Transcript: Pressure builds on Beijing to boost economy

This is an audio transcript of the FT News Briefing podcast episode: ‘Pressure builds on Beijing to boost economy’

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Kasia Broussalian
Good morning from the Financial Times. Today is Tuesday, October 15th, and this is your FT News Briefing. Insurers are finally coming to grips with climate change and Beijing is taking a “wait for it” approach to spending. Plus, OpenAI wants to trial a new corporate model to protect itself from activist investors.

Cristina Criddle
It’s a really interesting structure, but it seems to be one that’s becoming more popular in the AI space.

Kasia Broussalian
I’m Kasia Broussalian, and here’s the news you need to start your day.

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Insurers across the world might be having a green awakening. That’s according to a new survey out from the money manager BlackRock. It found that basically all insurers now include at least one low-carbon transition goal in their investment plans. That’s things like hitting net zero emissions by a certain date. Just two years ago, only 2 per cent made this commitment. But the growing cost of climate change is making them think differently. Like take this figure: insured losses just from the recent hurricanes in the US might cost up to $55bn. So insurers can’t really afford to ignore extreme weather.

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China has released a lot of economic data in recent weeks. And the outlook? Weaker than expected. Investors are now on tenterhooks waiting for more information on Beijing’s plans for fiscal stimulus. My colleague Joe Leahy is tapped into what’s going on and he’s here with me now. Hey, Joe.

Joe Leahy
Hi.

Kasia Broussalian
OK. So tell me about this data. What does it say about the health of the Chinese economy?

Joe Leahy
Yeah, there’s been a slew of data since August showing that the economy probably slowed down during the second quarter and the third quarter. And the Chinese authorities are very worried that they might miss their official growth target of about 5 per cent. Deflationary pressures are one of the big problems dogging the economy at the moment. You know, after China’s property boom, prices started to fall. Consumer confidence fell as well, and people started saving money instead of spending. And now prices, at least at the producer level, have been falling now for two years straight. So we’ve seen a bit of a pivot going on where since late September they’ve started introducing a lot of stimulus measures to try to convince investors that the outlook is better than it was looking before.

Kasia Broussalian
Yeah. And just give me a quick recap on some of these stimulus measures. What plans has Beijing announced recently?

Joe Leahy
So they came out at the end of September with this very strong, almost unprecedented monetary easing plan. And this really cheered up investors who’ve been waiting for ages for something more convincing to happen on stimulus. But then after the October holiday finished, the policymakers came back and gave a press conference that really didn’t contain a lot of information on, you know, how much is the government actually going to spend to improve conditions. So last week we had the market swinging up and down and had some record falls in the market. And then over this weekend, the finance ministry met and gave us sort of the outline of what it might do. It was going to try to stabilise the property market by buying millions of apartments that haven’t been sold. And it would also try to recapitalise banks and also, crucially, local governments which don’t have money. But again, no figures. So investors are now sort of still waiting for, you know, how much exactly is China going to spend on this stimulus programme?

Kasia Broussalian
And what’s the hold-up here? I mean, why make these promises of more fiscal stimulus but then not actually lay out a plan?

Joe Leahy
It seemed for a long time that the view in Beijing was that everything is going OK. But I think what happened during August and a little bit earlier was the authorities saw that the domestic economy is much worse than they thought and then they started this pivot. Now, how determined are they to do a massive stimulus? I don’t think that that’s really what they’re planning to do. What they want to do is put in a strong effort to meet their growth target, but they don’t want to do what they did in 2008, which is flood the economy with money. That then becomes huge amounts of debt and eventually leaves them with another problem in the future.

Kasia Broussalian
So then when do you think we’ll hear more from Beijing about its spending plans?

Joe Leahy
Yeah. Over the coming week or two, we’ll be looking very closely for this meeting of the National People’s Congress, which we call it, the rubber stamp parliament. But, you know, technically, it does have to approve new issuance of special government debt, that it’s needed to increase the deficit and then through to the end of the year, there’s going to be other sort of important Communist Party meetings that will be deciding on the stimulus. I guess in the shorter term, this week, we do have third-quarter GDP on Friday and that’s expected to be below target. So I think there’s going to be a lot of focus on that.

Kasia Broussalian
Joe Leahy is the FT’s Asia news editor. Thanks, Joe.

Joe Leahy
Thanks very much.

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Kasia Broussalian
Bets on the US election are rising like crazy after a federal appeals court lifted a ban last week. Before that, regulators had essentially stopped US residents from participating in election prediction markets. The site Kalshi fought the ban and its market went live on Friday. Since then, more than $12mn have already been wagered and that pot is set to grow. Kalshi is now telling institutional investors that they can put as much as $100mn on either Kamala Harris or Donald Trump to win on November 5th.

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OpenAI is planning a major restructuring. It wants to become a public benefit corporation. And the model is pretty unusual. The goal is to better protect the company from activist investors. Cristina Criddle has been reporting on this, and she joins me now. Hey, Cristina.

Cristina Criddle
Hi.

Kasia Broussalian
So, can you just break down OpenAI’s plans a little bit more for me?

Cristina Criddle
So OpenAI has been looking at a corporate restructure to basically make it more of a traditional company and basically a PBC or a public benefit corporation. It means exactly that. So it has to balance the best interests of shareholders and stakeholders like employees, but it also has to have a public benefits. And this is often written publicly so they can be held accountable to that. And board members can act in the public benefit over, say, the interests of shareholders in certain circumstances. So having this approach gives OpenAI more of a defence to activists who might claim that the company is not making enough money. It can help protect the chief executive, such as Sam Altman, from outsider interference. And so it’s really a way for it to generate more revenues in a more traditional corporate structure, attract more investment, but still stay with its mission of creating AI that benefits humanity.

Kasia Broussalian
Yeah. And one thing that’s kind of throw me off here is that OpenAI was, you know, originally founded as this non-profit. So is that still going to be the case if it does transition to a PBC?

Cristina Criddle
OpenAI still wants to keep its mission, and it believes that a PBC allows it to do this because it will also be creating a not-for-profit entity that separate from this PBC. And so the for-profit entity, the PBC, would be able to focus on commercialisation, developing technology, building products and also speaking to regulators and stakeholders and raising money. Whereas the not-for-profit would be able to focus solely on those kind of areas where it can really benefit humanity, but also drawing upon the public benefit corporations, research and access to technology.

Kasia Broussalian
So now you mentioned that a PBC would potentially protect someone like Sam Altman. What kind of role would he have in this new structure?

Cristina Criddle
Well, I think it’s very interesting that our sources told us that the not -for-profit is probably going to be run by a different executive to Altman, who is going to lead the PBC and really focus on running the business. Now, he as a character is really seen as the face of OpenAI. But obviously there was the brief ousting in a coup a year ago and there has been drama at OpenAI ever since. As we know, several leaders have announced their departures in recent weeks, some of them criticising the company for prioritising shiny products over humanity.

Kasia Broussalian
Mmm. And so what does this new structure potentially say about the current situation at OpenAI right now?

Cristina Criddle
It’s a really interesting structure, but it seems to be one that’s becoming more popular in the AI space — xAI, which is Elon Musk’s AI start-up as a PBC, as is Anthropic. These are leading companies in the space, and I think there’s a reason that they’re aligning with this. It does allow them to keep this mission of being a public benefit, but also able to compete and raise money and OpenAI really does need to raise money because its burn rate is so high, it’s spending so much cash training these models. And that’s really saying something because they’ve just raised over $6bn and they are at a 150bn valuation, one of the most valuable companies right now. And so it’s really a sign of how fast OpenAI has grown, the pressure on it to generate revenues to attract new investment, and whether it can do that while still retaining its mission, which has been so important to its history so far, is going to be something we’ll have to watch.

Kasia Broussalian
Cristina Cradle is the FT’s technology correspondent. Thanks, Cristina.

Cristina Criddle
Thank you.

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Kasia Broussalian
Now, you may have heard that three US academics won the Nobel Prize for Economics yesterday. Daron Acemoğlu, Simon Johnson and James Robinson were recognised for their work on what sort of institutions make some countries rich and others poor. Daron Acemoğlu actually spoke to my colleague Soumaya Keynes from the Economics Show recently and they chatted about AI. A link to that episode is in our show notes, along with the rest of the stories you’ve heard today.

This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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