A French presidential election rematch

This is an audio transcript of the FT News Briefing podcast episode: A French presidential election rematch

Marc Filippino
Good morning from the Financial Times. Today is Monday, April 11th, and this is your FT News Briefing.

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It’s official: we’re going to see a rematch of the 2017 French presidential election in just a few weeks. And a former banker in the 1MDB trial has been found guilty. Plus, China has made a major concession to US regulators in order to keep its companies on US exchanges. But will it actually smooth things over? The FT’s Tabby Kinder explains. I’m Marc Filippino and here’s the news you need to start your day.

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The people of France came out to the polls yesterday to vote in the first round of the country’s presidential election. And they advanced two candidates, incumbent Emmanuel Macron and the far-right candidate Marine Le Pen. It’ll be a rematch of the 2017 election. That’s when Macron beat Le Pen by a pretty wide margin. This time, though, things were much closer. Here’s the FT’s Paris correspondent, Leila Abboud.

Leila Abboud
Macron’s bet to kind of wait quite late to come into the campaign, he was kind of, had this attitude that he was gonna be president until the last 15 minutes and was very busy managing the war in Ukraine. And that was actually quite a risky move because the final kind of polling estimates going into the vote showed that the lead that he had on the other candidates had really narrowed quite markedly. What did I learn from Le Pen today? I was in her headquarters for when she gave her speech. They’re really, really, really positive. They feel good about their chances now. They think that there is gonna be a movement that they can play off of all the people who dislike Macron in the country. She thinks she has a pretty good shot.

Marc Filippino
OK, so the final round of voting is on April 24th. What do you expect to see in the next two weeks?

Leila Abboud
I think it’s gonna be pretty brutal [laughs] on the campaign trail. I mean, they are opposites in many ways, you know, all the kind of caricatures of Macron, sort of like the pro-Europe elitist president of the rich. That’s kind of how Marine Le Pen will paint him. And he will try and paint her as somebody who is too extreme to be trusted with power. Someone who’s too close to Russia and Putin and who would be sort of a disaster for France and the western liberal order that we’re all so familiar of.

Marc Filippino
Leila Abboud is the FT’s Paris correspondent. By the way, if you wanna learn more about the French presidential election, the FT will be holding a webinar on it today. Leila will be there along with other FT journalists and a few guests from outside the FT, too. If you’re a subscriber, you can sign up at FT.com/francevotes. FT.com/francevotes. We’ll also have a link in the show notes.

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On Friday, a US jury decided the fate of a key player in the 1MDB embezzlement scandal. Former Goldman Sachs banker Roger Ng was found guilty on three counts in the case, including conspiring to violate US anti-bribery laws and to launder money. The trial lasted about two months. Ng, who had pleaded not guilty, could face up to 30 years in prison. Ng’s boss, Tim Leissner, has already pleaded guilty and testified against Ng as the government’s star witness. Stefania Palma has been following the story. She says that while this is a win for the Department of Justice, critics say more people than just Ng should have been put on trial.

Stefania Palma
He is the only banker from Goldman Sachs which arranged three different bond deals for 1MDB from which money was stolen. And the critics just say that this is not enough, despite this win for prosecutors, to really deter figures on Wall Street from perpetrating a similar scheme in the future. At the same time, I think if he had not been found guilty, this would have been a catastrophic defeat for the Department of Justice.

Marc Filippino
What’s your big takeaway from this case, Stefania?

Stefania Palma
If anything, what this probe has done, it really has highlighted the big gaps that some of these financial entities have when it comes to internal processes around accepting specific types of deals for these banks. I think it also really underscored the fact that in a sector and in an industry like investment banking, obviously there is very strong competition and bankers are obviously pushed to do as much as they can to win deals. But obviously, you know, at the same time, not all investment bankers get ensnared in multibillion-dollar embezzlement scandals. But it’s without a doubt that the whole internal sort of checks and balances system was definitely examined far more after the 1MDB affair came to light.

Marc Filippino
Stefania Palma is the FT’s US legal and enforcement correspondent. The court is expected to sentence Ng and Leissner this week.

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Beijing has revised its laws on giving financial information to foreign regulators. It’s a move to keep companies from being delisted from US exchanges. And it marks a significant concession to pressure from Washington and would help around 270 Chinese companies stay in New York markets. Tabby Kinder is the FT’s Asia financial correspondent. She says this started with a law introduced in 2001 requiring the US accounting regulator to inspect all companies.

Tabby Kinder
In the last 20 years since then, there has been a flood of Chinese companies listing in the US, and none of them have abided by that law. The Chinese companies that are listed in the US, so these include some of the biggest names like Alibaba, Pinduoduo, I mean, these are companies worth tens of billions of dollars. They provide audited annual accounts that US investors can see, and they’ve raised so much cash on the back of these. What US regulators can’t see is any of the evidence that backs up those audit opinions. So like a lot of things, when you consider global investment in Chinese equities and Chinese assets, there’s a little bit of kind of blind faith involved because for the last 20 years the Chinese growth story has been so attractive.

Marc Filippino
Why has Beijing made this concession now, Tabby?

Tabby Kinder
So the reason that Beijing has capitulated now appears just to be because in the last couple of weeks we’ve seen US regulators really move ahead with this delistings issue. The SEC in New York just started naming the Chinese companies that would be delisted in the next three years, which really kind of shook China into action because if there was any thinking that just US investors would be affected by Chinese companies being delisted, I mean, that was completely proved wrong in the last couple of weeks because the SEC move was followed by another massive sell-off in Chinese stocks.

Marc Filippino
So Beijing said its law on securities disclosure was out of date and it would revise it. How significant is this?

Tabby Kinder
The crux of the revision is basically that it removes the requirements that inspection of the financial statements of overseas-listed Chinese companies has to be conducted by mainly Chinese regulators. So this opens the door to the idea that the PCAOB, which is the audit regulator in the US, can inspect audits conducted in China of Chinese companies. And so it’s basically a pretty significant attempt by Beijing to secure a compromise on this issue and stop these 270 or so companies from being delisted.

Marc Filippino
OK, so does all this mean that US regulators now won’t delist Chinese companies that they’ve named?

Tabby Kinder
The capitulation by Beijing doesn’t just mean that this is a done deal. Gary Gensler, who’s the chairman of the SEC, said just last week that only full compliance with its laws would be good enough. So even though China is saying it will allow joint inspections, there’s no real framework yet for joint audit inspections between China and the US. There are lots of questions still. The companies have, one of the things that keeps coming up when companies are talking about this, is concerns that the revised law on secrecy puts too much onus on the companies to decide what counts as state secrets and what doesn’t. So there is still national security concerns by China that requires companies to hold back some information. So where companies will draw that line, where their auditors will draw that line, for example, has yet to be worked out.

Marc Filippino
Tabby Kinder is the FT’s Asia financial correspondent.

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And before we go, Pakistan may have a new leader today. Lawmakers are set to confirm opposition leader Shehbaz Sharif as the country’s new prime minister. This comes after Imran Khan was ousted in a no-confidence vote over the weekend. Khan was a former cricket star. As prime minister, he recently was criticised for his response to rapid inflation. The to-be prime minister Sharif is the former chief minister of Pakistan’s most populous province and the brother of three-term former prime minister Nawaz Sharif.

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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.

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