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Chinese cities are competing to woo overseas entrepreneurs

The coffee’s on us

WHEN Maria Veikhman, founder of SCORISTA, a Russian credit-scoring startup, was considering expansion abroad, China immediately came to mind. She believes the scope there is vast, for two-fifths of Chinese have no credit records. Ms Veikhman settled in Tianfu Software Park, a state-owned incubator in Chengdu, capital of Sichuan province where city authorities “offer almost everything for free”. Complementary facilities range from office space, basic furniture and logistics services to detailed guidance on entrepreneurial methods.

Chengdu aims to catch up with Beijing, Shanghai, and Shenzhen, which at present are in a different entrepreneurial league—together they have over a hundred unicorns, or private startups worth over $1bn. The south-western city allocated 200m yuan ($30m) in 2016 to an innovation-and-startup fund for overseas founders, and hands out up to 1m yuan in cash to well-capitalised foreign startups and joint ventures. If the...Continue reading

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The spoils from American corporate tax reform are unevenly spread

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“IT’S always a lot of fun when you win,” President Donald Trump enthused after his tax package was approved by Congress in December. Company bosses nodded along. The centrepiece of the reform is a drastic cut to the corporate-tax rate, from 35% to 21%, taking it below the rich-country average. Although its impact is partly offset by some revenue-raising measures, the congressional Joint Committee on Taxation estimates that American business will gain around $330bn from the reform over the next ten years. Yet within that are sizeable variations in terms of which firms and industries benefit most.

The biggest winners are more domestically oriented companies. These typically face higher effective tax rates than American companies with a big presence overseas, which do business in lower-tax countries. Bosses are also evaluating other new measures. So-called “full expensing”, for example, helps those with big spending plans by allowing them to deduct investment costs up front. But...Continue reading

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Europe’s flourishing gunmakers

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Beretta hits its sales target

IT WAS a blunder by Heckler & Koch, a big German gunmaker. On February 15th the firm apologised for a “mistake” after its American subsidiary posted a Valentine’s image showing a handgun surrounded by ammunition arranged in the shape of a heart. The image went out to social media shortly after a deadly school shooting in Florida.

The post was also a reminder that although Europeans often criticise lax firearm-ownership laws across the Atlantic, the region’s firms are increasingly present in America’s market for small arms—defined as revolvers, pistols, rifles and shotguns. Americans buy far more such weapons than any other nationality and their appetites have been growing steadily. This year they are likely to buy 14.5m such firearms, notes Jurgen Brauer of Small Arms Analytics, a consultancy. Europeans have proved deft at grabbing a sizeable portion of all this.

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A banking centre seeks to reinvent itself

ON A clear day, sunset over Lake Zug is magnificent. Snow-dusted mountains cut through the orange glow above and are mirrored in the lake below. “Zug is our spiritual home,” says Jeremy Epstein, from Washington, DC, who has just taken 40 foreigners to tour the small Swiss town south of Zurich. They came not for sunsets, though, but to find out how Zug has become known as “crypto-valley”—meaning the home of many firms dealing in crypto-currencies and related activities.

Switzerland’s famous banking secrecy is falling to a global assault on money-laundering and tax evasion. But financial security remains in demand. The country should seek to become the “crypto-nation”, said the economy minister, Johann Schneider-Ammann, last month. Zug aims to be the capital of that nation.

To that end, Switzerland is maintaining loose rules for crypto-businesses, even as other countries are tightening theirs. An industry is developing to store tangible crypto-assets, such as the hard drives...Continue reading

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One of Russia’s most successful private entrepreneurs sells–to the state

IN THE Russian business community Sergei Galitsky served as a rare example of a self-made billionaire who rose with relatively little state help and outside the natural-resources trade. He built his retail company, Magnit, from scratch into Russia’s largest network; it has more than 16,000 stores. Rather than moving to Moscow, he kept his headquarters in his hometown of Krasnodar, where he also founded a football club. On February 16th he made a telling exit, announcing he would sell nearly all of his shares in Magnit—29.1%—to VTB, a state bank.

That Mr Galitsky (pictured, above) decided to sell is the result of a tough business cycle and some strategic mistakes. More remarkable is that he found a buyer not on the domestic private markets, or from among foreign investors. Selling to a public-sector bank reflects the growing role of the state in the Russian economy. Russia’s federal anti-monopoly service puts its share at 70%. Yet the retail sector had largely been insulated from the trend. Now...Continue reading

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OPEC mulls a long-term alliance with Russia to keep oil prices stable

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OIL bears beware. On February 20th Suhail al-Mazrouei, OPEC’s rotating president and energy minister of the United Arab Emirates, said the 14-member producers’ group is working on a plan for a formal alliance with ten other petrostates, including Russia, aimed at propping up oil prices for the foreseeable future. If it comes to anything, it could be OPEC’s most ambitious venture in decades.

The result will not be, he insists, a “supergroup”. The notion of Saudi Arabia and Russia joining forces as the Traveling Wilburys of the oil world may be a bit jarring. It remains an idea in “draft” form. But whatever its chances, it attempts to shift a belief widely held by participants in oil markets: that non-American oil producers are helpless against the shale revolution.

That belief has strengthened because of a renewed flood of American shale production in the latter part of 2017 after prices of West Texas Intermediate climbed above $50 a barrel. The International Energy Agency...Continue reading

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Economists cannot avoid making value judgments

AMID the name-calling and bluster that mar many fights between economists are a few common tactics. Belligerents may attack the theory used to support a claim, or the data analysis used to quantify an effect. During the debate over President Donald Trump’s tax bill, to take a recent example, economists bickered over which side had more credibly calculated the economic effect. They did not, for the most part, argue about whether it was morally acceptable to pass a regressive tax reform after years of wage stagnation and rising inequality. To do so would strike many economists as entirely un-economist-like. Yet economics has not always been so shy about moral philosophy. As well as “The Wealth of Nations”, Adam Smith wrote a Theory of Moral Sentiments”. Great 20th-century economists like Paul Samuelson and Kenneth Arrow also took questions of values very seriously. Their successors would do well to take several pages from their books.

Modern economists have attempted...Continue reading

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Firms should make more information about salaries public

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SWEDES discuss their incomes with a frankness that would horrify Britons or Americans. They have little reason to be coy; in Sweden you can learn a stranger’s salary simply by ringing the tax authorities and asking. Pay transparency can be a potent weapon against persistent inequities. When hackers published e-mails from executives at Sony Pictures, a film studio, the world learned that some of Hollywood’s most bankable female stars earned less than their male co-stars. The revelation has since helped women in the industry drive harder bargains. Yet outside Nordic countries transparency faces fierce resistance. Donald Trump recently cancelled a rule set by Barack Obama requiring large firms to provide more pay data to anti-discrimination regulators. Even those less temperamentally averse to sunlight than Mr Trump balk at what can seem an intrusion into a private matter. That is a shame. Despite the discomfort that transparency can cause, it would be better to publish more...Continue reading

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How airlines are responding to America’s laptop ban

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THE recently announced ban on laptops and other large electronic devices on direct flights from Middle Eastern airports to America is bad news for business travellers hoping to get work done on these long journeys. That, in turn, spells trouble for the airlines that fly these routes. Carriers like Emirates, Turkish, Qatar, and Etihad compete for long-haul flyers all over the world. They have just become a little bit less competitive. (Gulliver recently booked a flight from Manila to Washington, DC on Emirates, via Dubai; had he known what was coming, he might well have opted to fly via Tokyo or Beijing instead.)

Turkish Airlines stock tumbled more than 7% after the ban was announced in America. (Britain announced similar restrictions soon after, though crucially the superconnectors' hubs in the United Arab Emirates, Qatar and Turkey were not included.) Rival airlines, meanwhile, are thrilled at the news. Emirates, Etihad and Qatar currently serve half the travellers flying between India and the United States, for example. Air India now Continue reading

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