Jeff Bezos vs the bridge

This is an audio transcript of the FT News Briefing podcast episode: Jeff Bezos vs the bridge

Marc Filippino
Good morning from the Financial Times. Today is Tuesday, June 21st, and this is your FT News Briefing.

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China is leaving the rest of the world in the dust when it comes to funding initial public offerings. Jeff Bezos has a new superyacht and it is igniting a philosophical debate in the Netherlands.

Javier Espinoza
At a time of inflation, looming recession, just post-Covid, what is the role of wealth and the wealthy in society?

Marc Filippino
Plus, New Zealand’s housing market offers a glimpse into the future for countries starting to raise interest rates. I’m Marc Filippino and here’s the news you need to start your day.

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China is pretty much blowing other countries out of the water when it comes to initial public offerings and the funding that’s going into them. The money that China’s raised is double what the US has raised so far this year. America is number two on the list. Around the world, IPO funding has fallen 80 per cent because of the war in Ukraine, surging inflation and higher interest rates. I’m joined now by our China capital markets correspondent, Hudson Lockett, to talk more about China’s IPO funding boom. Hudson, this is kind of incredible, especially considering the strict Covid lockdowns in Shanghai. Did that impact these companies’ ability to fundraise at all?

Hudson Lockett
Well, certainly not as much as you think. In fact, we ran the numbers and during the lockdown, China averaged more than one IPO per trading day. Now, part of that was finance in Shanghai and Shenzhen, working double time. But there was also quite an effort from officials, including sending a squad of regulators to the Shanghai Stock Exchange for the duration of the lockdown where they were signing off in person on listings applications and sleeping on cots at night.

Marc Filippino
So they were busy, they were busy giving out.

Hudson Lockett
Yep. But it was a pretty successful camping trip, all things considered.

Marc Filippino
(Laughter) It sounds like it. So what kind of companies have done the most of the fund raising we’re talking about now?

Hudson Lockett
Well, a lot of these companies are in what Beijing has designated as strategic emerging industries. So that’s semiconductors, high-end manufacturing, renewables, electric vehicles. These are sectors that the leadership considers vital to the economic future of China, as well as national security, and ensuring that China can withstand potentially further sanctions from the US, as it has with some of its state-run chipmakers and telecoms groups.

Marc Filippino
So Hudson, I wanna talk about the fact that it’s become a lot more complicated for Chinese companies to raise money outside of China, especially on Wall Street. How much does that impact how much money was raised for IPOs in China?

Hudson Lockett
Well, I would say that certainly part of it, I think about 95 per cent of fundraising from new listings by Chinese companies globally this year has been done domestically. And certainly that outsized share is far larger than it has been in previous years because of the tech crackdown over the last 12 months. And for any company in China that has substantial amounts of user data, which is quite a lot of them, all of these companies are still waiting on final regulations for listing abroad, which has pretty much put the brakes on any substantial listings, either in Hong Kong or in New York.

Marc Filippino
Do you think this is gonna change anytime soon?

Hudson Lockett
Well, it’s hard to picture how things are gonna change meaningfully until we get those new regulations on foreign listings. But even once we do, it’s very unlikely that we’re gonna see a return of the disruptive start-ups seeking to reinvent this or that major sector of the Chinese economy, as you used to see from the likes of Alibaba and Tencent. Disruption these days in China is somewhat verboten.

Marc Filippino
Hudson Lockett is the FT’s China capital markets correspondent.

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Jeff Bezos wants to sail his brand new superyacht, but he’s facing a very old obstacle, the 95-year-old Koningshaven Bridge in the Dutch city of Rotterdam. The bridge has to be dismantled in order for this huge boat to leave the nearby shipyard where it’s being built. And the bridge needs to be dismantled every single time this boat needs to pass through. That could cost Bezos a €100,000 fee. Local officials are deciding whether to allow the boat to pass through, and it’s sparked an intense debate among the people that live there. The FT’s Javier Espinoza visited Rotterdam and spoke to some of the residents. Javier, tell us about what they told you.

Javier Espinoza
I was talking to Paul van de Laar, who is a historian of the way that cities develop. He was saying to me when I met him just in front of the bridge, he was making the point, are we going to bow our heads for Jeff Bezos and for this matter, other billionaires, just so that they can have their, what he called his pleasure boat, our cities built to make sure that billionaires can have a good time. Not everyone agrees with him. There are some other local politicians that I spoke to that said, you know, these are wealthy people with lots of money, so why not take their money? A businessman that I spoke to was saying, why don’t we even make Bezos pay double the fee so that he can contribute some of his money to help some of the poor families that live near this bridge.

Marc Filippino
Yeah, I guess €100,000 is probably isn’t a ton of money for a billionaire like Jeff Bezos. What’s the takeaway here, Javier, for people who don’t live in Rotterdam, you know, what lessons can we draw from this?

Javier Espinoza
The bigger theme here, it’s really a story about what are cities and societies for. So this is sort of like the debate that the people of Rotterdam are having at a micro level. But I guess it’s part of the wider debate that we’re having in society right now, especially, you know, at a time of inflation, looming recession, just post-Covid, you know, what is the role of wealth and the wealthy in society?

Marc Filippino
Javier Espinoza is the FT’s EU correspondent.

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Rising interest rates have been causing some anxiety for people in the US and Europe. Just look at what happened to the markets late last week after the Federal Reserve, the Bank of England and the Swiss National Bank raised rates. So we’re gonna head to a place that can give us an idea of what we might be able to expect as those interest rates start to impact the economy. New Zealand started tightening its monetary policy back in October, so it’s several months ahead of the curve. The FT’s Nic Fildes looked into the impact on the country’s housing market since then. Hey, Nic.

Nic Fildes
Hi, how are you doing?

Marc Filippino
I’m doing well. So what’s going on with the New Zealand housing market? What’s happened to housing costs over the past few years?

Nic Fildes
During the pandemic, as you probably know, it became known as the hermit isle because they closed their international borders. Yet the economy was extremely resilient. Basically, New Zealanders took to what someone described to me doing as doing their favourite thing, which is trading houses. And it just caused a roughly 43 per cent spike in the house prices. So it was an incredible spike and it made a lot of people very, very wealthy.

Marc Filippino
So the way I understand it is that the country stepped in to do something about this, at least the housing market aspect of it. What did they do and what kind of effect did it have?

Nic Fildes
Well, there were two things. One, which is what we’re seeing around the world now. The Reserve Bank of New Zealand, before anybody realised that things were getting a bit hot and they started to worry about inflation, so they started raising interest rates from, you know, historically very, very low level last October and they haven’t let up since. So they’ve really, really moved into ultra hawkish mode. But the other thing that happened was that the lending criteria were tightened, so that put the brakes very much on the housing market.

Marc Filippino
I feel like, Nic, you and I are kind of tiptoeing around the word bubble. Is that how people would describe it in New Zealand?

Nic Fildes
I don’t think you’ll find anybody that says it wasn’t the housing bubble. It’s really sort of, you know, where it lands. I think even though we’re talking these massive numbers, about 40 per cent decline, peak to trough, that will still only take house prices back to sort of around 2020 levels, so pre-pandemic levels. So, you know, I think if it continues to fall or if we start to see, you know, major recessionary impact, then, you know, perhaps we may see some ripple effects down the track. And the alternative thing, obviously, is that there are a lot of people in New Zealand who haven’t been able to get onto the housing market. Our house ownership is at its lowest level since the 1950s. So there are a sort of generation of people out there that have sort of, are starting to feel a little bit better about that and waiting to pounce on these lower prices and potentially get their dream family home. So there are some buffers in place in the economy there.

Marc Filippino
So is there anything that Europe and the US can learn from New Zealand as they begin to raise their interest rates?

Nic Fildes
There certainly is. I mean, first up, just the house price situation itself. There has been some criticism of the Reserve Bank of New Zealand and whether they’ve gone too hard, too fast on interest rates and whether that’s going to have a real knock-on effect into consumer confidence, business confidence, especially at a time when companies are still struggling to hire people. So, you know, I think a lot of global economies will be looking at places like New Zealand and then Australia as well to see, you know, whether that recession really does start to kick through and how aggressive a central bank can really be. I think it was described in our piece as a canary in the coal mine, really for similar economies. And, you know, the great thing is New Zealand is small enough in a way to sort of see how this will play out very quickly.

Marc Filippino
Nic Fildes is the FT’s Australia and Pacific correspondent. Thanks, Nic.

Nic Fildes
Thank you very much.

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Marc Filippino
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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