TheChek News Flow

The latest sale brings the number of Hyundai Motor factories in China to three from five

Hyundai Motor 005380 -2.36%decrease; red down pointing triangle sold a factory in Chongqing for less than half the amount sought initially, as it pushed to streamline operations in China.

The South Korean carmaker’s China-based joint venture sold its Chongqing plant to Yufu Industrial Complex Construction, a local government-backed entity, for 1.62 billion yuan ($225.9 million). It had sought CNY3.68 billion for the factory, according to Hyundai officials in Seoul on Wednesday.

“Beijing Hyundai Motor sold its plant in Chongqing, China, late last year as part of its continued efforts to optimize operations in China,” Hyundai Motor said in an email statement.

Yufu officials weren’t immediately available for comment.

The latest sale brings the number of Hyundai Motor factories in China to three from five.

The Chongqing plant, which began operating in August 2017, is the second Hyundai Motor-invested factory sold in China. Hyundai sold one of its plants in Beijing in 2021.

The South Korean auto manufacturer has recently suffered from sluggish vehicle sales in China.

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Walt Disney Co.‘s board decided not to recommend Nelson Peltz’s board candidacy to shareholders because he had not presented a “single strategic idea” in two years of seeking a seat and “seemed oblivious to the ongoing secular change in the media industry,” the company revealed in a securities filing. The comments come as Peltz’s proxy contest to win seats on Disney’s board is ramping up.

The company also said the board decided not to recommend Peltz’s other nominee, former Disney CFO Jay Rasulo, because the media business had changed so much since he had left the company and that “an outdated perspective on the business would be damaging to the ongoing strategic transformation underway.”

The securities filing also detailed the history of Disney’s interactions with Peltz, which the company said numbered more than 20 since last February, when Peltz ended his last proxy contest against Disney. It said that in a meeting between CEO Bob Iger and Peltz in November, Iger asked Peltz what he would recommend the board do to lift the company’s stock price, and Peltz “responded that he was not there to put forth a plan, he was only there to get a Board seat.”

Last month, OpenAI board director Adam D’Angelo called Databricks CEO Ali Ghodsi to see if he might consider joining OpenAI’s board, according to a person familiar with the situation. That kind of request might not seem unusual—except that Ghodsi has positioned Databricks as a kind of anti-OpenAI through its business of helping companies develop AI applications instead of relying on OpenAI’s technology.

Ordinarily, companies don’t invite representatives of quasi rivals to join their board. Even if Ghodsi doesn’t end up joining, the fact that D’Angelo made such an approach signals the potential for further turmoil on the board and new challenges for OpenAI’s CEO, Sam Altman, who was fired and rehired in November after a battle with the company’s then-board.

As OpenAI’s business has taken off, Ghodsi, a well-known figure in AI, and his colleagues at Databricks have argued publicly and privately to major software buyers that in the long run, for both performance and security reasons, companies may be better off developing their own AI models or customizing open-source ones rather than getting hooked on OpenAI’s closed-source models. The two companies are on different sides of a brewing debate about the societal and geopolitical ramifications of open-source AI models.

D’Angelo’s approach to Ghodsi may be in keeping with the board’s nonprofit mandate to prioritize limiting societal harms from AI over making money, said a person who has spoken with him. In 2019, when Altman was still a director of the nonprofit, he started the for-profit arm so that OpenAI could raise more money while still adhering to the mission of the nonprofit, which oversees the commercial unit. D’Angelo, whose day job is CEO of question-and-answer site Quora, believes the board should keep that unit—and Altman—in check, said a person who has spoken to him.

But the inherent conflict between the nonprofit’s charter and Altman’s push to build OpenAI’s business while also using his role to pursue deals outside the company—such as AI devices and investing in OpenAI vendors—contributed to Altman’s short-lived ouster. Board directors such as D’Angelo weren’t privy to some of those dealings, multiple people with knowledge of the situation said at the time.

D’Angelo, the only holdover from the OpenAI board that fired and rehired Altman, is now playing a key role in a search for new board members. He, along with two board members appointed following the drama in November, former Treasury Secretary Larry Summers and former Salesforce co-CEO Bret Taylor, have said they are looking to fill at least several open seats. (As part of his deal to return as OpenAI CEO, Altman agreed that he will not regain his seat on the nonprofit board for now.)

Among other candidates, OpenAI board representatives have approached Alexandr Wang, CEO of Scale AI, a firm whose services OpenAI has used to train its models, and former Microsoft and GitHub executive Nat Friedman about potentially joining as directors. The status of those talks also isn’t clear, but neither choice would raise eyebrows among OpenAI and Databricks employees the way Ghodsi’s appointment to the board would. It’s also unclear how advanced the talks between Ghodsi and D’Angelo are.

D’Angelo talked to another OpenAI competitor during the period after Altman was fired and before he was reinstated. D’Angelo talked to Dario Amodei, CEO of OpenAI’s archrival, Anthropic, about possibly becoming OpenAI’s new CEO, The Information previously reported at the time. Those talks didn’t go anywhere, but it showed the lengths D’Angelo would go to secure a future for OpenAI without Altman.

In the meantime, OpenAI is becoming an even more powerful force in the business world. It is now generating more than $130 million in revenue per month. Marquee investors currently value the for-profit entity at $86 billion.

The amount of capital OpenAI may need—Altman has said it might raise another $100 billion on top of the more than $13 billion it has raised already—as well as its fast-growing business and the influence of powerful equity holders such as Microsoft, Sequoia Capital and Andreessen Horowitz could put the for-profit arm at odds with the nonprofit’s mission.

Tensions could also increase if the company’s AI makes more progress following a recent breakthrough. Some OpenAI leaders believe they can develop superintelligent AI that can outperform humans at any task and perhaps help them colonize Mars and beyond. OpenAI says final decisions about whether the company can release new technology, now or in the future, ultimately rest with the nonprofit board, which can “overrule” decisions by leaders of the for-profit arm.

To ease those tensions, OpenAI could rework its structure so the nonprofit entity only owns a small portion of the for-profit arm but receives a percentage of the latter’s profits to fund its mission, a structure similar to those of other nonprofits such as the Lego Foundation, said Josh Wolfe, managing partner at venture firm Lux Capital and a trustee at two nonprofits. (Lux is also a Databricks shareholder.)

For instance, profits from OpenAI could fund AI safety research the board leads or could subsidize access to OpenAI’s technology for students or impoverished communities, Wolfe said. When Altman was reinstated, the new three-person board said it would look at “improving our governance structure” but didn’t imply that it would make any major changes.

Policymakers face deepening property sector crisis along with deflationary and demographic pressures

China’s population decline accelerated in 2023 as its economy grew at one of the lowest rates in decades, pointing to persistent challenges for the world’s second-largest economy from a property slowdown, deflation and demographic pressures.

Gross domestic product expanded 5.2 per cent last year, outpacing growth of just 3 per cent in 2022, when the economy was constrained by Beijing’s draconian zero-Covid restrictions, and exceeding the government’s official target of around 5 per cent, already the lowest benchmark in decades.

But the population dropped by a second year in a row as deaths rose and births fell. Wang Feng, an expert on Chinese demographics at the University of California, Irvine, said the decline of 2mn people revealed the “footprint of Covid-19”, which spread through the country in early 2023 after authorities hastily lifted the anti-pandemic measures.

Analysts said the data highlighted the challenge for President Xi Jinping, who began an unprecedented third five-year term in power last year, to engineering a stronger economic recovery.

The property sector, which has been mired in a debt crisis for three years, continued to suffer in 2023, the official statistics showed on Wednesday. Investment in property development fell 9.6 per cent last year compared with a year earlier, while new home prices in December declined 0.4 per cent on the previous month, the sharpest fall since February 2015.

Chinese equities lost ground following the data release. The Hang Seng Mainland Properties index in Hong Kong fell 4.9 per cent to an all-time low, while the Hang Seng China Enterprises shed 3.5 per cent to be down 9 per cent this month. The broader Hang Seng index declined 3.4 per cent, while the CSI 300 index of Shanghai- and Shenzhen-listed stocks fell 1.1 per cent.

China’s population fell to 1.4bn in 2023, as 11mn deaths outstripped 9mn births, and demographers forecast further falls as the population rapidly ages. The number of deaths last year was almost 600,000 more than in 2022, exceeding the increase of more than 200,000 between 2021 and 2022.

“It is very likely that the rapid increase in number of deaths comes from the chaotic ending of zero-Covid, which led to many excess deaths,” Wang of the University of California said.

The population, which declined for the first time in 60 years in 2022, is the result of a 1980s policy that restricted most couples to one child, well below the average of 2.1 needed to remain level. The national death rate was 7.87 per 1,000 people in 2023, the highest since the early 1970s, and up from 7.37 last year.

China’s premier Li Qiang on Tuesday pre-empted the official data release, announcing the headline GDP growth figure on Tuesday at the World Economic Forum in Davos. Li praised policymakers’ focus on “strengthening the internal drivers” rather than unleashing massive stimulus, which some experts have called for to revive growth.

Economists said the annual growth rate was probably flattered by as much as 2 percentage points because of a comparison with low growth during the pandemic and suggested Beijing would need to do more this year to stabilise the property market and drive up consumption to quash deflationary pressure.

Fourth-quarter GDP was 1 per cent higher than in the third quarter and up 5.2 per cent year on year, narrowly below analyst forecasts of 5.3 per cent.

Fixed-asset investment excluding rural households was up 3 per cent in 2023 over the previous year, with investment in infrastructure 5.9 per cent higher and manufacturing up by 6.5 per cent. Private investment fell 0.4 per cent, though excluding real estate it grew 9.2 per cent, said the National Bureau of Statistics.

Investment in strategic areas prioritised by Beijing also grew faster. Investment in manufacturing of aerospace vehicles and equipment, for example, grew 18.4 per cent.

Retail sales, a gauge of consumption, rose 7.4 per in December cent year on year, compared with 8 per cent forecast by analysts and 10 per cent growth in November, while industrial output grew 6.8 per cent last month against a year earlier, above expectations of 6.6 per cent.

Analysts said it was not clear whether officials planned a more comprehensive programme to stabilise market expectations. Beijing signalled late last year that it was prioritising growth and security over reform at the annual Communist party central economic work conference.

“Recent speeches by China’s top leaders seek to triangulate the message that the economy is on the right course and no panicky stimulus measures are needed but [that] the government still understands the concerns of businesses and households and stands ready to act if needed,” said Eswar Prasad, a senior fellow at the Brookings Institution think-tank.

But the data revealed an economy that is experiencing “at best subdued growth characterised by weak domestic demand and persistent deflationary pressures”, he added. “It seems premature to say the economy is out of the woods.”