Sequoia Capital to spin off its China business

This is an audio transcript of the FT News Briefing podcast episode: ‘Sequoia Capital to spin off its China business’

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, June 7th, and this is your FT News Briefing.

[MUSIC PLAYING]

The destruction of a huge dam in Ukraine could give Russia a military advantage. And one of the biggest US venture capital firms is splitting off its China business.

Kaye Wiggins
It just feels like this is a step towards accepting that in the long term, you know, the US is really not going to be investing in China or anything like the scale that it has been.

Marc Filippino
Meanwhile, the UK is worried about Chinese spying, and we’ll tell you about a shock merger in the world of professional men’s golf. I’m Marc Filippino, and here’s the news you need to start your day.

[MUSIC PLAYING]

The UK will order government departments to remove Chinese-made surveillance equipment from “sensitive sites”. The Cabinet Office made the announcement yesterday. It’s worried that Beijing could use the devices to spy on the UK. People familiar with the plans said the order is directed at two companies in particular, Hikvision and Dahua. Removing the devices will be a big job though. At least a third of police forces in England and Wales use surveillance cameras made by Hikvision.

[MUSIC PLAYING]

One of Silicon Valley’s biggest venture capital firms is splitting off its China business into an independent company. Sequoia Capital is known for its successful bets on fast-growing tech companies like Alibaba and TikTok’s parent ByteDance. The spin-off of Sequoia’s China unit is notable because it’s happening as tensions between the US and China continue to grow. The FT’s Kaye Wiggins has more.

Kaye Wiggins
So Sequoia China finds itself in this very difficult situation right now where it has the delicate task of kind of trying on the one hand to invest in areas that are priority areas for Beijing, so things like artificial intelligence, whilst also kind of trying to stay on the right side of Washington’s push to introduce controls on exporting sensitive technologies to China, for example. So it’s in this very difficult spot where it’s kind of at the pinch point of the geopolitical tensions that we’re seeing between the US and China.

Marc Filippino
How big of a deal is this in the private equity world and the world of US investment in China? I mean, just give us a sense.

Kaye Wiggins
Yeah, So in the short term, actually, not a lot changes. So if you’re an investor in one of these funds, your money is still in the same fund. It’s still being invested, in theory, in the same way that it would have been. You know, it’s a change in branding, and it’s a change in the fact that the various different arms of Sequoia in different parts of the world won’t be sharing like back office services anymore. But why this matters is because this has basically been one of the most successful US-China investing alliances, you know. It’s done really well because it has brought together investors and companies in both of those countries over the past 20 years at a time of, like, phenomenal growth. And so what this separation really tells us is that that model is just so much more difficult now.

Marc Filippino
Do you see other private equity firms doing the same at some point following in Sequoia footsteps and splitting off their China business into an independent company?

Kaye Wiggins
I think it’s very likely that this will be the start of something like that. I think there are lots of firms that are already looking at doing this type of thing because lots of private equity firms that are doing deals in China, they have this dilemma now where everyone knows that Joe Biden and the Washington administration is keeping a much closer eye on how US money is being invested in China. And I think it’s very likely that lots of other global private equity firms or private equity firms that raised money from investors globally to invest in China are thinking the same thing.

Marc Filippino
Kaye Wiggins is based in Hong Kong. She’s our Asia financial correspondent.

[MUSIC PLAYING]

There is massive flooding in Ukraine’s Kherson region after a major dam was destroyed. Rising waters have forced tens of thousands of people to evacuate. Kyiv and Moscow are both blaming each other for the disaster, which could give Russia an advantage. To find out more, I’m joined by FT Ukraine correspondent Chris Miller. Hi, Chris.

Christopher Miller
Hi Marc.

Marc Filippino
So, Chris, how is this affecting people who lived by the dam?

Christopher Miller
There are towns and cities on either side of the river. Some of them are in Ukrainian-controlled territory. Some of them are in Russian-controlled territory. Water levels are continuing to rise. It’s already waist- or even shoulder-deep for some people in many of these areas. The Ukrainian authorities are saying that at least 12 settlements are completely underwater. A lot of the photos that I’ve been sent and videos show houses floating downstream, cars being swept away. It’s clear that this is a catastrophe of epic proportions. And even President Zelenskyy himself said that this is one of the biggest man-made catastrophes in Europe in decades.

Marc Filippino
Now, this disaster comes as Ukraine is launching a big counteroffensive, something that we’ve talked about on the show before. Does this change anything?

Christopher Miller
Yeah, you know, this counteroffensive that everybody has been waiting for seems to have gotten under way this week. There have been a lot of new attacks up and down the front line. Now, the former defence minister, Andriy Zagorodnyuk, as well as my sources in Ukrainian military intelligence, are telling me if they had any plans before to cross the river, now that’s essentially been taken off the table. And so analysts are now thinking that Russia could be relocating some of its troops, trying to narrow this area that Ukraine could potentially attack to give Russian forces essentially a better chance at defending what is a very expansive frontline.

Marc Filippino
So, Chris, just to give a little bit of context, Ukrainian forces have purportedly attacked Russian-controlled territory over the past few weeks. If Russia is responsible for destroying the dam that we’re talking about here, could that be seen as retaliation?

Christopher Miller
I would be hesitant to call it retaliation because these attacks have been happening up and down the front line now for several days. There have certainly been attacks beyond Russia’s front line now for several weeks. We’ve seen these drone attacks in Russia and in Russian-controlled territory. Missile attacks as well. These incursions, the Belgorod region of Russia by these pro-Kyiv, Russian militia groups. If Russia is feeling as though Ukraine’s having some success on the front line, it could take more drastic measures to keep it from advancing and having success on the battlefield. This might be one of those ways in which it’s doing so.

Marc Filippino
Chris Miller covers Ukraine for the FT. Thanks, Chris.

Christopher Miller
Thanks, Marc.

[MUSIC PLAYING]

Marc Filippino
Before we go, if you’re wondering who’s the biggest player in the world of men’s golf right now, well, it’s Saudi Arabia. First, the kingdom financed a breakaway league called Liv Golf and lured top golfers away from the PGA Tour in the US. Lawsuits ensued. Liv players were banned from the PGA. But yesterday, in a stunning announcement, the PGA Tour and Saudi officials announced the two warring leagues are merging. They’ve agreed to end any pending litigation, and the Saudis will pump in billions of dollars in cash. Plus, Europe’s DP World Tour has also signed on to the deal.

[MUSIC PLAYING]

You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.