarious generation with different preferences, posing a new kind of test for the housing market. One problem is that the bulk of the supply won’t necessarily be in places where these new buyers want to live.”
MONEY ON THE HILL
— Pelosi, Mnuchin key to next spending deal: “When Congress returns from its Thanksgiving break, lawmakers will have just three weeks to come up with a detailed agreement on funding for more than a dozen federal agencies, or risk a government shutdown days before Christmas for the second year in a row,” the WSJ’s Kate Davidson and Andrew Duehren report.
“To help negotiate a path forward, the administration is deploying Treasury Secretary Steven Mnuchin to work with House Speaker Nancy Pelosi (D., Calif.), according to two administration officials. It is an unusual remit: Past Treasury secretaries have played a role in budget negotiations, but they haven’t typically conducted discussions over detailed spending legislation.”
Note: Congress is on recess.
- The Peterson Institute for International Economics holds an event with Brazil's economic minister Paulo Guedes.
- HP, Dollar Tree, Dell Technology, Cracker Barrel, Dick's Sporting Goods, Best Buy, Abercrombie & Fitch are among the notable companies reporting their earnings, per Kiplinger.
- The American Enterprise Institute holds an event on synthetic data set for tax policy analysis.
- Deere and Daktronics are among the notable companies reporting their earnings, per Kiplinger.
- The market is closed for the holiday. Happy Thanksgiving!
- The market closes early at 1 p.m.