TheChek News Flow

Chinese industrial profits return to growth

April rise underlines authorities’ efforts to boost manufacturing

Profits at China’s industrial companies returned to growth in April, highlighting Beijing’s efforts to boost manufacturing as other areas of the world’s second-largest economy struggle to regain momentum.

Industrial profits at businesses with more than Rmb20mn ($2.8mn) in turnover increased 4 per cent year on year in April after a decline of 3.5 per cent in March, according to the National Bureau of Statistics. So far this year, their profits are up 4.3 per cent, unchanged compared with the rate in the first quarter after a large jump at the start of the year.

The improved April data follows a rise in Chinese exports in the same month after a push from Xi Jinping’s government to boost “high-quality development” in manufacturing, which prompted complaints from western leaders over perceived overcapacity.

The EU is carrying out a probe into state support for Chinese electric vehicle production, while US President Joe Biden this month introduced 100 per cent tariffs on EV imports from China, where intense domestic competition has spurred a price war.

Recent economic data in China is being closely watched for further evidence of the government’s strategy as it grapples with a historic property sector slowdown and weak consumption. Exports in April grew 1.5 per cent year on year in dollar terms, while industrial production jumped 6.7 per cent.

Analysts at Goldman Sachs noted strong increases in profits across equipment manufacturing in the first four months, with profits in electronics and transportation equipment growing by 76 per cent and 41 per cent, respectively.

Yu Weining, statistician for the National Bureau of Statistics, also emphasised the contribution of equipment manufacturing and said market demand picked up in April, citing the impact of “macroeconomic policies”.

But Yu added that domestic demand remained “insufficient” and that the development of new productive forces — a widely used term in China for its recent focus on manufacturing — still needed to be “accelerated”.

State-owned companies’ profits dropped 2.8 per cent year on year in the first four months of 2024, the data showed, while profits at private groups rose 6.4 per cent and those at foreign businesses grew 16.7 per cent.

Thames Water pumped 14bn litres of sewage into Thames in central London in 2023

Figures obtained via freedom of information laws come as effluent pollution climbs political agenda

Thames Water pumped 14.2bn litres of sewage into the river Thames in central London last year, according to data that highlights the quantity of effluent flowing from the pipes of the UK’s largest water company.

The figures, obtained under freedom of information laws, reveal for the first time the volume of sewage outflows into the section of the river covered by the £4.5bn Tideway Tunnel, which is due to open next year.

They also come days after Sir Chris Whitty, England’s chief medical officer, warned that sewage pollution in UK waters had become a “public health priority” that needed to “be taken seriously”.

Water companies are facing a growing backlash against sewage pollution, which has risen up the political agenda in marginal seats in the south of England that the Conservatives are seeking to retain in the election on July 4.

Thames Water, the UK’s biggest water provider by number of customers, says the Tideway Tunnel project, which began eight years ago, will significantly cut the amount of sewage leaked from its network.

While private water companies are obliged to monitor and report on the number of sewage overflow incidents, Thames Water has electronic devices that also measure the quantity of effluent flowing into the part of the Thames that falls within the Tideway Tunnel area of central London.

These devices recorded at least 85.9bn litres of sewage being pumped into that part of the river between 2020 and 2023, according to freedom of information requests obtained by the Liberal Democrats over successive years.

The latest, released this month, showed that 14.2bn litres of sewage entered the Thames at these sites last year.

Sarah Olney, Treasury spokesperson for the Lib Dems, said the outflows last year were “disgusting” and called for every combined sewage overflow pipe to be installed with monitors measuring volume and frequency. 

The worst incident took place in October at Mogden in south-west London, where 558mn litres of sewage were discharged.

The second-worst incident occurred at Crossness in Bexley, where 430mn litres of effluent were released in one day in November. Both Mogden and Crossness are home to sewage treatment works.

The increased focus on sewage overflows has also increased public and political scrutiny of water companies’ finances.

The 16 water and sewage companies in England and Wales paid out £78bn in dividends and accrued £62bn in net debt between privatisation in 1991 and March 2023, according to research by the Financial Times.

Ofwat was due to rule in June on how much water companies would be allowed to increase bills in England and Wales until 2030, but the sector regulator has delayed its decision until July 11 because of the election.

The decision will have a bearing on the financial health of Thames Water, which is struggling under the weight of its £18bn debt mountain and needs a £750mn cash injection from shareholders this year to keep running and deliver infrastructure improvements.

Ministers have already drawn up contingency plans to put the business in special administration, a form of temporary nationalisation.

The Lib Dems are calling for special administration measures to be enacted. Labour, the main opposition party, is urging a regulatory shake-up.

Thames Water said retrofitting the entire network with volume monitors would be “prohibitively expensive”. It said it had published plans to upgrade 250 sewage treatment works and sewers including a £100mn upgrade of the Mogden sewage treatment works and a £145mn upgrade of the Beckton sewage works.

“We regard all discharges as unacceptable and taking action to improve the health of rivers is a key focus for us,” the company said, adding that the Tideway Tunnel would capture 95 per cent of the volume of untreated sewage entering the tidal section of the river in a typical year once operational. 

Abu Dhabi conglomerate embarks on flurry of mining deals

Business owned by $240bn IHC broke into market last year with acquisition of a major Zambian copper mine

The mining business owned by $240bn Abu Dhabi conglomerate IHC has embarked on a flurry of deals in Africa, after breaking into the market last year with its acquisition of a major Zambian copper mine.

IHC chief executive Syed Basar Shueb, told the Financial Times that its IRH subsidiary had signed joint venture agreements for iron ore mining in two places in Angola — Kassala Kitungo and Munenga — and that it was in advanced talks to mine nickel in Burundi as well as various metals in Tanzania and Kenya.

IHC expected to make about $1bn of mining acquisitions this year, Shueb told the FT.

The Abu Dhabi group’s foray into the mining industry comes as BHP’s £34bn approach for rival Anglo American highlights the race to secure access to minerals such as copper, iron ore and lithium that are critical to the transition to cleaner energy.

Asked who IRH was bidding against for mining assets, Shueb said the “majority of the time you’re competing with Chinese. There’s no other countries.”

IHC is chaired by Abu Dhabi royal Sheikh Tahnoon bin Zayed Al Nahyan, who is also the United Arab Emirates’ national security adviser and a key business figure. 

IRH appeared to have come from nowhere when it launched a $1.1bn bid for 51 per cent of the Mopani copper mine in Zambia last year. But Shueb said the group had been formed from different mining interests belonging to IHC and Royal Group, an investment group also chaired by Sheikh Tahnoon that preceded IHC. 

“Whether it’s a mining or a refinery business of the gold, or the trading side of the business, we have consolidated everything under IRH,” Shueb said.

He said IRH’s strategy was to buy mining concessions, as opposed to providing investment to other operators in return for future supply of raw materials, and that it wanted to make its mining projects “green” by using renewable energy sources, such as solar power.

IRH did previously have some involvement in a gold trading scheme in the Democratic Republic of Congo (DRC). The company said it had facilitated an arrangement between Auric Hub Gold Refinery, an Abu Dhabi gold and silver refinery, and gold trading business Primera Gold DRC, which last year won a 25-year monopoly for hand dug gold in the DRC. 

However, Shueb said this trading operation was now being handed over to the DRC government.

He also said IRH was discussing taking over Konkola Copper Mines with the Zambian government. Vedanta, the Indian metals and energy group, currently operates the mine and wants to sell a minority stake.

“Next to Mopani is KCM . . . we are talking to the government because it makes a lot of sense that one party manages Mopani and KCM,” he said.

“We had a few meetings with Vedanta and the government, but of course, Vedanta is a large player, they are much more experienced than us.” 

IRH employed about 60 mining specialists, Shueb said, and was owned by an IHC holding group called TwoPointZero that had other technology, financial sector, and metals assets.

Philip Lane brushes off fears that loosening Eurozone monetary policy before US Fed could backfire

The European Central Bank has sent a clear signal that it will cut interest rates from their historic highs next week, as its chief economist brushed off fears that doing so before the US Federal Reserve could backfire.

The ECB now looks almost certain to be one of the first major central banks to cut rates, having been criticised for being one of the last to raise them after the biggest inflation surge for a generation three years ago.

Philip Lane told the Financial Times in an interview ahead of the bank’s landmark June 6 meeting: “Barring major surprises, at this point in time there is enough in what we see to remove the top level of restriction.”

Investors are betting heavily that the ECB will lower its benchmark deposit rate by a quarter percentage point from its record high of 4 per cent at next week’s meeting after Eurozone inflation fell close to the bank’s 2 per cent target.

The Swiss, Swedish, Czech and Hungarian central banks have already reduced the cost of borrowing this year in response to falling inflation. But among the world’s major economies, the Fed and Bank of England are not expected to cut rates before the summer and the Bank of Japan is considered more likely to continue raising them.

Asked if he was proud that the ECB was in a position to cut rates earlier than others, Lane said: “Central bankers aspire to be as boring and I would hope central bankers aspire to have as little ego as possible.”

He added that a key reason why inflation had fallen faster in the Eurozone than the US was because the region had been hit harder by the energy shock triggered by Russia’s invasion of Ukraine. “Dealing with the war and the energy problem has been costly for Europe,” he said.

“But in terms of that first step [in starting to cut rates] that is a sign that monetary policy has been delivering in making sure that inflation comes down in a timely manner. In that sense, I think we have been successful.”

Lane said ECB policymakers needed to keep rates in restrictive territory this year to ensure that inflation kept easing and did not get stuck above the bank’s target, which he warned “would be very problematic and probably quite painful to eliminate”.

However, he said the pace at which the central bank lowered Eurozone borrowing costs this year would be decided by assessing data to decide “is it proportional, is it safe, within the restrictive zone, to move down”.

“Things will be bumpy and things will be gradual,” said Lane, who is responsible for drafting and presenting the proposed rate decision before it is decided by the 26 members of the governing council next week. 

“The best way to frame the debate this year is that we still need to be restrictive all year long,” he added. “But within the zone of restrictiveness we can move down somewhat.”

Despite recent data showing Eurozone wage growth picked up to a near-record pace at the start of this year, Lane said “the overall direction of wages still points to deceleration, which is essential”, adding that this was backed up by the ECB’s own wage tracker.

Some analysts have warned that if the ECB diverges from the Fed by cutting rates more aggressively it could cause the euro to depreciate and push up inflation by raising the price of imports into the bloc. 

Lane said the ECB would take any “significant” exchange rate move into account, but pointed out “there has been very little movement” in this direction. The euro has rebounded by a fifth against the US dollar from a six-month low in April and it remains up over the past year. 

Instead, he said delays in the expected timing of Fed rate cuts had pushed up US bond yields and this had lifted long-term yields of European bonds. 

“That mechanism means that for any interest rate we set, you get extra tightening from the US conditions,” he said, indicating the ECB might have to offset this with extra cuts to its short-term deposit rate. “All else being equal, if the long end tightens more, then how you think about the short end changes.”

Eurozone inflation has fallen from above 10 per cent at its peak in 2022 to a near three-year low of 2.4 per cent in April, but it is expected to tick up to 2.5 per cent when data for May comes out this week.

Lane said that the “still significant amount of cost pressure” coming from rapid wage growth pushing up services prices meant that the ECB would have to keep policy restrictive until 2025.

“Next year, with inflation visibly approaching the target, then making sure the interest rate comes down to a level consistent with that target − that will be a different debate,” he said.

How far the ECB cuts rates overall will hinge on its assessment of the so-called neutral rate, the point at which savings and investment are balanced at desired levels, where output is at an economy’s potential and inflation is at target.

Estimates of the neutral rate vary but Lane said it was likely to imply a policy rate at or just above 2 per cent, although this could be higher if “a vigorous green transition” to renewable energy or vast gains from generative artificial intelligence prompted a surge in investment.

Copper price to rocket to $40,000 a tonne, says top trader Andurand

When mining company BHP made a bid for rival Anglo American last month, it was seen as a play on the future of copper. The shiny red metal is a crucial component in electric vehicles, solar panels and wind farms, and a deal would give BHP control over Anglo’s lucrative copper mines in Chile and Peru. 

Now, one of the world’s best known commodities hedge fund managers tells my colleague Costas Mourselas that the price of copper could almost quadruple to $40,000 a tonne in the next four years.

“We are moving towards a doubling of demand growth for copper due to the electrification of the world,” says Pierre Andurand, chief investment officer of Andurand Capital Management, arguing that supply will struggle to keep up with the voracious demand that comes with a global transition away from fossil fuels. 

“I think we could end up to $40,000 per tonne over the next four years or so. I’m not saying it will stay there then; eventually we will get a supply response, but that supply response will take more than five years.”

The mining industry estimates that it typically takes around 15 years to develop a new mine, and Andurand doesn’t think that digging deeper and faster in existing mines will be enough. 

Andurand climbed the ranks at Goldman Sachs and then at oil trader Vitol before launching his own fund at the age of 30. His volatile performance has earned him a reputation as something of a comeback kid. And indeed he hasn’t been right on all of his big calls. Last year, his Commodities Discretionary Enhanced fund suffered a 55 per cent loss as bullish oil wagers backfired. 

“I think we all lost a lot of money, expecting supply disruption that did not happen,” he said. “You remember that pain.”

But he has since recovered most of those losses. His best-known fund, which runs $1.3bn, is up 83 per cent this year, according to investors. One of the bullish bets that got him there was on soaring copper prices, which are up more than 20 per cent.

Scheming for secession

In Belgium’s upcoming elections, a party that wants to split up the country is expected to become the biggest winner. But the road to Flemish independence is still a long way off, writes Laura Dubois.

Context: On June 9, Belgians elect their federal and regional governments. As the country is divided into Dutch-speaking Flanders and French-speaking Wallonia, plus the bilingual capital Brussels, citizens cast votes for regional parties, who then have to form a federal coalition. Often, chaos and delays ensue.

For the first time, the Flemish far-right Vlaams Belang is expected to become the largest party with 26 of 150 seats in the federal parliament, and is polling first at around 26 per cent in Flanders.

“If we have a democratic majority, we will strive for independence,” VB party leader Tom Van Grieken told the FT.

Van Grieken explains that “we do not feel represented in the Belgian country,” complaining that the wealthy Flanders has to foot the bill for less affluent Wallonia.

His aim is to negotiate with Wallonia after the elections and, if they refuse, simply go it alone: “We will have a declaration of independence.”

But to push ahead with this plan, Vlaams Belang will need the support of nationalist N-VA, which governs the region and is projected to become the second-largest force in Flanders — and they don’t seem inclined.

“We are trying to offer a realistic path towards a better model of political representation for the Flemish people,” N-VA chief Bart De Wever said, explaining that this would entail more autonomous governance for both regions. All-out secession would be “a chaotic strategy which would ultimately weaken the voice for more Flemish autonomy”, De Wever said.

Other parties also believe that Vlaams Belang’s strategy won’t work. This is because it remains unclear what will happen to Brussels, which Vlaams Belang sees as the capital of its future country, or to membership of the EU — a crucial question for the city that hosts its institutions.

“I don’t think it will happen because they have no solution,” says Peter Mertens, general secretary of the far-left Workers’ party. “They want to create a political standstill after the elections, to have no government after the elections.”

Researchers also believe that few people, including Vlaams Belang voters, support independence. “Only a very, very small minority of Belgians, also on the Flemish side, are in favour of splitting up the country,” says Didier Caluwaerts of the Free University Brussels (VUB).

“It’s going to be difficult making policies,” Caluwaerts predicts of the period after the elections. “But the country splitting up, that’s not immediately going to happen.”

Everything in society can feel geared toward optimization – whether that’s standardized testing or artificial intelligence algorithms. We’re taught to know what outcome you want to achieve, and find the path towards getting there.

Kenneth Stanley, a former OpenAI researcher and co-founder of a new social media platform called Maven, has been preaching for years that this method of thinking is counterproductive, if not outright harmful. Instead of prioritizing objectives, Stanley says we should be prioritizing serendipity.

“Sometimes, in order to find those stepping stones that will lead to the things we care about, we have to get off the path of the objective and onto the path of the interesting,” Stanley told TechCrunch in a video interview. “Serendipity is the opposite of finding something through objectives.”

The idea of seeking novelty for its own sake started as an algorithmic concept that Stanley studies called open-endedness, a subfield of AI research about systems that “just keep producing interesting stuff forever.”

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How Maven’s AI-run ‘serendipity network’ can make social media interesting again

Rebecca Bellan

7:30 AM PDT • May 26, 2024

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Image Credits: Getty Images

Everything in society can feel geared toward optimization – whether that’s standardized testing or artificial intelligence algorithms. We’re taught to know what outcome you want to achieve, and find the path towards getting there.

Kenneth Stanley, a former OpenAI researcher and co-founder of a new social media platform called Maven, has been preaching for years that this method of thinking is counterproductive, if not outright harmful. Instead of prioritizing objectives, Stanley says we should be prioritizing serendipity.

“Sometimes, in order to find those stepping stones that will lead to the things we care about, we have to get off the path of the objective and onto the path of the interesting,” Stanley told TechCrunch in a video interview. “Serendipity is the opposite of finding something through objectives.”

The idea of seeking novelty for its own sake started as an algorithmic concept that Stanley studies called open-endedness, a subfield of AI research about systems that “just keep producing interesting stuff forever.”

“Open-ended systems are like artificially creative systems,” said Stanley, noting that humans, evolution and civilization are all also open-ended systems that continue to build on themselves in unexpected ways.

This algorithmic insight morphed into a life philosophy for Stanley. He even wrote a book about it in 2015 with his former PhD student Joel Lehman called Why Greatness Cannot Be Planned. The concept took off, making Stanley something of an international focal point for the brazen idea that, actually, you can just do things because they’re interesting, rather than because you need to complete some stated objective.

But in 2022 while leading an open-endedness team at OpenAI, Stanley said he was “boiling over with discontent” and “had this epiphany” where he decided to stop talking about bringing open-endedness to wider audiences and instead start doing something about it.

What if, he asked himself, he created a “serendipity network,” a system that’s set up to increase the probability of serendipity, for other people to enjoy?

So he quit his job and set about to create Maven, a social network built around an open-ended AI algorithm that evolves to seek novelty. When signing up, users select a series of topics to follow — from neuroscience to parenting — and the algorithm shows them posts that align with their interests. There are no likes, upvotes, retweets or follows, and there’s no way to amplify content to the masses.

Instead, when a user posts something, the algorithm automatically reads the content and tags it with relevant interests so it shows up on those pages. Users can turn up the serendipity slider to branch out beyond their stated interests, and the algorithm running the platform connects users with related interests. So if, for example, you’re following conversations about urban planning, Maven might also suggest conversations about public transit.

And while there’s no way to follow people on the platform, you can see and connect with other people who follow topics you’re interested in.

In a lot of ways, Maven feels like an antidote to today’s social media, where the “objective paradox is on full display” as people fall over themselves to create sensationalist content that will garner more attention and popularity.

“The echo chambers and the toxicity, the narcissism amplification and personal branding has gone totally out of control so that people are losing their soul and turning into brands,” said Stanley.

The addictive qualities of social media, harm to mental health in adolescents and adults, and ability to polarize nations is well documented. These, Stanley says, are the unintended consequences of ambitious objectives, the outcome of making popularity a proxy for quality.

“And then you get all these other things because once you have popularity, you have perverse incentives,” he said.

Stanley noted that Maven users can flag inappropriate content or misinformation when it pops up, and its AI is actively monitoring for highly inflammatory, offensive “or worse” content. He said Maven can’t fix the nastiness in human nature, but by eliminating the incentives behind sharing such content, Stanley hopes it could change the “overall aggregate dynamic of how people are behaving.”

Some social media companies have attempted to combat such incentives in the past. The OG of pushing out serendipitous content was StumbleUpon, a browser extension and app created by entrepreneur Garrett Camp, years before he co-founded Uber. Instagram in 2019 then tested out hiding “likes” to curb comparisons and hurt feelings that come with attaching popularity to content. X, formerly Twitter, is preparing to make likes private, as well, but for less wholesome reasons. In a very Elon Musk-inspired line of thinking, X’s goal is to create more engagement by allowing people to privately like “edgy” content that they otherwise wouldn’t to protect their public image.

Maven is less interested in connecting users with audiences, and more focused on connecting them with what’s interesting.

The problem of monetization

Stanley and his co-founders – Blas Moros and Jimmy Secretan – soft-launched Maven in late January. The platform publicly debuted in May alongside a Wired feature that Stanley says gave Maven a top trending spot on Product Hunt and brought on thousands of sign ups.

Those are still small numbers compared to other new entrants into the social media space. Bluesky, which launched in 2021, has had 5.6 million sign ups. As of January 2024, Mastodon had 1.8 million active users. Farcaster, a new crypto-based social protocol that just raised $150 million, has counted about 350,000 signups. All of these new networks will need to grow significantly if they’re to be considered successful.

It’s still an open question over whether Maven will even be able to grow its user base without the very toxic qualities we love to hate, but which nonetheless drag us back to the cesspit that is social media.

Maven raised $2 million in 2023 in a round led by Twitter co-founder Ev Williams, Stanley told TechCrunch. OpenAI CEO Sam Altman also participated in the round. Stanley said Williams and Altman invested because, like many of us who have become endeared by Maven’s almost too-sweet-for-this-world ethos, they think the world and the internet needs something like this.

And indeed, Maven’s idealistic hope to connect people to interesting ideas is reminiscent of the early 2000s, when the internet was a place of connection and exploration. Sentiments from early users on the platform are mostly positive and optimistic, as many came to the platform for genuine and serendipitous interactions and the promised freedom from toxicity.

But will idealism be enough to bring on more institutional investors later when Maven wants to grow?

“I think the challenge we face is that going forward, that becomes a harder and harder way to raise money,” said Stanley, noting that investors won’t be throwing down millions unless there’s a clear path to get a return on their investment.

“I just need to find the right investors going forward and quickly get to a sustainable business model,” he continued, musing over the idea of a subscription model that would allow Maven to keep its ideology intact.

There are, of course, other ways for Maven to bring in revenue. Advertising is one path, but one that appeals less to Stanley because of how tied up it is with virality and sensationalism.

Down the line, Maven could also potentially sell its data to companies like OpenAI that are training their algorithms on reams of data. OpenAI earlier this month signed a deal with Reddit to train its AI on the social media company’s data. And Maven’s value proposition from an AI standpoint isn’t even just the content on the platform – it’s the open-ended algorithm running it.

Stanley told TechCrunch he believes open-endedness is essential to artificial general intelligence (AGI), a type of AI that aims to match or surpass human capabilities across a range of cognitive tasks. Open-endedness is “such a salient aspect of being intelligent,” Stanley said. “It’s like this creative and also curiosity-driven aspect of being human.”

“The data is interesting from an AI perspective, because it’s data about what is interesting,” said Stanley, noting that current AI models are missing the intuitive understanding of what is interesting and what is not, and how that can change over time. However, even though the data has potential value to AI, Stanley said Maven has no deal with any company to grant access to that data.

And while he said he hasn’t ruled that possibility out in the future, he would think very carefully about what the implications of sharing such data would be.

“That’s not the point of this for me,” he said, noting that he’s not convinced that it would be a good thing for neural networks to be completely open-ended because that might make any creative endeavors by humans completely pointless.

“I really wanted to create this worldwide serendipitous community,” he said. “It’s not like I have a side plan that we’re going to use Maven to create open-ended AI or something. I just wanted to create something for people because I started to feel like everybody’s gonna be talking to chatbots more and more and we’re gonna be less and less connected with other people. And I was contributing to that being an AI researcher.”

“Something about this idea of a serendipity network made me feel morally better, like I could actually contribute to people being more connected rather than less.”