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What’s
News
Business & Finance
G M is facing pressure
from investor David Ein-
horn to split its common
stock into two classes: one
that pays dividends and a
second that would entitle its
holders to all earnings after
the dividend is paid. A1
 SoftBank approached
Didi about investing
roughly $6 billion to help
the ride-hailing firm ex-
pand in self-driving-car
technologies. B1
 Tencent bought a 5%
stake in Tesla, as the elec-
tric-vehicle maker prepares
to launch its first car aimed
at the mass market. A1
 Aviva is looking to sell
its Friends Provident unit
in a deal that could fetch as
much as $750 million. B6
 Huishan Dairy said it
has lost contact with a top
executive and co-owner
who had abruptly left the
company last week. B1
 Pimco settled a breach-
of-contract suit filed by for-
mer star manager Bill Gross
for $81 million, people famil-
iar with the matter said. B6
 Amazon said it is acquir-
ing Dubai-based Souq.com,
betting on the rapidly ex-
panding Middle Eastern
online shopping market. B4
 HNA is seeking to buy a
stake in Swiss airport re-
tailer Dufry. B3
 Crude prices rose
amid disrupted supply in
Libya, rallying from near
four-month lows a day
earlier. B7
World-Wide
 Western military com-
manders are concerned
that large-scale Russian
military exercises near the
Baltic states in September
pose heightened risks for a
miscalculation that could
trigger a crisis. A1
 The Fed’s Evans said
rates could be raised four
times this year if inflation
picks up, but suggested
three increases remain
more plausible. A7
 The U.S. has ramped up
support for Sunni Arab
states fighting al Qaeda
and Iranian-backed mili-
tias in Yemen. A3
 One of the most fero-
cious tropical storms to hit
Australia in years blew
ashore, causing widespread
flooding and damage. A4
 Iran and the Gulf states
are trying to repair their
damaged relationship as
the U.S. takes a more con-
frontational stance toward
Tehran. A3
 Taiwan’s Ma was found
not guilty of libel and leak-
ing confidential information
in a case involving suspected
influence peddling. A4
 Criminal charges
against pro-democracy
demonstrators in Hong
Kong prompted public crit-
icism over the timing. A4
 Brexit will be a big bur-
den for German businesses,
with four of 10 companies
expecting trade activities to
worsen over the coming
months, a survey showed. A3
CONTENTS
Business News...... B3
China’s World......... A2
Crossword.............. A12
Heard on Street... B10
Life & Arts......... A9,12
Management.......... B5
China: RMB28.00; Hong Kong: HK$23.00;
Indonesia: Rp25,000 (incl PPN);
Japan: Yen620 (incl JCT); Korea: Won4,000;
Malaysia: RM7.50; Singapore: S$5.00 (incl GST)
KDN PP 9315/10/2012 (031275); MCI (P)
NO. 066/01/2017; SK. MENPEN R.I. NO: 01/
SK/MENPEN/SCJJ/1998 TGL. 4 SEPT 1998
s Copyright 2017 Dow Jones &
Company. All Rights Reserved
NIKKEI 19202.87 À 1.14%
Australia’s Northeast Reels From Ferocious Cyclone
DAN PELED/EUROPEAN PRESSPHOTO AGENCY
FORCEFUL: Strong winds and heavy rain from Tropical Cyclone Debbie lash trees in the northeast Australia resort town of Airlie Beach. A4
Moscow Moves Worry NATO
Biggest Russian
exercises ever near
Baltics raise concern
of miscalculation risk
BY JULIAN E. BARNES
BRUSSELS—Western mili-
tary commanders are con-
cerned that large-scale Russian
military exercises near the Bal-
tic states in September pose
heightened risks for a miscalcu-
lation that could lead to a cri-
sis, allied officials said.
RISKY INVESTMENTS ARE Tehran Looks to Open New Doors
A SWIPE AWAY ON PHONE
Losses pile up for small-time Chinese investors who use online apps
BY JAMES T. AREDDY
CHONGMING ISLAND, Total payments by mobile
China—Millionaire real-estate devices in China
developer Han Hongwei has
$3 trillion
been accused of securities
fraud by stock-market regula-
tors, dishonesty and slander
by a takeover target, and ille-
gally firing employees.
He wasn’t required to dis-
close any of that while pitch-
ing a $15 million investment
deal last year to small-time
Chinese investors through
apps on their mobile phones.
Anyone who put up $15,000
for eight months to help
build Elegant Villa, more
than 400 homes aimed at
rich Shanghai residents as a
weekend getaway on an is- Source: Credit Suisse
land known for its bird sanc- THE WALL STREET JOURNAL.
tuary, was promised an 8.8%
annual return—seven times what they could
earn on bank deposits.
In China, about 700 million people carry a
Tencent Backs Tesla
With $1.8 Billion
BY TIM HIGGINS
AND ANNE STEELE
Tencent Holdings Ltd.
bought a 5% stake in Tesla
Markets................... B10 Inc., bringing the backing of
Opinion.............. A10-11
Property Report... B9
China’s most valuable com-
Technology............... B4 pany to the Silicon Valley elec-
U.S. News............. A6-7 tric-vehicle maker as it pre-
Weather................... A12 pares to launch its first car
World News........ A2-5
aimed at the mass market.
The $1.8 billion that Ten-
cent paid makes it Tesla’s
fifth-largest shareholder, ac-
cording to data from S&P Capi-
tal IQ. It marks a vote of confi-
dence in Tesla Chief Executive
Elon Musk at a time when he
faces questions about whether
he can meet his ambitious
goals of delivering the $35,000
Model 3 sedan on time and at
the scale he has projected.
Tencent acquired the stake
through a combination of a
WEDNESDAY, MARCH 29, 2017 ~ VOL. XLI NO. 146
STOXX 600 377.30 À 0.61%
The exercises, which Western
officials estimate will involve
nearly 100,000 troops, will be
the first to roll out after the new
North Atlantic Treaty Organiza-
tion force in the region reaches
full strength. They will also take
place at the same time as mili-
tary drills by Western forces in
Sweden, across the Baltic Sea.
U.S. and NATO officers have
warned this year’s version of
Russia’s annual Zapad exercises
could create more tensions
than they have in years, even
recalling those that arose dur-
ing the Cold War.
Dialing for Dollars
2 online investing proponents
1 ternet to raise money, hawk-
0
’13 ’14 ’15 ’16
Estimates
’17
bubbles in asset types from bonds to plastic
pellets. And it is shifting more of the risks
stock offering by Tesla and
shares purchased on the open
market, according to a filing
Tuesday. Tencent’s stake is
passive, meaning the company
likely isn’t seeking board seats
or agitating for change.
A Tencent spokeswoman
called Tesla “a global pioneer
at the forefront of new tech-
nologies.” Tencent’s success
comes from backing entrepre-
neurs like Mr. Musk who com-
bine vision, ambition and exe-
cution, the spokesperson said.
Mr. Musk, who is also chair-
man, remains Tesla’s largest
shareholder with a little more
than 20% of the company.
Please see TESLA page A2
 SpaceX eyes historic launch
with reused booster............... B1
 Musk’s new goal: Upgrade
the human brain...................... B4
BRENT 51.77 À 2.01% GOLD 1255.90 À 0.04%
NATO diplomats and their
Russia counterparts will hold a
meeting Thursday of the NATO-
Russia Council, the alliance an-
nounced Tuesday. While the Za-
pad exercises aren’t on the
agenda, the ambassadors are
expected to discuss Russia’s
military buildup in the region,
particularly in its Baltic Sea ex-
clave of Kaliningrad, and as
well as details about the con-
tinuing deployment of the
NATO force in Poland, Lithua-
nia, Latvia and Estonia.
The U.S. troops committed
to that NATO force will arrive
smartphone, and many of
them are comfortable send-
ing money from their
screens through the world’s
busiest mobile-payment net-
works. That has created a
crowdfunding wave bigger
than anywhere else, a real-
time experiment in a type of
have long pushed in the U.S.
A million companies in
China have turned to the in-
ing loosely regulated, often
risky investments, according
to one of the country’s larg-
est online lenders.
Swipe by swipe, the online
money supply is helping to
democratize investing and
loosen capital markets. It also
is propping up indebted Chi-
nese companies and inflating
Please see MONEY page A8
INSIDE
RUSSIA PROBE
CHAIR FACES
CRITICISM
U.S. NEWS, A6
CHINA DRIFTS
INTO A U.S.
VACUUM IN ASIA
CHINA’S WORLD, A2
WSJ.com
EURO 1.0849 g 0.14%
at their training base in Poland
on Saturday. German troops
are in place in Lithuania and
the entire force is due to be
operational by the summer.
The alliance force is relatively
small at roughly 4,000 troops,
but Moscow has criticized it as
destabilizing.
For the Russians, the Zapad
exercises will be a chance to
practice detecting, jamming
and targeting allied forces with
drones and advanced artillery,
while spreading disinformation
about what its forces are do-
Please see DRILL page A2
STRIDING THROUGH: Iranian President Hassan Rouhani, above,
visited Russian President Vladimir Putin in Moscow on Tuesday.
Iran also is moving to mend ties with the Gulf states. A3
These Are Banner Days
For English Soccer Managers
i i
Impatient fans are hiring planes to fly
messages during matches
BY JOSHUA ROBINSON
LONDON—During a recent
Premier League soccer match,
the crowd was momentarily dis-
tracted by a buzz from above.
Arsène Wenger, the embat-
tled French manager of Arse-
nal, one of England’s
top teams, looked
up from the sideline
to see a small air-
craft pulling a ban-
ner that offered a
hot take on his job
performance. It
said: “No Contract
#WengerOut.”
Minutes later, an- Arsène
other plane ap-
peared above the stadium, al-
though this time with a
conflicting message fluttering
behind in 5-foot-tall letters: “In
Arsene We Trust #RespectAW.”
English soccer fans are no-
toriously impatient—and opin-
ionated—when it comes to
managers, with the average
tenure lasting just a couple of
seasons. This is bad news for
ASIA EDITION
DLR ¥110.65 g 0.01%
GM Faces
New Heat
On Price
Of Stock
BY DAVID BENOIT
AND MIKE COLIAS
General Motors Co. is facing
pressure from investor David
Einhorn to boost its languish-
ing stock price.
Mr. Einhorn’s Greenlight
Capital Inc. wants the auto
maker to split its common
stock into two classes: one
that pays dividends and a sec-
ond that would entitle its
holders to all earnings after
the dividend is paid. GM
would also return funds to
shareholders via buybacks of
the nondividend stock.
Greenlight believes the
move could attract new inves-
tors who are willing to pay
more for potential earnings
growth, potentially boosting
the auto maker’s market capi-
talization by as much as $38
billion, according to people fa-
miliar with the matter. GM’s
market value currently stands
at around $52.2 billion, ac-
cording to data provider Fact-
Set. It currently pays an an-
nual dividend of $1.52 a share.
A GM spokeswoman called
the proposed share structure
“unprecedented and untested”
and said it creates risks that
are “unacceptable” and “aren’t
in the best interest of our
shareholders.”
Mr. Einhorn believes GM
isn’t getting credit for either
its earnings potential or its div-
idend payouts, the people said.
GM has benefited from an
unprecedented seven-year rise
in U.S. auto sales since the fi-
Please see GM page A2
 Trump touts Ford investment
in Michigan factories............. B3
SERGEI KARPUKHIN/ASSOCIATED PRESS
i
Mr. Wenger, whose 21-year
stint is currently the focus of a
debate so fierce that two rival
fan groups decided to ring up
a fellow named Simon Moores.
Mr. Moores, the owner of a
banner-flying company called
Airads, is one of the quiet bene-
ficiaries of England’s
perpetual state of
sporting disconsola-
tion. His planes
achieved a rare dou-
ble this month by
towing both Wenger
banners, pro and
con, earning around
$2,500.
Wenger In March 2014,
Airads was also
hired to fly by Manchester
United’s home stadium with a
banner that read: “Wrong
One—Moyes Out.” A month
later, United’s then-coach Da-
vid Moyes was canned.
Last season, Mr. Moores
was prepared to fly another
banner calling for the ouster of
Mr. Moyes’s replacement at
Please see BANNER page A8
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A2 | Wednesday, March 29, 2017
China Drifts Into an American Vacuum in Asia
CHINA’S WORLD
ANDREW BROWNE
BOAO, China—For more
than half a century, Washing-
ton has set the economic
agenda for the Asia-Pacific,
where global wealth, technol-
ogy and military power are
concentrat-
ing.
Today, in-
creasingly,
Beijing does.
That’s not
because its
economic model is so widely
admired; Deng Xiaoping’s
“open door” to global trade
and investment is creaking
shut under President Xi Jin-
ping, a hard-line nationalist.
Nor does the country’s po-
litical system, brutally fo-
DRILL
Continued from Page One
ing—techniques they employed
in Ukraine. At the same time,
they will offer the U.S. and its
allies a prime opportunity to
see how Russia undertakes
such efforts.
The Baltic states have raised
concerns about the Zapad exer-
cises, which are being con-
ducted jointly by Russia and Be-
larus. Lithuania’s president has
said they show Moscow is pre-
paring for war with the
West. Allied officials have noted
that Russia used military exer-
cises to hide preparations for
the annexation of Crimea and
support for separatists in east-
ern Ukraine.
Many officials are on edge
that an error by an alliance or
Russian soldier, such as mis-
reading a drill as an aggressive
TESLA
Continued from Page One
Tesla declined to comment.
Shares of Tesla, which have
surged 26% this year, were
ahead 2.8% midday Tuesday in
New York.
Earlier this month, Tesla
moved to strengthen its fragile
balance sheet amid a risky
ramp-up in production of the
Model 3. At the time, it said it
was offering $250 million in
common stock and $750 million
in convertible notes.
26%
Increase in Tesla’s stock price
this year
The new sedan is part of Mr.
Musk’s bet to transform Tesla
from a luxury car maker into a
company that offers a mass-
market electric vehicle, along
with solar panels to generate
energy to power its vehicles,
and batteries to store that
power at home and offices.
The Silicon Valley com-
pany—which is unprofitable
and deeply indebted—plans to
begin Model 3 production in
July, and ramp up to 5,000 ve-
hicles a week in the fourth
quarter.
But the cost has been high,
and Tesla needs a cushion to
move ahead in the capital-in-
tensive auto industry.
The company has more than
$2 billion of debt due in 2018—
a year during which it aims to
sell significantly more vehicles
than last year.
It also plans to continue in-
vesting heavily in overhead
The U.S. market in 2016
for investments that take into
account environmental, social
and governance risks was $8.7
trillion, according to the Fo-
rum for Sustainable and Re-
sponsible Investment. A Fi-
nance & Markets article
Monday about State Street
Corp.’s analytical tools for re-
sponsible investing incorrectly
said the ESG market in the
cused on self-preservation,
have much appeal.
China isn’t even well liked.
Domestic repression and
trade mercantilism combine
these days with a prickly as-
sertiveness overseas. A recent
poll in South Korea, the latest
target of Beijing’s economic
bullying, shows the country
has even less affection for its
close neighbor than Japan, its
historical archenemy.
R
ather, China’s advance
is being enabled by a
factor that few coun-
tries in Asia could have fore-
seen, not even China itself: an
American retreat.
With no obvious alterna-
tives, Beijing is filling a vac-
uum that is rapidly expanding
in the early days of the
Trump presidency.
But while China dominates
its region with the sheer size
of its economy, it struggles to
lead—or inspire.
Years in the making, the
12-nation Trans-Pacific Part-
nership was the core of the
A Romanian soldier aiming his weapon during a NATO exercise earlier this month.
act, could quickly escalate into
a crisis if one side were to re-
spond with force. An incident
such as a crashed jet fighter
could also raise questions about
whether an accident or aggres-
sion by the other side occurred.
Senior NATO and American
officials say they have precau-
tions in place to minimize the
chance of miscalculations.
and product creation in com-
ing years.
Tesla recently closed its $2.6
billion acquisition of SolarCity,
combining Mr. Musk’s electric-
car and solar-energy compa-
nies, and dropped “Motors”
from its name to signal it is
more than just a car company.
Having a powerful friend in
China could help Tesla as it
pursues global expansion.
The auto maker’s revenue in
China rose to $1.07 billion last
year from $319 million in
2015—outpacing growth in the
U.S., where sales about doubled
to $4.2 billion.
China made up 15% of
Tesla’s $7 billion in revenue
last year, up from 8% in 2015.
The U.S. accounted for 60% of
the company’s 2016 revenue,
up from 48% in 2015.
Tencent’s investment in
Tesla marks the highest-profile
foray into the autos sector for
the Chinese internet giant. Big
Chinese tech companies have
backed a wave of green-car
startups in the country re-
cently, with Tencent supporting
smaller outfits such as NextEV
and Future Mobility Corp.
Tencent, while little known
outside China, is the world’s
largest game publisher by reve-
nue. It owns “League of Leg-
ends” developer Riot Games
Inc. and last year teamed up
with Chinese investors in an
$8.6 billion acquisition of Su-
percell Oy, the Finnish maker of
“Clash of Clans.” Tencent also
owns China’s largest social net-
work, WeChat, which has 889
million monthly active users.
Tencent shares rose more
than 40% over the past year,
thrusting it ahead of e-com-
merce giant Alibaba Group
Holding Ltd. and Industrial and
Commercial Bank of China, the
world’s biggest bank by assets.
—Dan Strumpf contributed
to this article.
CORRECTIONS  AMPLIFICATIONS
U.S. last year was $40 trillion.
The Alliance of Automobile
Manufacturers’ industry-regula-
tion proposals are known as the
One National Program. The
Rumble Seat column in the Fri-
day-Sunday edition about the
Chrysler Pacifica Hybrid mini-
van incorrectly gave the name
as the One National Standard.
Also, the maximum all-electric
Readers can alert The Wall Street Journal to any errors in news articles by emailing wsjcontact@wsj.com.
WORLD NEWS
Obama administration’s
“pivot” to Asia, the product of
compromises hammered out
in capitals from Tokyo to Can-
berra, an ambitious—perhaps
the last—U.S. effort to shape
the destiny of a region that
stands at the crossroads of
every global trend from fash-
ion to “fintech” and clean en-
ergy.
In repudiating that deal,
President Donald Trump has
empowered China.
The new administration,
says Goh Chok Tong, the for-
mer Singapore prime minis-
ter, “has taken a step back-
ward.”
At an annual gathering of
Asian power brokers on
China’s tropical Hainan Island
last week, Mr. Goh, one of the
region’s most respected elder
statesmen, posed an anxious
question: “Who will step into
the shoes of the U.S. to make
sure that we have free trade?”
It is hard for Chinese poli-
ticians to sound credible
when they proclaim the vir-
tues of globalization—the free
NATO forces will avoid holding
exercises close to the Russian
border during the Russian drill.
“We will be alert, we will be
very vigilant. But we don’t want
it to turn into a face-off during
their biggest exercise of the
year,” said Gen. Ben Hodges, the
top U.S. Army commander in
Europe, said at a recent train-
ing event for the American unit
GM
Continued from Page One
nancial crisis, while prolonged
low gas prices have fueled de-
mand for the company’s high-
margin pickup trucks and
SUVs. The nation’s largest
auto maker posted $12.5 bil-
lion in operating profit last
year—its second straight re-
cord—with the lion’s share
coming from North America,
its primary truck market.
Yet its shares trade only
about 6% above the price in-
vestors paid when GM re-
turned to the market in 2010
after its government-backed
bankruptcy. The stock trades
at the lowest valuation in the
S&P 500, measured by the
price compared with its ex-
pected earnings per share.
Its dividend yield, mean-
while, is among the top 25 in
the index.
Mr. Einhorn believes GM’s
management is doing a good
job operating the business and
isn’t pushing GM to change its
capital-spending plan, as other
investors have previously, the
people said.
Greenlight has been a GM
investor at various points for
about five years and had a
0.9% stake and options on 25
million shares at the end of
December.
Investors have pressured
GM in recent years to find a
way to improve its stock’s per-
formance. The auto maker,
which returned to the public
markets in November 2010 at
$33 a share, closed Monday at
$34.71.
Mr. Einhorn estimates the
dividend stock could trade be-
tween $17 and $22 and the re-
maining stock could trade at
$26 to $28, according to peo-
ple familiar with the plan.
ranges of the Porsche Cayenne
S E-Hybrid and Mercedes-Benz
GLE550e are 14 miles and 12
miles, respectively. The column
incorrectly said the maximum
range of both cars is 16 miles.
The Chevrolet Volt is a plug-in
hybrid electric vehicle, and the
Chevrolet Bolt is a battery-elec-
tric vehicle. The column in one
reference incorrectly referred to
the Bolt as a PHEV. The power
THE WALL STREET JOURNAL.
flow of ideas, technologies ment agency that seeks to
and cultures across borders— attract foreign investors to
from the battlements of the the country.
“Great Firewall,” the most ex- In Mr. Lembong’s view,
tensive barrier in all of cyber- Asia is headed into a more
space. anarchic future dominated by
Instead of a U.S.-inspired leaders with strong mandates
free-trade deal focused on the like India’s Narendra Modi or
digital economy, intellectual Japan’s Shinzo Abe. It will be
property, the environment a case of “everybody negotiat-
and labor standards—what ing with everybody else,” he
Hillary Clinton called the says. “Some will take the re-
“gold standard,” before turn- form route; others will do the
ing against it as presidential reverse and turn protectionist
candidate—China is pushing a and regressive.”
lower-grade alternative.
F
Yet, despite the shortcom- or now, the danger is
ings of this incremental ef- that Mr. Obama’s Trans-
fort, known as the Regional Pacific Partnership will
Comprehensive Economic morph into Mr. Trump’s
Partnership, Asian economies Trans-Pacific trade war.
are aligning around it be- Mr. Trump has threatened
cause there’s no better deal to impose 45% import tariffs
on the table. on Chinese imports. If he trig-
Neighbors are skeptical gers such an action, the ef-
that China can build consen- fects will ricochet around the
sus across the region. “Lead- entire Asia-Pacific manufac-
ership takes humility, humor turing supply chain.
and flexibility,” says Thomas A common view in Asia is
Lembong, the chairman of that the success that the U.S.
the Indonesia Investment Co- did so much to encourage is
ordinating Board, a govern- now feeding a backlash.
ROBERT GHEMENT/EUROPEAN PRESSPHOTO AGENCY
liance and Moscow are moving
to more regular meetings.
September is the traditional
month for military exercises
and Sweden, a close NATO
partner, is planning its biggest
military exercise in two decades
at the same time.
The Swedish exercise will
involve the U.S. and more than
a half-dozen NATO allies.
Some 19,000 troops will be in-
volved in practicing for the
territorial defense of Sweden,
including Gotland Island,
which U.S. officials consider
critical for ensuring allied ac-
joining the NATO force. cess to the Baltic States.
Alexander Grushko, Russia’s Swedish officials said they
ambassador to NATO, declined were aware of the Zapad exer-
to comment on the Zapad exer- cises and would be using cau-
cises. But he said the flexible for- tion to ensure no errors occur.
mat of Thursday’s meeting with The U.S. contribution to the
the alliance would allow consid- NATO force is planning its own
eration of “issues related to re- exercises, including an August
gional security” and other mili- drill with Polish and Lithuanian
tary activities. Russian officials forces to simulate an operation
have expressed hope that the al- to keep open the Suwalki Gap
David Einhorn’s Greenlight Capital wants General Motors to split its common stock into two classes.
At those levels, the stock billion stock-buyback plan. It
gains could total between $12 also detailed to investors the
billion and $38 billion. return it expected on its own
“We don’t know if there spending, tying executive com-
will be market demand and li- pensation to return on in-
quidity for the proposed secu- vested capital, a favorite met-
rities,” said GM spokeswoman ric of hedge funds and other
Joanne Krell. She said Mr. investors.
Einhorn’s proposed setup GM said that above a $20
could endanger its invest- billion cushion, it would re-
ment-grade credit rating, turn to shareholders any cash
among other risks. that it couldn’t put to work for
Mr. Einhorn has made a ca- at least a 20% return.
reer pushing what he sees as The moves persuaded the
misunderstood stories on Wall investors, a group that in-
Street, arguing that Lehman cluded Appaloosa Manage-
Brothers Holdings Inc. was ment LP and Hayman Capital
overvalued months before its Management LP, to drop their
collapse and successfully push to add Mr. Wilson to
pushing Apple Inc. to imple- GM’s board.
ment a $100 billion capital-re- Despite GM’s healthy re-
turn plan. sults in recent years, investors
His campaign comes just are cautious as U.S. vehicle
two years after GM fended off sales show signs of peaking.
a proxy fight led by a group of Analysts say they want to see
hedge funds and Harry J. Wil- evidence that GM can remain
son, an Obama administration solidly profitable in the next
official who ushered GM market downturn.
through bankruptcy in 2009. GM has said it has posi-
GM responded with a $5 tioned the business to remain
output of the Pacifica Hybrid’s umn incorrectly stated that the
V6 engine is 248 hp. The figure gas-equivalent is the Pacifica
given in the column, 260 hp, re- Premium and costs the same.
fers to maximum system out-
put, including both gas- and Jaylin Walker, a basketball
electric-power sources. Mean- player for Kent State Univer-
while, the comparable gas sity, is a sophomore. A Page
model to the Pacifica Hybrid One article in the Friday-Sun-
Platinum is the Pacifica Limited, day edition about players
which costs $2,500 less than named after basketball player
the Pacifica Hybrid Platinum, Jalen Rose misidentified him
the model evaluated. The col- as a freshman.
Having adopted Washing-
ton’s economic prescriptions
for growth—lower tariff bar-
riers, expansion of market
forces and investment in in-
frastructure—the region has
become a lightning rod for
the populist resentments of
an America still grappling
with the effects of the 2008
financial crisis.
The White House chief
strategist Steve Bannon la-
ments that “the globalists
gutted the American working
class and created a middle
class in Asia.”
On the one hand, this kind
of rhetoric scares the Chinese
leadership. “There is deep
anxiety,” says Fred Hu, chair-
man of Primavera Capital
Group, a China-based global
investment firm, who has ad-
vised the Chinese government
on financial reform. “They are
really alarmed about Trump.”
The angst is shared in a re-
gion that feels unmoored as it
steadily drifts into Beijing’s
orbit, as much by default as
by design.
on the two countries’ border in
the event of a Russian incursion.
In an effort to avert miscal-
culations, the top NATO com-
mander, U.S. Army Gen. Curtis
Scaparrotti, will take peace-
time control of strategic com-
munications, exercises and
force posture.
NATO has long criticized
Russia for not opening its exer-
cises up to observers and has
said it is far more transparent
with its drills. The two sides
have been briefing each other
in the NATO-Russia Council
sessions about exercises.
Russia has said the Zapad
exercise will involve 3,000
troops, below the number re-
quiring notification. Retired
Gen Philip Breedlove, the for-
mer top NATO commander,
has estimated 100,000 troops,
however, and alliance officials
have said it would be the larg-
est exercise ever on the border
of the Baltic states.
BRENDAN MCDERMID/REUTERS
profitable even if U.S. industry
sales fall below 11 million light
vehicles from the 17.5 million
sold last year. Most forecasts
show sales remaining in the 16
million to 17 million range for
the next several years.
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THE WALL STREET JOURNAL.
Iran, Gulf States Move to Mend Frayed Ties
Relations deteriorated
last year after Saudi
Arabia executed a
prominent Shiite cleric
BY MARGHERITA STANCATI
AND ASA FITCH
Iran and the Gulf states,
whose contest for power in the
Middle East has been tipping
toward open confrontation, are
quietly trying to repair the
damaged relationship as the
U.S. takes a more confronta-
tional stance toward Tehran.
The longstanding rivalry
flared last year when Saudi
Arabia executed a prominent
Shiite cleric and angry Iranian
protesters stormed the Saudi
Embassy, smashing its win-
dows and setting the com-
pound on fire. Saudi Arabia
and Bahrain responded by sev-
ering diplomatic ties with Iran,
and other Gulf states sided
with Riyadh.
Now, even as public rhetoric
remains strident, signs of a
tentative rapprochement have
surfaced in recent low-profile
meetings between Iranian and
Gulf officials, including a visit
by Iranian President Hassan
Rouhani to Kuwait and Oman,
and a recent agreement be-
tween Riyadh and Tehran to al-
low Iranians to join this year’s
hajj pilgrimage to the Saudi
city of Mecca. Iranians were
excluded from last year’s hajj—
a religious duty Muslims
should fulfill once in their life-
German Businesses
Anticipate Brexit Cost
BY ANDREA THOMAS
BERLIN—Britain’s decision
to leave the European Union
will be a big burden for Ger-
man businesses, with four of
10 companies expecting trade
activities to worsen over the
coming months, according to a
survey published Tuesday.
As a result, one in 10 busi-
nesses already plans to relo-
cate investment from the U.K.
to one of the remaining EU
countries, a German Chambers
of Commerce poll from Febru-
ary of 1,300 companies doing
business with the U.K. found.
“Brexit will significantly
harm German companies’ busi-
ness with the U.K.,” said DIHK
President Eric Schweitzer. “Fur-
ther decreases in trade are ex-
pected for the coming months.”
The comments come as U.K.
Prime Minister Theresa May is
expected to officially trigger
Britain’s exit from the EU on
Wednesday, kicking off a two-
year process of tough negotia-
tions to settle terms of the
exit and forge new ties be-
tween the U.K. and the EU’s
remaining 27 member states.
Among the key contentious
issues are the future of the free
movement of goods, capital and
labor. For Europe’s biggest ex-
porting nation, a lot is at stake.
Britain is Germany’s fifth impor-
tant trade partner, with the to-
tal trade volume reaching €122
billion ($132 billion) last year,
and it was Germany’s third-larg-
Meat Scandal Leaves Brazil’s Farms Flush With Turkeys
BY PAULO TREVISANI
MINEIROS, Brazil—The
seven climate-controlled barns
of the Santa Luzia turkey farm
here are getting crowded. The
35,000 birds who had so much
room when they were skinny,
dull-feathered poults are
plump and white and ready for
table.
No slaughterhouse will take
them, though, and along with
the birds, worries are growing
in this steamy, poultry-cen-
tered town.
“It’s good when they go for
slaughter; if they stay here too
long, the whole system is in
trouble,” said Wanderson
Domiense, 24, who works at
this largely automated farm.
Brazilians aren’t big turkey
eaters, and much of the global
market has banned the coun-
try’s poultry, along with its
beef, since federal police al-
leged that meatpackers were
paying health inspectors for
sanitary certificates. Even as
the crisis eases somewhat—
China reduced its sanctions to
a handful of Brazilian export-
times—after talks with Saudi
officials collapsed.
The hajj deal “shows that
there is hope that the relation-
ship can become more prag-
matic,” said Abdullah al-Sham-
mary, a Riyadh-based political
analyst and former Saudi dip-
lomat. “Now is the time is to
sit and talk.”
Behind the steps toward
better ties, analysts and offi-
cials say, is a new U.S. adminis-
tration that has taken a more
confrontational stance toward
Tehran. President Donald
Trump and his aides have
vowed to reverse the Obama
administration’s outreach to
Iran—a shift America’s long-
time Gulf allies have welcomed.
“Under Obama, Iran was un-
der no pressure to make seri-
ous efforts to improve rela-
tions” with the Gulf, said
Ibrahim Fraihat, a professor of
conflict resolution at the Doha
Institute for Graduate Studies
in Qatar. “Iran has realized that
has changed.”
The decline in oil prices has
also created pressure to re-
solve differences. In November,
Saudi Arabia dropped its de-
mand that Iran slash its crude
output to reach an OPEC deal
aimed at limiting global pro-
duction to prop up prices, now
hovering around $50 a barrel—
about half of where it was a
few years ago.
“It seems that because of a
lack of money, they have to sit
around a table and talk to each
other,” said Saeed Laylaz, an
Iranian economist close to
est export market in 2016.
Roughly 750,000 jobs depend on
trade with the U.K., DIHK said.
The group calls on those in-
volved in the divorce process
to keep the hurdles for the
movement of goods low and
possible additional red tape as
little as possible.
Another concern is that the
complexity of the Brexit talks
could mean that details about
future trade agreements be-
tween the U.K. and the EU will
remain unsolved over the two-
year exit process.
“Brexit negotiations should
proceed swiftly and transpar-
ently so as not to burden the
European economy unneces-
sarily. We must absolutely
avoid standing there in two
years without an agreement,”
said VDMA Chief Executive
Thilo Brodtmann. “This would
lead to considerable distor-
tions in bilateral trade.”
Both groups also stressed
that it is more important to
discourage other EU countries
from following the U.K.’s ex-
ample to leave the bloc than
striving for any short-term
trade relief for the U.K. The
preservation of the European
internal market is the main
long-term goal, they said.
“Too many concessions
from the EU in the negotia-
tions mustn’t endanger the
single market as a whole,” said
Mr. Schweitzer. “That would
be an even bigger problem for
our international companies.”
ers over the weekend—the
country’s massive poultry ex-
ports remain largely stalled,
with a ban still in place in the
European Union, the country’s
biggest market for poultry.
As a result, slaughterhouses
across Brazil have shut down
or dramatically slowed pro-
duction, leaving those who
raise turkeys, chicken and
other fowl scrambling to fig-
ure out what to do with the
birds.
Raising fowl is a highly
time-sensitive business. While
cattle ranchers can hold off as
they wait for slaughterhouses
to open and exports to re-
sume, chicken and turkeys
have short lifespans and fatten
up fast. Producers need to
move fat birds to slaughter af-
ter 120 days of being fed to
make room for younger ones.
Few towns know more
about the intricacies of this in-
and-out style of production,
with its tight time schedule,
than this one deep in Brazil’s
agricultural heartland, where
birds outnumber people by
more than three to one and 171
WORLD NEWS
Iran’s President Hassan Rouhani met Kuwait Sheik Sabah al-Ahmad al-Sabah in Kuwait City in February.
President Rouhani’s moderate
political faction.
In addition, Saudi Arabia
has suffered a series of for-
eign-policy setbacks. Riyadh is
trying to extricate itself from
its war in Yemen, a costly cam-
paign that it waded into in part
to check what it perceived as
Iran’s influence in a neighbor-
ing country. And in Syria, Iran-
and Russia-backed government
forces late last year over-
whelmed rebels the kingdom
supported in Aleppo.
“Aleppo was a turning
point, and the Saudis have
been pragmatic about it,” said
a Western diplomat based in
the Gulf. “They said: ‘We lost.
Let’s make the best of a bad
U.S. Boosts Saudi, U.A.E. Support
BY GORDON LUBOLD
AND JAY SOLOMON
WASHINGTON—The Trump
administration has signifi-
cantly increased military sup-
port for Sunni Arab states
fighting al Qaeda and Iranian-
backed militias in Yemen, U.S.
and Arab officials said, draw-
ing the U.S. deeper into the
two-year civil war there.
American support now in-
cludes greater intelligence and
logistical support for the mili-
taries of Saudi Arabia and the
United Arab Emirates, these
officials said.
The Trump administration
also is moving to resume the
sale of precision-guided weap-
ons to Saudi Arabia, which
were frozen during the final
months of the Obama adminis-
tration due to concerns about
the rising numbers of civilian
fatalities in Yemen.
“We have a commit-
ment…that they will increase
this cooperation,” said Saudi
Gen. Ahmad al-Asiri, spokes-
man for the Saudi-led coalition
in Yemen, who visited Wash-
ington this month with Saudi
Arabia’s defense minister,
Prince Mohammed bin Salman.
“If there was a hiccup last
year, this was an abnormality.”
The U.S. is predominantly
interested in providing support
for Gulf nations to fight al
Qaeda militants inside Yemen,
who are seen as posing a direct
threat to the American home-
land, according to U.S. officials.
But Arab military officials
The Santa Luzia turkey farm on the outskirts of Mineiros, Brazil.
turkey farms are in operation.
The townspeople in this re-
mote community that sits
amid undulating hills, eucalyp-
tus trees and soybean farms
are worried.
“It has an impact on all of
us,” said Juliano Pina, 22, who
works at a gift store.
Usually, the slaughterhouse
here is busy killing off 25,000
turkeys and 120,000 chickens
daily. But Brazilian authorities
Wednesday, March 29, 2017 | A3
and Arab officials.
Tehran says the Sunni Mus-
lim monarchies have sup-
pressed the rights of their Shi-
ite populations, and fueled
extremism through their sup-
port of Sunni rebel groups in
Syria.
Yemen is one area where
improved ties between Iran
and Saudi Arabia could show
results. Saudi Arabia leads a
U.S.-backed Sunni Arab coali-
tion there that is fighting to
unseat the Houthi rebels, who
practice an offshoot of Shiite
Islam and are supported by
PRESIDENT.IR/REUTERS
Iran, with the aim of restoring
to power ousted President
Abed Rabbo Mansour Hadi.
In a sign that Saudi Arabia is
softening its stance toward
some Iranian allies, Mr. al-Ju-
beir last month became the first
Saudi foreign minister in more
situation.’ ” and publicly, that they want to than two decades to visit Iraq, a
Saudi Arabia, a Sunni mon- turn the page, they would like Shiite-majority country where
archy, and Shiite-dominated to have dialogue,” said Ab- Iran has extensive influence.
Iran are still exchanging sharp delaziz Aluwaisheg, assistant In November, Riyadh sup-
words. “For 35 years, we have secretary-general for political ported a deal that elevated to
extended our arm in friendship affairs at the Gulf Cooperation the Lebanese presidency a
to the Iranians, and for 35 Council, the umbrella body for Christian ally of the militant
years we have gotten death the Gulf’s Arab states. “While and political group Hezbollah,
and destruction in return,” they tell us that, they also con- an Iranian proxy.
Saudi Foreign Minister Adel al- tinue these activities.” Mr. Rouhani’s deputy chief of
Jubeir told a security confer- The flurry of diplomatic staff, in a Twitter message dur-
ence in Germany last month. activity began in January, ing the Iranian president’s visit
“This cannot continue.” with a visit by Kuwait’s for- to the Gulf last month, wel-
Riyadh and others in the eign minister to Tehran on comed the diplomatic opening,
Gulf accuse Iran of exploiting behalf of the GCC. As a condi- but warned it might not last.
sectarian tensions to gain po- tion for improved ties, the “Opportunity passes like a
litical influence across the six-nation body has appealed cloud,” he wrote in Arabic, the
Arab world and say Tehran’s to Tehran to end its interfer- language of the Gulf states, in-
recent ballistic missile test ence in the region, including stead of his native Farsi.
launch worries them. arming and supporting Shiite “Therefore make good use of
“Iran is saying, privately proxies, according to Western good opportunities.”
moorings and drift into inter-
national waters, possibly
threatening U.S. naval vessels
as well as commercial ships.
“The risk to the Bab-el-
Mandeb depends in many ways
YAHYA ARHAB/EUROPEAN PRESSPHOTO AGENCY
upon whether our operations
against al Qaeda get conflated
with the Saudi-led coalition’s
war against the Houthis,” said
Eric Pelofsky, who was senior
director for North Africa and
Yemen at the National Security
Council under former Presi-
dent Barack Obama.
Senior U.S. defense officials
said much of the Trump ad-
ministration’s Yemen strategy
Houthi supporters attended a Sunday rally in Yemen marking the is now tied to its military alli-
second anniversary of the Saudi-led campaign against the rebels. ance with the U.A.E. The two
countries historically have
have lauded the increased U.S. sour Hadi from Yemen’s capi- been allies, but cooperation has
cooperation as pivotal to their tal in 2015. Iran has denied intensified in recent months.
own effort to push back supplying arms to the Houthis. “Iran must not be allowed to
against what they call Iranian Houthi fighters have shown create a Hezbollah-like proxy
expansionism in the Persian an increased willingness to in Yemen through the Houthis,”
Gulf region. target U.S. naval vessels oper- said Yousef Al Otaiba, the
While Washington’s immedi- ating in the Persian Gulf, view- U.A.E.’s ambassador to the U.S.,
ate focus is on fighting al ing them as aiding Saudi Ara- who called U.S. support to
Qaeda in the Arabian Peninsula, bia and the U.A.E. in denying fight the Houthis and AQAP a
or AQAP, the support for Gulf the flow of supplies into Ye- “welcome development.”
countries in Yemen also risks men, particularly the Red Sea Defense Secretary Jim Mat-
dragging the U.S. more directly port of Hodeida. tis has requested White House
into the country’s civil war, U.S. officials have voiced approval to allow the U.S. to
which has left more than 15,000 growing concern about the provide support to the Saudi
people dead. The U.S. support flow of commercial traffic and Emirati governments for
also creates a counterbalance through the waters off Yemen, their operations in Yemen, to
to Iranian influence there, and in particular, the Bab-el-Man- include a plan by U.A.E. forces
could put the U.S. in more di- deb waterway, between the to drive Houthi rebels out of
rect conflict with Tehran. Arabian peninsula and Djibouti. Hodeida, U.S. officials said.
Yemen’s Houthi insurgents, The U.S. Navy has warned That proposed operation was
who receive military and fi- about mines that Houthis, with earlier reported by the Wash-
nancial support from Iran, ac- help from Iranian advisers, ington Post. The U.S. also
cording to U.S. and Arab offi- have placed in the waters wants to provide nonlethal aid
cials, drove the government of there. U.S. officials worry that and other equipment as well,
President Abed Rabbo Man- those mines may slip off their another U.S. official said.
farms like Santa Luzia and of their crop as feed to poultry
grow rotund in carefully farmers. Wood chips made of
tended barns, where the tem- local eucalyptus lines the
perature is a cool 68 degrees floors where birds grow. Bird
Fahrenheit and the din of gob- remains are mixed with wood
bling can be heard from far chips to produce fertilizers
PAULO TREVISANI/THE WALL STREET JOURNAL
away. used by corn and soy farmers.
Increasingly desperate, “It’s what makes farming a
growers here have asked per- good business here,” said Ion-
mission from the Agriculture aldo Villegla, owner of 300
Ministry to use another cows, who feed on grass forti-
slaughterhouse 300 miles fied with mix of turkey ma-
away. nure and wood chips, rich in
The delay in getting an an- nitrogen, phosphorous and po-
swer is prompting Aloir Vi- tassium.
cente da Silva, a grower who People here fear that if the
leads a local association of slaughterhouse takes too long
poultry farmers, to ponder to reopen—or if foreign rivals
whether he will have to start start to take over Brazil’s
destroying eggs. global clientele—Mineiros
have closed it down, as they “I am thinking of letting my could be exposed to the reces-
have others nationwide. The turkeys out in front of the Ag- sion and joblessness battering
hulking white building, with riculture Ministry,” he said the rest of the country.
its distinctive water tower, jokingly. “The lack of a deci- Over the weekend, Donizete
now sits idle on a hill just out- sion is killing us.” The Agricul- da Rocha, 54, whose restau-
side town. ture Ministry said it still had rant buys beef and chicken
The turkeys it normally no date to reopen the local grown locally, noted that meat
slaughters take a firmly set slaughterhouse and hasn’t prices were going down be-
path to their end. ruled on whether local produc- cause of the whole scandal in-
First they hatch in nurser- ers can use another one. volving meat and poultry.
ies, where they take 30 days to Poultry’s role here can “But I can’t celebrate,” Mr.
reach about 2 pounds. hardly be overstated. Farmers da Rocha said. “It’s bad for the
Then they are moved to growing corn and soy sell part whole town.”
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A4 | Wednesday, March 29, 2017 HK JP KO ML SI IN UK FR MN PR THE WALL STREET JOURNAL.

WORLD NEWS

Defectors to South
Learn Capitalism
North Koreans with details of her story.
Even sophisticated inves-
scant financial know- tors fall prey to financial
how are ripe for scams. But North Korean de-
fectors, many of whom arrive
fraudulent schemes with virtually no experience in
the modern financial system,
SEOUL—Four years after are even more vulnerable, say
arriving in capitalist South Ko- South Korean government ex-
rea from the nominally social- perts involved in the educa-
on maps and is ringed with
barbed-wire fence.
In response to concerns of
defectors falling victim to
scams, South Korean officials
in the past two years have
nearly doubled the time they
spend teaching finance. They
also have created a matched
savings program to encourage

CLEMENT BURGE/THE WALL STREET JOURNAL

ist North, Ms. Kim was offered tion programs. defectors to save.
an investment plan from a fel- That has prompted the The government has joined
low defector that seemed too South Korean government to with domestic banks and pro-
good to be true. expand its financial education fessional advisers who help
for new arrivals from the defectors set up bank accounts
By Jonathan Cheng, North, who now number more and map out financial goals. It
Min Sun Lee than 30,000. The three-month even helped set up a mock
and Clément Bürge program to prepare them for bank in Seoul, with an ATM,
life in South Korea is con- so defectors can get comfort-
Turned out it was. ducted at Hanawon, or House able making transactions.
Ms. Kim, who arrived here of Unity, a facility in the coun- In 2004, officials scrapped
in 2010 with scant knowledge tryside that doesn’t show up a policy of giving lump sums A book by Kim Byeong-uk teaches North Korean defectors how to use South Korean finance and banks.
of banks, credit or automated of about $25,000 to newly ar-
teller machines, was told she rived defectors. Instead, start- everything about an individ- South Korea with help from a stitute in Seoul, a think tank.
would receive a 1% monthly Moving On ing in 2013, the government ual’s finances,” said Jang government loan and is now Mr. Kim, who conducted a
return on her investment. Ea- The number of North Korean provides fresh graduates of Yong-seok, a senior researcher launching a farm cooperative detailed study of the pyramid
ger to enjoy the trappings of defectors rose in 2016 after Hanawon with about $6,000 at Seoul National University’s for fellow defectors, many of scheme that ensnared Ms.
wealth she saw around her, declines that South Korea upfront, with more payments Institute for Peace and Unifi- whom grew up in the country. Kim, said it tricked roughly
she put down the equivalent attributes to heightened border when defectors reach mile- cation Studies. But scams have long been a 230 defectors and incurred to-
of $134,000—everything her security. stones, like getting a job. Defectors say the financial persistent problem, leading tal losses of about $14 million.
family had saved over four “The overall program is education at Hanawon is help- many defectors to financial The perpetrator, a North Ko-
3,000
years. turning into one that is fo- ful. But some say the on- ruin and providing a propa- rean defector who was and
For six months, the pay- cused on real life, rather than slaught of new information— ganda coup for Pyongyang. In convicted, told prospective
ments came. Then, the pyra- 2,500 on theory about the capitalist including learning the basics 2012, one defector to the victims that they were invest-
mid scheme collapsed, wiping system,” said Kwon Dong- of democracy and mastering South returned to North Ko- ing in a trading company.
out her savings. Now, Ms. Kim 2,000 2016: hyuk, who oversees education the internet—can be head- rea, and appeared on state Mr. Kim, no relation to Ms.
1,417
and her 88-year-old mother at Hanawon. spinning, said Joo Yee-un, a television to criticize South Kim, said it was likely the
get by on a monthly South Ko- 1,500 In North Korea, citizens defector who works for a Korea as a society where largest scam since North Kore-
rean government subsidy of traditionally are cared for by church in southern Seoul. scams are as plentiful “as ans began to flee the country
about $360 a month. 1,000 the state. Though banks exist, Not all defectors struggle. there is water in the river.” during the mid- to late-1990s
“It was my money, my defectors say few North Kore- Younger ones, who grew up in Friends of that defector, famine. Some 165 defectors
mother’s money and my 500 ans use them, since it is the 1990s alongside the infor- Park In-sook, said she decided lost everything. Three com-
daughter’s money, and it’s all widely believed that deposits mal markets that have become to return to the North in part mitted suicide.
gone now,” said Ms. Kim, who 0 can’t be easily withdrawn. common in North Korea, learn because she had fallen victim Ms. Kim said that when de-
spoke to The Wall Street Jour- There are also political rea- the basics of capitalism before to one such scam in South Ko- fectors arrive, “We have to
nal on condition that her full 2001 ’05 ’10 ’15 sons. arriving to South Korea. rea, according to Kim Byeong- learn everything from the
name not be published. The Source: South Korean Ministry of Unification “Once all the money is in Joseph Park, who defected uk, a defector now with the start. It’s like we were just
Journal couldn’t corroborate THE WALL STREET JOURNAL. the bank, authorities can see in 2004, started a cafe in North Korean Development In- born.”

Charges Against Hong Kong Activists Rile Critics

BY JOHN LYONS layed to avoid controversies tem, the city’s leader is chosen tems” handover agreement be-
that might have hampered Ms. by an electoral committee tween the U.K. and China. Re-
HONG KONG—Criminal Lam’s campaign. As the for- stacked with pro-Beijing busi- cent events, critics say,
JAYNE RUSSELL/AGENCE FRANCE-PRESSE/GETTY IMAGES

charges against pro-democ- mer No. 2 official in this semi- nessmen and activists. suggest the Western freedoms
racy demonstrators in Hong autonomous Chinese city, Ms. On Tuesday, Ms. Lam dis- Hong Kong enjoys are eroding
Kong, filed right after this Lam negotiated with the pro- missed any significance to the as China exerts more control.
weekend’s election, have testers and is unpopular timing of the charges. “This is Ms. Lam has promised to
prompted public criticism and among them. an action of the current [Hong try to heal divisions within
a denial from Hong Kong’s “Obviously the timing was Kong government], done inde- Hong Kong. But some Hong
newly elected leader Tuesday planned, and it looks rather pendently by the investigation Kongers say that will be diffi-
that the timing was delayed to absurd to launch this the day and prosecution authority,” cult since she is seen as deeply
help her. after the election,” said Albert she said. “I want to reiterate pro-China. Her election victory
Police on Monday filed a Ho, a human-rights lawyer and that the rule of law and the in- was dogged by allegations that
range of public-nuisance former Hong Kong legislator dependence of the judiciary she defeated a more-popular
charges against nine activists who also participated in the are important core values of second-place contender with
and local lawmakers who protests. “They wanted to wait Hong Kong.” the help of a behind-the-
helped organize weeks of “Oc- until the election was over.” Hong Kong’s Justice De- scenes arm-twisting effort or-
cupy” protests in 2014 that The charges also drew at- partment rejected what it said Activist Tanya Chan, before authorities charged her on Monday. chestrated by Beijing. She has
paralyzed parts of Hong Kong. tention in the U.S., where Sen. were accusations in Hong denied that allegation.
The charges came a day after Marco Rubio (R., Fla.) called Kong that Ms. Lam had or- ence and organizers had been The nine defendants have a Mainland China authorities
Carrie Lam, a pro-China candi- them “ominous” and urged Ms. dered the police action. The expecting some form of prose- court hearing Thursday. Police have consistently denied sway-
date widely viewed as Beijing’s Lam to push for the demo- department “stresses that cution. He said the biggest also charged an officer ac- ing the vote and said any con-
pick, was elected. cratic changes sought by pro- such surmising is completely test would be whether the de- cused of using excessive force. tacts with Hong Kong electors
Critics say that the charges, testers, who are seeking the baseless and utterly untrue.” fendants get a fair trial. Hong Kong, a former British by Chinese officials were con-
coming more than two years universal right to vote in Hong Mr. Ho said the protests The charges carry potential colony, enjoys a special status ducted lawfully under the ex-
after the protests, were de- Kong. Under the current sys- were a form of civil disobedi- sentences of up to seven years. under a “one country, two sys- isting framework.

WORLD WATCH
Powerful Cyclone Batters Australia TAIWAN nulled measures put in place in
BY ROB TAYLOR 2014 against Aisha Muammer
Court Clears Former Mohamed Gadhafi, which in-
CANBERRA, Australia—One Leader in Leak Case cluded travel restrictions and
of the most ferocious tropical freezing of funds.
storms to hit Australia in Taiwan’s China-friendly for- The EU courts have struck
years blew ashore, causing mer President Ma Ying-jeou down a number of targeted
widespread flooding and dam- was found not guilty of libel sanctions against Syrian, Ira-
age, after thousands of people and leaking confidential infor- nian and other individuals in re-
were evacuated from its path. mation in a case involving sus- cent months, all citing a dearth
Tropical Cyclone Debbie, pected influence peddling by a of evidence to support the re-
the most powerful storm since powerful lawmaker. strictive measures.
Cyclone Yasi made landfall in Mr. Ma was credited with Gadhafi was driven from
February 2011, lashed tourist substantially improving Tai- power in Libya in 2011 after a
DAN PELED/EUROPEAN PRESSPHOTO AGENCY

islands and resorts in Queens- wan’s relations with China dur- campaign of airstrikes by the
land state with destructive ing his two terms in office U.S. and the North Atlantic
winds of more than 160 miles from 2008 to 2016. His Nation- Treaty Organization and was
an hour, tearing the roofs off alist Party lost both the presi- killed in October 2011. The EU
homes and uprooting trees. dency and its parliamentary imposed targeted sanctions in
There were few early reports majority to the pro-indepen- 2014 after the outbreak of a
of injury and death. dence Democratic Progressive renewed civil war in Libya.
“This is a very destructive Party in elections in January Tuesday’s ruling was similar,
storm and storm system,” said 2016. raising questions about the justi-
Queensland Police Commis- The charges against Mr. Ma fication used by the EU to place
sioner Ian Stewart. He said stemmed from a 2013 lawsuit her on a list of people subjected
one man was seriously injured A fallen palm tree crosses the yard of a motel in the resort town of Airlie Beach, Queensland. brought by Democratic Progres- to the targeted sanctions.
during the storm after a wall sive Party lawmaker Ker Chien- Ms. Gadhafi argued that she
fell on him and a tourist was (US$2.75 billion) in cyclone-re- Bay, Hay Point and Abbot sugar crops in the Bowen- ming alleging that the then- didn’t represent a threat to
killed as the storm approached lated claims. Point were closed Tuesday Mackay region. Around a quar- president leaked information peace and security in Libya and
the coast on Monday. Prime Minister Malcolm ahead of the cyclone’s arrival. ter of all sugar produced in from a wiretapped conversation therefore the restrictive mea-
Television footage showed Turnbull said a navy amphibi- Weather and climate scien- Australia comes from the Mac- featuring powerful Nationalist sures were unfair.
boats smashing into harbor ous transport ship, helicopters tists have warned that Austra- kay-Proserpine region [hit by lawmaker Wang Jin-pyng. In its ruling, the court again
walls as the storm hit, while and aircraft would help with lia is likely to face fewer but the storm],” Mr. James said. The Taipei District Court took issue with the EU’s evi-
more than 50,000 homes were the cleanup. Emergency per- more powerful cyclones in the Resource companies includ- cleared Mr. Ma of the charges. dence against Ms. Gadhafi, ar-
left without electricity after sonnel helped to evacuate coming years, which they have ing BHP Billiton Ltd. and Glen- Mr. Ma, a U.S.-educated legal guing that there was no infor-
power lines fell. Several yachts more than 30,000 people. attributed to climate shifts. core PLC closed port-and-min- scholar, had denied the charges. mation about “her individual,
sank, said Clayton Matthews, “The federal and Queens- Last year, Australia’s weather ing operations in a state that —Associated Press specific and concrete role” in
the port manager in Airlie land governments have pre- bureau warned that this year’s accounts for about 60% of attacks against civilians in
Beach, a resort town. pared well for the onset of cyclone season was likely to global production of coking EUROPEAN UNION Libya. Rather the initial action
As Australia’s military and this cyclone. We have acti- be intense. coal, used to make steel. BHP against her included vague ac-
thousands of emergency per- vated the disaster response Craig James, an economist said operations at its Hay Gadhafi Daughter cusations of being close to the
sonnel began a disaster opera- plan,” Mr. Turnbull told Parlia- with securities brokerage Point coal terminal and BHP Sanctions Annulled former Libyan regime.
tion after the eye of the storm ment. CommSec, said the repair of Billiton Mitsui Coal’s South The court called Ms. Gad-
crossed the coast near Airlie The affected area is one of damaged buildings and infra- Walker Creek mine had been The European Union’s sec- hafi’s complaint well-founded
Beach, the Insurance Council Australia’s biggest producers structure could increase Aus- suspended. Glencore ceased ond-highest court invalidated and therefore nullified the mea-
of Australia declared a catas- of sugar, fruit and vegetables tralian economic activity in work at its Collinsville and targeted sanctions against the sures against her and ordered
trophe. Since 2006, insurers and is home to significant coal the coming months. Newlands coal mines. daughter of the former Libyan the European Council to pay
have paid out more than 3.6 and gas export ports. The “Most concern surrounds —Rhiannon Hoyle in Sydney leader Moammar Gadhafi. the court costs.
billion Australian dollars ports of Mackay, Dalrymple the impact of the cyclone on contributed to this article. The EU’s General Court an- —Julian E. Barnes
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
France’s Fiery Populist Courts the Elite
Marine Le Pen seeks advice from same establishment she rails against; meetings with clandestine ‘Les Horaces’
BY STACY MEICHTRY
AND WILLIAM HOROBIN
PARIS—For more than a
year, French presidential
candidate Marine Le Pen,
representing the once-ostra-
cized National Front, met
with influential bankers, cor-
porate executives and gov-
ernment officials to get ad-
vice on the radical changes
promised by her campaign.
Now the group is helping
plan what she hopes will be
her first 100 days in office.
Ms. Le Pen has dubbed
these members of France’s
elite “Les Horaces,” a refer-
ence to the poet who penned
verses for the first Roman
emperor. It is a measure of
her rise that she has lured
talent and expertise from
parts of the same establish-
ment she rails against.
Under Ms. Le Pen, Na-
tional Front’s goal is to move
from a xenophobic protest
movement founded by her
father into a mainstream
party espousing economic
nationalism. That effort cen-
ters on tapping a long-sub-
merged vein of Gaullist tra-
ditionalism, which regards
the European Union and euro
as infringements on French
national sovereignty.
Believers, including mem-
bers of the country’s leader-
ship class, are eager to help
Ms. Le Pen prepare for the
practicalities of gover-
nance—and are willing to ac-
cept her incendiary cam-
paign rhetoric and a result
that would threaten the con-
cept of a united Europe.
Ms. Le Pen, 48 years old,
has called the euro a “knife
in the ribs” of France that
allows the EU to inflict “its
views, its inept directives
and its millions of migrants.”
She wants higher taxes on
foreign workers and a lower
retirement age. Ms. Le Pen
blames the common cur-
rency for France’s chroni-
cally high unemployment
and has said she would bring
back the franc if elected.
That could be a devastat-
ing blow to the EU, which al-
ready is wrestling with the
exit of the United Kingdom.
If France also pulls out of
the eurozone, the 60-year,
post-World War II effort to
safeguard against future con-
flicts by deepening economic
and political integration
might crumble.
Polls suggest Ms. Le Pen
will make it through the first
round of voting April 23. Her
support runs deep in work-
ing-class France, where slow
economic growth and job-
lessness have fueled mount-
ing anger over globalization.
Winning the second-round
runoff in May looks harder
because supporters of candi-
dates knocked out in the
first round are likely to co-
alesce against her.
In recent head-to-head
polls, Ms. Le Pen trailed con-
servative candidate and for-
mer Prime Minister François
Fillon and Emmanuel Ma-
cron, a pro-EU centrist who
was a French economy min-
ister. Even if she loses,
though, the growth of Ms. Le
Pen’s ardent following means
she is likely to help keep
shaping French and Euro-
pean politics.
Back to de Gaulle
Most political and busi-
ness leaders in France sup-
port the eurozone and are
backing other candidates in
the presidential election. In
contrast, the tight circle of
advisers to Ms. Le Pen gen-
erally holds views reminis-
cent of the 1960s, when
President Charles de Gaulle
pushed for an independent
nuclear strike force, called
Force de Frappe, and with-
drew French forces from the
North Atlantic Treaty Organ-
ization’s unified command.
These elites also adhere to
a French tradition of the
economy being steered
largely by the state rather
than market forces.
Her recruitment of elites
is a delicate matter that be-
gan years before Ms. Le Pen
formed Les Horaces. The
National Front keeps many
of their identities confiden-
tial to shield the group from
public attention, according
to aides to Ms. Le Pen. She
declined to comment for
this article.
Marine Le Pen at a campaign rally in Lyon, France, in February. She is trying to steer her far-right party into the political mainstream.
Father and Daughter
Recent polls suggest that Marine Le Pen will win a higher percentage of
the first-round presidential vote in April than her father, Jean-Marie Le Pen,
did in the five times he ran for president.
Jean-Marie Le Pen
1974 1981
0.8% 14.4%
7th place 4th place
Latest Ipsos Sopra Steria poll showed 27% for Le Pen and 26% for Emmanuel Macron.
Jean-Marie Le Pen reached the presidential runoff and got 17.8% of the vote, losing to Jacques Chirac.
Jean-Marie Le Pen didn't get enough support to run.
Source: Constitutional Council of the French Republic (election results); Ipsos Sopra Steria (latest poll)
Many elites worry that
their bosses, friends, social
connections and others
would disapprove of them
helping Ms. Le Pen, despite
her efforts to distance Na-
tional Front from its past
reputation for anti-Semi-
tism. That some Horaces are
employed by large, publicly
traded firms also makes it
hard for them to overtly
ally with Ms. Le Pen, who
has described the election
as “a referendum against
the lies of the self-pro-
claimed elites.”
Nearly all the Horaces
have remained in their jobs
while clandestinely lending
assistance to her. “They’re
what you call shadow advis-
ers, and they want to remain
as such,” said Jean Messiha,
a Horace who recently took a
leave of absence as a senior
Defense Ministry official to
join Ms. Le Pen’s campaign.
The elite makeover of Na-
tional Front began during
the aftermath of the finan-
cial crisis, while Ms. Le
Pen’s father was still run-
ning the party.
Jean-Marie Le Pen, 88,
ran for president five times
but made it to the runoff
only in 2002. His extreme
anti-immigrant rhetoric cre-
ated a niche for National
Front in European politics
but hamstrung his appeal to
a broader electorate.
A shift began in 2008,
when he called for the end of
“euro-globalism” and an “an-
ticrisis shield,” but the party
lacked a brain trust that
could articulate an economic
alternative.
“Before, you didn’t really
need a macroeconomic pro-
gram,” said Wallerand de
Saint-Just, who joined Na-
tional Front in the 1980s.
“We could just chirp about it
here and there.”
As National Front’s heir
WORLD NEWS
Marine Le Pen
1988 1995
15% 16.9%
4th place 2nd place
apparent, Ms. Le Pen set out
to change that. First, she
needed advisers who could
reformulate the party’s plat-
form. That included recast-
ing the National Front’s op-
position to immigration—the
party’s longstanding raison
d’être—as part of a new eco-
nomic credo.
She blamed the EU for ex-
posing France to new waves
of immigrants and faulted
the euro for hollowing out
the country’s manufacturing
base by making French labor
and goods too costly. She
said a nation’s jobs and enti-
tlements should go to its
own citizens.
In 2009, Ms. Le Pen met
Florian Philippot, an Interior
Ministry official whose soft-
spoken polish was a study in
contrasts with her plain,
raspy voice. He is a graduate
of the École Nationale d’Ad-
ministration, the academy
for France’s ruling elite that
trained President François
Hollande and Mr. Macron.
What Mr. Philippot and
Ms. Le Pen had in common
were the ambition to govern
and disdain for the euro. “It
was love at first sight, intel-
lectually,” she told a French
television network about
their introduction.
She quickly made him her
right-hand man for party
strategy and communication
but kept their ties secret.
Mr. Philippot’s mother died
in October 2009 without
knowing, and he didn’t tell
his father for years.
He told a television inter-
viewer that he didn’t want
his father to worry. He didn’t
respond to requests to com-
ment for this article.
Mr. Philippot gradually
went public with his ties to
Ms. Le Pen, initially granting
interviews to French news-
papers using aliases, accord-
ing to “Philippot 1er,” a new
2002 2007 2012 2017
10.4% 17.9% 27%
4th place 3rd place poll
THE WALL STREET JOURNAL.
book by journalists Astrid de
Villaines and Marie Labat.
In late 2011, Mr. Philippot
left his Interior Ministry
post to work on Ms. Le Pen’s
2012 presidential campaign.
Ms. Le Pen teamed up Mr.
Philippot with Bernard
Monot, an economist at
state-owned financing insti-
tution Caisse des Dépôts et
Consignations.
Mr. Monot was working
clandestinely for National
Front, publishing articles un-
der the pen name Nicolas Pa-
villon while writing new doc-
trines to turn the page on
the party’s past position as a
promoter of free markets.
The result was Ms. Le
Pen’s campaign platform. It
called for France to abandon
the euro, which “condemns
France to a slow death,” she
argued.
Only by ditching the com-
mon currency could France
stave off the bitter austerity
measures sweeping other
parts of Europe, the cam-
paign platform urged. The
document also outlined a
road map back to the franc:
capital controls and closing
The candidate receiving a blue rose, a Le Pen campaign symbol.
Wednesday, March 29, 2017 | A5
the room. Her aunt, flanked
by Mr. Philippot, stood firm.
Aides to Ms. Maréchal-Le
Pen’s didn’t respond to re-
quests for comment.
Mr. Philippot’s rise
strained Ms. Le Pen’s rela-
tionship with her father. In
2015, Jean-Marie Le Pen re-
peated his assertion that
Nazi gas chambers were a
“detail of history.” He also
told a right-wing paper that
Marshal Philippe Pétain, a
French military leader con-
victed of treason for collabo-
rating with Germany in occu-
pied France, wasn’t a traitor.
The remarks threatened to
unravel Ms. Le Pen’s efforts
to move past National
Front’s anti-Semitic history.
So she convened a commit-
tee of senior party leaders,
including Mr. Philippot. They
suspended her father’s mem-
bership in the party and
stripped him of the title of
honorary chairman.
Estranged father
Mr. Le Pen successfully
sued to be reinstated in the
party. In an interview with
The Wall Street Journal at
the time of the clash, he
partly blamed Mr. Philippot
for the estrangement with
JEFF J MITCHELL/GETTY IMAGES
his daughter. Mr. Le Pen said
Mr. Philippot “is exercising
more and more influence
over Marine.”
The sidelining of Mr. Le
Pen accelerated what party
insiders described as Mr.
Philippot’s efforts to “de-de-
monize” National Front for
this year’s French presiden-
banks to prevent a run on tial election.
deposits. Campaign posters were
emblazoned with Ms. Le
Pen’s first name—but not
Oh, la la! her last name. National
The change in focus Front’s tricolor flame sym-
shocked some National Front bol, appropriated from Ital-
old-timers. “It was always ian neo-fascists decades ago,
the same reaction: ‘Oh, la la! was replaced by a solitary
Oh, la la!’ ” Mr. Saint-Just blue rose.
said. “We even reproached The changes have helped
[Mr. Philippot], saying there the party find a new follow-
were way too many numbers, ing among younger voters
too much complexity.” who aren’t part of its tradi-
In 2012, Ms. Le Pen got tional base of older people.
about 18% of the presidential Davy Rodriguez, 23, joined
votes, behind Mr. Hollande the National Front in 2015,
and Nicolas Sarkozy. Her drawn by its anti-euro, anti-
third-place finish pulled in globalization stance. He quit
more fresh blood from the far-left Parti de Gauche
among France’s elite. and helped start a National
Guy Deballe, a Frenchman Front student group at the
of Central African origins elite Sciences Po. “I wouldn’t
who once was a Socialist have joined the National
Party activist, switched to Front when Jean-Marie Le
National Front because he Pen was president,” Mr. Rod-
saw Mr. Philippot and others riguez said.
as a symbol of the party’s In late 2015, Ms. Le Pen
shift toward an anti-globali- decided to accelerate her
zation stance that envisaged outreach to the elites by cre-
a bigger role for the state in ating the Horaces.
France’s economy. One of the earliest people
“The new face and Philip- to join the Horaces was Mr.
pot’s professionalism Messiha, another École Na-
showed what was already tionale d’Administration
happening on the inside,” graduate. The Egyptian-born
Mr. Deballe said. civil servant met Ms. Le Pen
Some National Front loy- a year earlier, introducing
alists thought the party was himself as “pure French by
straying too far from the be- naturalization.”
liefs of its base. In 2013, Ms. For months, Mr. Messiha
Le Pen refused to attend a kept his membership confi-
march against the legaliza- dential while continuing his
tion of gay marriage. Her ab- job at the Defense Ministry
sence was seen by party as a deputy director in
hard-liners as an act of def- charge of logistics. Late last
erence to Mr. Philippot, who year, Mr. Messiha took a
is openly gay. leave of absence so he could
Instead, they rallied be- officially join Ms. Le Pen’s
hind her niece, Marion campaign and talk more
Maréchal-Le Pen, who openly about his role.
marched at the protest. Mr. Messiha said public
When Ms. Le Pen gathered exposure of other Horaces
senior leaders of the party would subject them to un-
for a closed-door meeting in welcome scrutiny from their
February 2016 to lay out employers, including some of
plans for her presidential France’s biggest banks and
run on an anti-euro plat- companies. Other Horaces
form, her niece objected. are judges, prosecutors and
“The euro is not the alpha prefects, according to Mr.
and the omega,” said Ms. Messiha, who wouldn’t iden-
Maréchal-Le Pen, 27, a French tify any of them by name.
parliament member, accord- Ms. Le Pen has held
ing to a person who was in monthly plenary sessions to
discuss policy and induct
new members into the
group, he added. Aides to
the presidential candidate
said she has divided the Hor-
aces into working groups.
One is looking at how France
can exit the U.S.-led NATO.
VALERY HACHE/AGENCE FRANCE-PRESSE/GETTY IMAGES
Another is examining the
mechanics of pulling France
out of the eurozone.
In late January, Ms. Le
Pen gathered about 90 Hor-
aces at a restaurant in Paris
to thank them for their
work, according to Mr.
Messiha. He predicted that
important members of the
group will run her govern-
ment if she wins.
“I’m counting on you until
my victory, and all the more
afterwards,” she said.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A6 | Wednesday, March 29, 2017 THE WALL STREET JOURNAL.

U.S. NEWS
Ryan Rejects Call for Nunes to Step Aside
Democrats say chair Trump Tower had been wire-
tapped,” he said.
of Intelligence panel Mr. Nunes’s meeting on the
should recuse himself White House grounds took
place in what is called a SCIF,
from election probe or Sensitive Compartmented
Information Facility, where
BY BYRON TAU classified information can be
viewed and classified matters
discussed in a secure setting.
WA S H I N G T O N — H o u s e Members of his House Intelli-
Speaker Paul Ryan on Tues- gence Committee and its Sen-
day rejected calls by the top ate counterpart have access to
Democrat on the House Intel- such facilities on Capitol Hill.
ligence Committee for the Mr. Nunes’s spokesman said
panel’s chairman, Rep. Devin that the information in ques-
Nunes, to recuse himself tion couldn’t be transported to
from investigating alleged the Capitol because of rules
Russian interference in the concerning the handling of
2016 election. classified information, necessi-
Democratic Rep. Adam tating an in-person visit by
Schiff of California said Mon- the chairman.

J. SCOTT APPLEWHITE/ASSOCIATED PRESS

day that after the Republican “Because of classification
Mr. Nunes’s disclosure that he rules, the source could not
reviewed sensitive information simply put the documents in a
on White House grounds last backpack and walk them over
week, he should step aside to the House Intelligence Com-
from any congressional inves- mittee space,” Mr. Langer said.
tigation pertaining to Russia “The White House grounds
or to the “incidental” collec- was the best location to safe-
tion of intelligence informa- guard the proper chain of cus-
tion, such as Mr. Nunes said tody and classification of
occurred to Mr. Trump’s tran- these documents, so the chair-
sition team. Rep. Devin Nunes was a Trump transition official. Democrats say he must step down from a probe of Russian meddling in the election. man could view them in a le-
Mr. Schiff said that it was gal way.”
“not a recommendation I make Mrs. Pelosi added that delivered one surprise after Trump Tower in New York official cleared him to enter White House press secre-
lightly,” but added: “I believe House Speaker Paul Ryan another over the past week, during the campaign. the grounds. The White House tary Sean Spicer deflected
the public cannot have the “must insist that Chairman leading many lawmakers to After Mr. Trump’s election grounds also includes the questions about Mr. Nunes’s
necessary confidence that Nunes at least recuse himself question its independence. last year, Mr. Nunes served as Eisenhower Old Executive Of- time on the White House
matters involving the presi- from the Trump-Russia inves- Mr. Nunes used a secure fa- a top presidential transition fice Building, which houses grounds and who he met with
dent’s campaign or transition tigation immediately. That cility to meet last Tuesday official. That role, coupled many federal workers. while there.
team can be objectively inves- leadership is long overdue.” with his source, a person with his handling of the con- Mr. Nunes “met with his Mr. Spicer also said he
tigated or overseen by the Mr. Ryan, at a news confer- whose name wasn’t disclosed, gressional investigation, has source at the White House didn’t know who had signed
chairman.” ence Tuesday, said Mr. Nunes a spokesman for Mr. Nunes led Democrats to call for him grounds in order to have prox- Mr. Nunes onto the White
A spokesman for Mr. Nunes shouldn’t recuse himself. said. On Wednesday, Mr. to step aside from the probe. imity to a secure location House grounds. Under Mr.
declined to comment on Mr. Mr. Nunes said he reviewed Nunes discussed publicly his Mr. Nunes said Monday where he could view the infor- Trump, the White House
Schiff’s statement. the sensitive information on concerns about the way intelli- that his actions represented mation provided by the hasn't updated the online visi-
House Democratic leader White House grounds a day gence agencies handled infor- “nothing new” and that law- source,” Jack Langer, a tor log maintained by Mr.
Nancy Pelosi also called for before he disclosed that U.S. mation related to Mr. Trump makers frequently travel to ex- spokesman for Mr. Nunes, said Obama’s administration. Under
Mr. Nunes to remove himself intelligence agencies had in- and his staff. ecutive branch offices to view Monday. the previous administration,
from the investigation. Mr. tercepted information about His announcement came classified documents. “The chairman is extremely visitor logs were typically up-
Nunes, she said, “has a seri- President Donald Trump and weeks after Mr. Trump, a Re- “I wasn’t sneaking around,” concerned by the possible im- dated within 90 to 120 days
ous responsibility to the Con- his staff during the presiden- publican, made unsubstanti- he said in an interview on proper unmasking of names of and showed details about visi-
gress and the country. Chair- tial transition. ated accusations on Twitter CNN. U.S. citizens, and he began tors to the White House.
man Nunes’ discredited The revelation added a new that his Democratic predeces- Mr. Nunes declined to say looking into this issue even —Rebecca Ballhaus, Shane
behavior has tarnished that of- layer of intrigue to a congres- sor, Barack Obama, ordered he which building he visited, who before President Trump Harris and Carol E. Lee
fice.” sional investigation that has be wiretapped while living at he saw or which White House tweeted his assertion that contributed to this article.

President’s Tweets Draw Many Voters’ Disapproval

BY MICHAEL C. BENDER Monday night that the House
Intelligence Committee should
Faced with a historically ask the similar questions of
low approval rating after a his former Democratic rival,
major legislative defeat last Hillary Clinton.
week, President Donald Trump He took aim at the conser-
lashed out with a flurry of vative wing of the House of
Twitter posts on Monday and Representatives, blaming the
Tuesday that touched on a va- chamber’s Freedom Caucus for
riety of topics, even as half of “snatching defeat from the
Americans disapprove of his jaws of victory,” referring to
use of social media. the failed health legislation.
With his campaign being He promoted a “big an-
probed by the Federal Bureau nouncement” from Ford Mo-
of Investigation for possible tor Co., and directed his 27
collusion with Russia, Mr. million followers to tune in to
Trump wrote on Twitter on the “Fox & Friends” morning
show on Fox News, which was
featuring an interview with
author Peter Schweizer. Mr.
Schweizer has written about
the Clinton family’s ties to
Russia and a Russian uranium
deal.
Mr. Trump repeated the
charge from the cam-
paign trail. No evidence has
emerged Mrs. Clinton had any
personal involvement in the
deal.
The tweets come as Mr.
Trump seeks to refocus his
White House after a stunning
defeat of the House Republi-
can leadership’s health-care
bill last week, which Mr.
Trump backed. After promis-
ing on the campaign trail to
quickly repeal and replace the
2010 Affordable Care Act,
known as Obamacare—and
promising his negotiating
skills could get the deal
done—Mr. Trump failed to get
the measure through the first
hurdle in Congress, the Repub-
lican-controlled House.
Mr. Trump’s job approval
rating in the Gallup poll fell to
36% for the three-day period
of March 24-26—a new low in
the poll. His previous low Even his own supporters
point was 37%, recorded are wary of Mr. Trump’s
March 16-18. tweets: While just 12% said
His 36% rating is 2 percent- they disapproved, 51% said he
age points below the low of should be more cautious.
former President Barack Amid the setbacks, Mr.
Obama, who hit his low mark Trump has also tried to refo-
in 2011 and 2014. cus on campaign pledges.
Mr. Trump’s decision to The White House signaled
turn to Twitter may not help Monday it plans to put pres-
him turn around those num- sure on sanctuary cities over
bers. A recent Fox News poll immigration enforcement and
found that 50% of Americans move forward on a tax-code
disapprove of the president’s overhaul, and Mr. Trump is ex-
tweeting, while 16% approve. pected to unveil an executive
An additional 32% said he order rolling back Mr. Obama’s
should be more cautious. climate rules.

Despite Trump Move, Utilities Likely to Shift From Coal

BY CASSANDRA SWEET
Rollback
The Trump administration’s The Trump administration's expected move to undo the Clean Power
expected move to roll back Plan is likely to have a modest impact on the long-term U.S. energy mix.
President Barack Obama’s sig-
nature climate-change policy U.S. net electricity generation by source, in megawatt-hours
may extend the life of some With Clean Power Plan Without
2.0 billion
aging coal-fired power plants,
PROJECTIONS
but companies and energy ex- Natural
perts say it is unlikely to re- Gas
1.5
verse the U.S. utility industry’s
shift to natural gas, solar and
Renewable
wind as leading sources of
LUKE SHARRETT/BLOOMBERG NEWS

electricity. 1.0
Coal
President Donald Trump
was scheduled to sign an exec- Nuclear
utive order Tuesday that 0.5
would begin to reverse the
Clean Power Plan, which would
have required utilities to re- 0 Petroleum
duce power-plant carbon-diox-
ide emissions to 32% below 1990 2000 ’10 ’20 ’30 ’40
2005 levels by 2030. The order Duke Energy is looking to cut its greenhouse-gas emissions by 35% from 2005 levels by 2026. Source: Energy Department THE WALL STREET JOURNAL.
also rolls back guidance from
the Council on Environmental of gas-fired plants, which re- estimates gas will be the domi- clining utilization of coal,” said Plan, however, the Energy De- panies that burn coal over
Quality on climate change and quire fewer workers to operate. nant fuel, followed by coal, nu- Terrell McCollum, a spokes- partment expects coal-fired concerns about the environ-
rescinds a temporary ban on Companies are also taking ad- clear and renewable power. man for the Atlanta-based util- generation from existing plants ment, said Fiona Reynolds,
new coal leases on federal vantage of tax credits for re- “Because of the competitive ity. to rise and natural gas-fired managing director at Princi-
lands, a senior White House newable power to build out so- price of natural gas and the U.S. utilities generated generation to fall by 2020, fol- ples for Responsible Invest-
official said. lar and wind farms, which are declining price of renewables, more electricity from natural lowed by another reversal after ment, a London-based non-
While the action may give a becoming more cost-competi- continuing to drive carbon out gas than from coal last 2030 when it anticipates gas profit that helps funds figure
reprieve to some coal-fired tive with fossil-fuel generation makes sense for us,” Ms. Good year. Power from coal plants will exceed coal again. out how to cut the carbon
plants facing extinction, large thanks to economies of scale said. “Administrations will fell to 3.4 million megawatt- The extent of a coal recov- footprint of their investments.
utilities said they would con- and advances in technology. change during the life of our hours a day in 2016 to supply ery will depend largely on the “Investors want to see compa-
tinue long-term investments to Duke Energy Corp. said it business and our assets, and 30% of U.S. generation, down price utilities pay for gas, nies that are moving away
generate more power from gas, planned to invest $11 billion in we’ll continue to move forward from 33% in 2015, according to which averaged about $3 a from coal, to other energies,”
wind and solar, which are be- natural-gas and renew- in a way that makes sense for the U.S. Energy Department. million British thermal units she said.
ing driven by economic as well able power generation over our investors and our custom- Natural-gas plants supplied 3.8 last year. The department pre- Nearly 700 institutions val-
as regulatory forces. The the next 10 years, as the com- ers.” million megawatt-hours daily, dicts it will rise to more than ued at more than $5 trillion
White House official said that pany aims to cut its green- Southern Co. plans to invest or 34% of total power supplies $4.50 in 2020, and $5 in 2029. have pledged to divest them-
the order is part of the presi- house-gas emissions by 35% at least $1 billion a year over this past year, up from 33% the Many energy companies selves from fossil-fuel compa-
dent’s promise to restore the from 2005 levels, by 2026. the next five years in new previous year. face state requirements to in- nies, according to a December
coal sector, but the official ac- That represents a long-term wind farms. It now uses natu- Hydropower and other re- crease renewable power gen- report by consulting firm Ara-
knowledged that merely re- company strategy and isn’t ral gas to generate 47% of newables generated 1.7 million eration and are coming under bella Advisors.
pealing the regulations likely to change, Duke Chief Ex- its power, with coal providing megawatt-hours daily, or pressure from large investors Still, some coal plants that
wouldn’t bring back jobs. ecutive Lynn Good said in a Feb- 31%, nuclear 15%, and hydro- about 15% this past year, up such as pension funds and uni- are economical to run, particu-
Cheap U.S. natural gas un- ruary interview. The util- power, wind, solar and other from 13% in 2015. Nuclear versity endowments larly those owned by rural
locked by hydraulic fracturing ity’s power-generating mix is renewable sources 7%. plants contributed 20%, and to clean up their operations. electric cooperatives in
and horizontal drilling has now 34% coal and 28% natural “Going forward, we antici- petroleum and other sources More pension funds, univer- states where coal is plentiful,
prompted many companies to gas, compared with 61% coal pate an increase in renewable produced the rest. sity endowments and other are likely to enjoy longer lives
scrap older coal plants in favor and 5% gas in 2005. By 2026, it generation capacity and de- Without the Clean Power funds are divesting from com- without the carbon rule.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, March 29, 2017 | A7

U.S. NEWS U.S. WATCH

Fed Official: 3 Boosts Likely in ’17

WASHINGTON
Health-Law Suit
Takes Center Stage
BY JEANNETTE NEUMANN has said the Fed’s projected President Donald Trump and
AND MICHAEL S. DERBY Warning on Politics Mr. Lockhart, who joined the ing created a long-term drag on path of rate rises, which GOP lawmakers, seeking to re-
Fed’s rate-setting committee in the country’s economy. holds for about two more in- group following the collapse of the
Federal Reserve Bank of From Ex-Fed Official 2007 and remained on the Fed’s “The U.S. is not Japan, and creases this year after the effort to repeal the Affordable Care
Chicago President Charles Ev- board for 10 years, said Monday the U.S. has other characteris- recent boost, looks appropri- Act, have an option for gutting the
ans said the U.S. central bank at the Credit Suisse Asian In- tics, but I do think demographic ate to him. health law relatively quickly: They
could raise short-term inter- As global markets responded vestment Conference in Hong influence on growth potential is A week ago, in a television could halt billions in payments in-
est rates four times this year to the failure of the U.S. health- Kong that he thought the U.S. an important consideration in interview, Mr. Evans said that surers get under the law.
if inflation picks up, but sug- care bill, a former Federal Re- economy is on a solid footing. the U.S.,” he said. “Demographics “if the growth outlook solidi- House Republicans were al-
gested three increases remain serve official warned that politi- However, he warned that ad- influence consumption patterns, fies and I have more confi- ready challenging those pay-
more plausible. cal issues threaten the central dressing long-term demographic savings and investment patterns dence inflation is going up, ments in court as invalid. Their
“At the moment, I don’t bank’s ability to maintain a sus- challenges posed by the retiring and even influence real-estate three [rate increases] for the lawsuit to stop the payments,
see the data, I don’t have the tainable recovery. baby-boomer generation will cre- development patterns,” he told entire year is entirely reason- which they call illegal, was sus-
confidence” for four rate in- Former Federal Reserve Bank ate a drag on economic growth, The Wall Street Journal in an in- able. It could be less if there’s pended as Republicans pushed to
creases in 2017, he said at an of Atlanta President Dennis Lock- and the political atmosphere terview. more inflation uncertainty or replace the ACA, but it could
event held in Madrid by the hart said politics could hamstring wasn’t conducive to considering Recent gross-domestic-prod- it could be more if things are now resume—or the Trump ad-
Global Interdependence Cen- efforts to achieve long-term other measures to improve eco- uct projections from the Atlanta stronger than that.” ministration could decline to con-
ter. “If I thought that I was growth as the Fed winds down nomic productivity, such as in- Fed have pointed to a weaker The Chicago central banker test it and simply drop the pay-
inclined to four rate hikes for its crisis-era stimulus measures, creased skills-based immigration. rate of growth than some of the is the first official to speak in ments. Mr. Trump could
2017, I would presumably be increases interest rates and He cited the effect of Fed’s other forecasts. a busy week for public com- unilaterally end the payments re-
seeing a much stronger lift in starts to shrink its balance sheet. Japan’s aging population as hav- —Gregor Stuart Hunter mentary by Fed officials. Fed gardless of the lawsuit.
inflation.” Chairwoman Janet Yellen was Such actions would stop the
Mr. Evans said long-term due to speak Tuesday, and government payments reimbursing
inflation expectations in the icy is another area of uncer- Evans’s support, boosted omy and their expectation many regional Fed bank lead- insurers for subsidies that lower
U.S. are running below the tainty. “We’re waiting in the short-term interest rates for that inflation will continue to ers also will be weighing in. the cost of deductibles, co-pay-
central bank’s 2% target, even U.S., as around the world, for the first time this year and tick back up toward the offi- Almost all central-bank ments and coinsurance for about
though short-term prices are a better articulation of ex- the third time since the fi- cial target of 2%, amid more commentary recently has six million people who obtain insur-
nearing that objective. actly what the trade policies nancial crisis, lifting its over- gains in hiring. been in support of rate ance through the ACA’s exchanges.
The failure of the health- will be,” he said. night target rate range to Mr. Evans was once on rises, although the Minneap- Insurers would lose billions of dol-
care bill that was backed by Mr. Evans is a voting mem- 0.75% to 1%. the side of those who are olis Fed chief Neel Kashkari lars in expected funding and would
Republican House leaders ber of the interest-rate-set- Fed officials have signaled skeptical of the push to raise has served as a voice of op- likely flee the ACA’s exchanges, a
adds to the uncertainties con- ting Federal Open Market more rate increases are likely rates when inflation is under position, saying economic foundation of the health law.
fronting the U.S. economy, Committee this year. This as the year progresses given the central bank’s desired data suggest no urgency to —Stephanie Armour
Mr. Evans said. U.S. trade pol- month, the FOMC, with Mr. the current vigor of the econ- level. But lately Mr. Evans act now.
IMMIGRATION
Sanctuary Cities to Be
Congress Gears Up for Fight Over Spending Barred From Funds
The Trump administration
BY KRISTINA PETERSON said it would withhold federal
AND SIOBHAN HUGHES criminal-justice grants from cit-
ies, counties and states that
WASHINGTON—President don’t fully cooperate with federal
Donald Trump and GOP leaders immigration authorities, a first
enter their next big battle facing strike in the new administra-
stubborn opposition in both tion’s battle against so-called
parties that increases Republi- sanctuary cities.
cans’ worries that they will Attorney General Jeff Ses-
need more Democratic support sions said Monday that he was
than previously expected to reaffirming a more limited
avert a government shutdown Obama-era policy that threat-
by the end of April. ened to pull grants from jurisdic-
It is a sign of the new reality tions that bar officials from com-
in Washington after Mr. Trump municating with federal agencies
and House Speaker Paul Ryan about immigration, and implied
failed to persuade the House’s that more sweeping rules were
most conservative Republicans, coming. He also said the Justice
as well as centrists, to back a Department would try to take
bill to replace the Affordable back previously granted funding
Care Act. The failure derailed from places that don’t comply
the GOP leadership and the new with the communications law.
administration’s top legislative —Laura Meckler
priority and has put unexpected
J. DAVID AKE/ASSOCIATED PRESS

questions before both parties SUPREME COURT

about their paths forward.
For Republicans leaders, the Justices Side With
main challenge is the House Death-Row Inmate
Freedom Caucus, an alliance of
the most conservative Republi- The Supreme Court on Tues-
cans who defied the White day sided with a Texas death
House to sink the health bill. row-inmate who claimed he
For Democrats, unified oppo- The House of Representatives side of the Capitol on Thursday night amid last-minute negotiations on the Republican health-care bill, which failed. shouldn’t be executed because
sition to the bill helped give the he is intellectually disabled. The
party a surprising legislative will need to pass a new spending “If we don’t get focused on it, Some GOP lawmakers said all the levers to not be able to re- justices, by a 5-3 vote, reversed
win and deprived Mr. Trump of bill or trigger a partial govern- there’s always a risk.’’ that while their party’s most peal and replace Obamacare.” a Texas appeals court ruling that
an early victory. Their success ment shutdown. More distantly, “The government can’t shut conservative members might feel Mr. Trump is working to inmate Bobby James Moore
in sticking together has left the Congress must approve an in- down,’’ he said. “If you have a new power to make demands, isolate the caucus. “The Re- wasn’t intellectually disabled.
party less incentive to compro- crease in the nation’s debt limit, Republican Congress shutting the conservative bloc could also publican House Freedom Cau- Justice Ruth Bader Ginsburg
mise with Republicans, who will likely by this fall, and then fund down a Republican govern- splinter amid disagreements cus was able to snatch defeat said in her majority opinion that
likely need them to supply votes the government for fiscal 2018. ment, that’s just about as po- over whether it was wise to from the jaws of victory,” he Texas’ top criminal appeals court
for the fiscal measures, as they Some Republicans say they litically stupid as it gets.” block the party’s best chance to said Monday night on Twitter. ignored current medical stan-
often did under Mr. Ryan’s pre- are worried about repeating the Some Republicans saw Demo- replace the Affordable Care Act. Congress agreed in the fall of dards and required use of out-
decessor, Speaker John Boehner. experience of 2013, when the cratic support as one way through While some Freedom Caucus 2015 to the overall spending lev- dated criteria when it decided Mr.
The most immediate test party drew most of the blame the political minefield. Rep. Chris members are “emboldened’’ be- els of a two-year budget deal that Moore isn’t mentally disabled.
comes at the end of April, when for a partial shutdown related Collins (R., N.Y.), a top ally of Mr. cause they defeated a top leader- ends in October. But several po- That ruling removed a legal hur-
the government’s current fund- to a fight over the health law. Trump, said he “would not be too ship priority, Mr. Collins said, litical conflicts could be triggered dle to Mr. Moore’s execution for
ing expires. Lawmakers have only Asked if chances of a govern- surprised” if Democrats supplied “there are others who are more next month, depending on what the shotgun slaying of a Houston
12 legislative workdays before ment shutdown were rising, the majority of the votes needed chastened by what happened and else GOP leaders decide to put grocery store clerk in 1980.
April 28, the date by which they Rep. Tom Cole (R., Okla.) said, to raise the debt ceiling. the failure of Republicans with into the short-term spending bill. —Associated Press

Police Hope to Deploy Military Gear Obama Restricted

BY ZUSHA ELINSON called for stiffer penalties for
AND BETH REINHARD harming officers, echo-
ing recommendations made by
Police groups helping to police unions to the Trump
shape President Donald Trump’s transition team, according
law-and-order agenda have to William Johnson, executive
their eyes on big prizes: mili- director of the National Asso-
tary equipment banned by ciation of Police Organiza-
the previous administration and tions, a coalition of unions and
tougher laws on violence associations representing
against officers. about 240,000 officers.
In a contrast with the past “To see that you’re like,
eight years, the nation’s big- ‘Wow,’ they really listened to
gest police unions say they what we said and they’re try-
now have the ear of the White ing to put it in place,” said Mr.
House. If their advocacy is Johnson. “For eight years we
successful, it would represent were beating our heads
a return to more aggressive against the wall.”
policing tactics of the past. In the Obama era, law-en-
more aggressive law enforce-
ment won’t necessarily im-
prove public safety and could
worsen tensions with minority
communities. While homicides
rose in most big American cit-
ies in 2016 (with notable ex-
ceptions including New York),
they note that overall crime
rates are at historic lows.
Charles Ramsey, a former
Philadelphia police chief who
was a co-chairman of an
Obama task force on policing
after the events in Ferguson,
Mo., where an officer in Au-
gust 2014 fatally shot an un-
armed black after an alterca-
tion, warned of dangers if
J.B. FORBES/ASSOCIATED PRESS

Police unions expect the forcement unions chafed over police unions become the lead-
Trump administration to re- criticism they felt was overly ing voice in shaping policy.
scind former President Barack broad and disparaging follow- “They have one constitu-
Obama’s 2015 executive order ing several police shootings of ency—that’s the rank-and-
that banned local police from unarmed minorities, some of file officer and that’s going
acquiring tank-like armored which triggered large pro- to be their priority, not nec-
vehicles, grenade launchers tests. Some felt Mr. Obama essarily what’s in the best
and other equipment from the wasn’t supportive enough af- interest of the public,” he
federal government. Last year, ter police were killed in tar- said. “Should they be at the The Obama White House restricted police use of military-style vehicles, as in Ferguson, Mo., above.
Mr. Trump said he would re- geted shootings, and was table? Of course. But I don’t
scind the Obama order. partly to blame for inflaming think they should be the peo- their recommendations seri- pying army. in touch with his organization
“We’re going to remind him tensions between police and ple that a president or a ously,” said spokeswoman Police unions and the coun- for input on the restrictions
of that promise and ask him to minority communities. mayor goes to first when Kelly Love. try’s sheriffs have cited exam- on military equipment, some-
deliver,” said Chuck Canter- Now, they feel they have they go to set policy.” Much of law enforcement ples such as an Alabama sher- thing he said didn’t often oc-
bury, national president of the Mr. Trump’s full backing as The White House declined have fought to reverse tighter iff who used tracked armored cur under Mr. Obama. “What a
Fraternal Order of Police, the the new administration pre- to comment specifically on the controls put in place under vehicles to search for armed difference six months makes,”
nation’s largest police union, pares to crack down on crime union’s involvement in the ex- Mr. Obama on riot gear and suspects in the woods. Some he said.
with more than 333,000 mem- tied to gangs, guns and illegal ecutive order, which called other items after images of of- argued that criminals had ac- As of last summer, police
bers, according to its website. immigration, citing a surge in for new federal crimes to pro- ficers wearing fatigues, carry- cess to more sophisticated ar- departments had returned 126
The union’s executive board murders in some big cities. tect officers. ing military-style weapons and mor and weaponry. tracked armored vehicles,
was scheduled to meet Tues- The administration’s ap- “In general, we listen to law traveling in armored vehicles Jonathan Thompson, execu- which look like tanks without
day morning with Mr. Trump. proach is unnerving civil enforcement organizations at protests in Ferguson, tive director of the National guns, 138 grenade launchers
An executive order issued rights advocates and even about what they think works sparked concern that the po- Sheriffs Association, said ad- and 1,623 bayonets to the fed-
by Mr. Trump’s last month some police chiefs. They say and doesn’t work, and we take lice seemed more like an occu- ministration officials had been eral government.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
A8 | Wednesday, March 29, 2017
MONEY
Continued from Page One
from China’s corporate debt
load onto consumers.
Chinese banks hold more
than $20 trillion in deposits,
with more than a third of the
total from household savings.
Online pitches like those by Mr.
Han and a plethora of other in-
vestments attracted about $200
billion in 2015 and even more
last year, consulting firm
McKinsey & Co. estimated.
In just one corner of the
booming online finance sector,
more than 5,700 firms are regis-
tered with the Association of
Shanghai Internet Financial In-
dustry, a quasigovernmental
group, to match small lenders
and borrowers.
Not every company is regis-
tered, and more than half of
those that are have had repay-
ment problems or have been in-
vestigated by the police, accord-
ing to the association.
In January and February,
Chinese electronics maker Co-
sun Group failed to repay
about $166 million in bonds
sold through an online mar-
ketplace owned by Ant Finan-
cial Services Group. Ant is an
affiliate of e-commerce giant
Alibaba Group Holding Ltd.
and is valued by some analysts
at more than $70 billion.
Many of the investors used
Ant’s highly popular Alipay on-
line payment system. After at
least 13,000 Ant customers were
affected, Ant said it was work-
ing to get them repaid but has
declined to comment since then.
Cosun couldn’t be reached.
Crying investors
In April 2016, crying inves-
tors flocked to Shanghai Kuailu
Investment Group to demand
their money back after its 13
fundraising platforms halted
redemptions for about 38,000
customers who invested more
than $2 billion, according to
company documents reviewed
by The Wall Street Journal. It
had invested in at least 20 fea-
ture films, one starring former
boxer Mike Tyson.
Kuailu blamed its failure on a
cash crunch, and police have al-
leged it raised some money ille-
gally. The company’s owner has
disappeared, and investors
claim they haven’t been repaid.
No one at Kuailu could be
reached to comment.
Instead of championing the
expansion of internet finance as
he did a few years ago, Chinese
Premier Li Keqiang grouped it
this month with other parts of
the country’s financial system
that will require the govern-
ment to be “fully alert to the
buildup of risks.”
President Xi Jinping came
into office in 2012 determined
to use personal finance as a
stimulant for the economy, al-
ready sagging from too much
Peer-to-Peer Problems
A rising percentage of the more than 5,700 Chinese firms that match
small borrowers and lenders have been in legal or financial trouble.
60%
40
20
0 out killing online finance, also
D J F M
2016
Sources: Wangdaizhijia; Association of Shanghai Internet Financial Industry
BANNER
Continued from Page One
United, Louis van Gaal. In the
end, the banner was grounded
by a technical problem: Mr. van
Gaal was fired before takeoff.
All this marks a departure
from the usual orders Mr.
Moores fields for local adver-
tising, birthday wishes and
marriage proposals. He likes to
say that he’s popped the ques-
tion to more women than any-
one else in the U.K. The 60-
year old, who has run Airads
since 2005, said he and his
crews have now flown over a
dozen soccer stadiums and
that new commissions have
been rolling in since the Arse-
nal display. “Football and avia-
tion seem to be coming to-
gether now,” he said.
Yet the growing market for
mile-high diatribes isn’t al-
ways a blue-sky affair. “Deal-
ing with fan groups is one of
the most difficult things,” Mr.
Prospective buyers, above, look at a model for Elegant Villa, a real-estate project that had little trouble raising $15 million from as
many as 1,000 online investors. A staff member, below, demonstrates how to make mobile payments at Alipay’s headquarters.
China Rising
Five of the world's 10 most valuable financial technology companies
are Chinese.
Ant Financial (China)
PayPal (U.S.)
Tencent Finance (China)
Lufax (China)
Stripe (U.S.)
Zhong An (China)
JD Internet Finance (China)
Square (U.S.)
Zenefits (U.S.)
Sofi (U.S.)
manufacturing, infrastructure
and property investment. Local
governments began offering
business licenses and credit
backing to internet financiers,
and “inclusive finance” became
part of Beijing’s official policy.
In a recent survey, about
70% of Chinese internet users
said carrying cash is no longer
a daily necessity. It is common
for consumers to swipe from
deal to deal on apps that ad-
vertise investment opportuni-
ties. The apps usually are con-
nected to online payment
services that supply the cus-
tomer’s personal details and
link to bank accounts.
The migration of investing
onto mobile phones happened in
a flash. After Alipay pioneered a
way to pay for goods with mo-
bile phones, entrepreneurs used
Alipay to sell shares during the
2015 stock-market boom. Stocks
crashed, but other investment
options proliferated, including
commodities trading and inter-
est-bearing insurance products.
An app offered by Shanghai
QianShengQian Financial Infor-
mation Services Ltd. advertised
a “shark plan” that lets inves-
tors bet on the prices of silver
A M J J A S O N
THE WALL STREET JOURNAL.
Moores said. “It’s more diffi-
cult than actually flying the
airplane.”
First there is the problem of
basic decency. Angry fans of-
ten request messages that are,
as he puts it, “deeply scatolog-
ical and offensive.” Mr. Moores
has to cajole them into some-
thing more family-friendly.
Once that is settled, he of-
ten has to counsel his clients
on how best to get their points
across. He recommends, for in-
stance, that they use a hashtag
for maximum exposure.
After the anti-Wenger ban-
ner flew, hundreds of people
used the hashtag to post photos
of the plane on Twitter. Some
asked where they could send
donations, while others joked
about shooting it down with a
bazooka. “This club is becom-
ing a joke,” said one post.
Another perennial problem:
English weather. On the Satur-
day of the Arsenal match, Mr.
Moores looked at the stormy
skies and warned his clients it
might not be possible to fly.
IN DEPTH
$70.0 billion
$47.0
$29.0
$18.0
$9.2
$8.0
$7.0
$4.9
Sources: CB Insights; Lendit
$4.5 Conference; Deutsche Bank;
CLSA; Credit Suisse
$4.0 THE WALL STREET JOURNAL.
and eggs. Multiple financial
firms accept nude photos of
borrowers as collateral on loans
to college students.
Online finance is part of
China’s wider shadow-credit
system, where borrowings to-
taled $9.22 trillion in 2016,
equivalent to 90% of gross do-
mestic product, according to
UBS Securities. The term
shadow credit refers to lending
outside the formal banking sys-
tem and its regulations.
Many people in the indus-
try say investors pay little at-
tention to details, other than
the advertised return. Their
money often is supposed to be
tied up for just days or weeks,
giving investors more comfort
about the risks.
While most borrowers have
been able to repay, often with
a new round of money bor-
rowed from somewhere else,
investors have suffered losses
in the billions of dollars.
Fat elder brother
Huang Chang, 39 years old,
and his retired mother invested
$45,000 with Shanghai Upros-
per Asset Management Co.,
which primarily sold products
that lent money to steelmakers.
“Attending the talk at their
fancy office gave me the impres-
sion that there would be zero
risk,” Mr. Huang said.
The firm’s founder, Wang
Mian, used the nickname “fat el-
der brother” on social media to
praise his best salespeople and
promise them cash bonuses. Mr.
Wang disappeared in June, and
Uprosper immediately shut
down. No one at Uprosper could
be reached to comment.
Government agencies have
responded with measures
aimed at halting abuses with-
D a growing source of funding
for Chinese mergers and acqui-
sitions and large initial public
offerings. Some lenders were
The Wenger In and Wenger
Out camps asked him to try.
Mr. Moores and his Wenger
Out payload took off from
southern England into fierce
headwinds toward West
Brom’s stadium in Birming-
ham. At the same time, a sec-
ond crew working for Mr.
Moores pointed its Cessna at
Birmingham with the opposite
message in tow.
“The chances of doing this
were somewhat less than
50/50,” Mr. Moores said.
The weather broke just long
enough for the juddering pro-
peller aircraft to be visible
from the stands. Both planes
made it to the game in the
first 15 minutes.
The anti-Wenger banner
conspirators had been the first
to call. They were led by long-
time Arsenal fan Chris Butler,
whose crowdfunding page for
anti-Wenger displays has raised
nearly $4,000 this month.
“We’re just tired of our
Groundhog Day seasons,” said
Mr. Butler, whose followers
told to keep investor money at
banks, but unlicensed lenders
can easily evade the rule.
Police also marched top exec-
utives of a dozen financial firms
through a Shanghai jail to meet
an executive accused of trying
to elude investors without pay-
ing them. The move was seen as
an attempt to warn the execu-
tives and reassure Chinese con-
sumers unnerved by the prob-
lems in online finance.
In China, investors ‘are handing over their
cash to a small group of internet pioneers.’
The freewheeling environ-
ment has some parallels to how
U.S. savings and loans lured de-
positors from across the coun-
try with high interest rates dur-
ing the 1980s. The S&L industry
was eventually swamped by bad
loans.
Internet pioneers
Andrew Collier, founder and
managing director of research
firm Orient Capital Research in
Hong Kong, said Chinese firms
are using money raised online
much like Wall Street did when
repackaging subprime loans into
securities before the financial
crisis hit.
In China, he said, investors
“are handing over their cash to
a small group of internet pio-
neers who are trying to find
ways to lend it short-term.”
Just north of Shanghai, the
Elegant Villa real-estate project
had little trouble raising $15
million from as many as 1,000
online investors.
Mr. Han made headlines
when the China Securities Reg-
ulatory Commission alleged in
2015 that he committed stock-
market fraud by concealing his
control of various business en-
tities. The agency fined Mr.
Simon Moores, owner of a banner-flying company, is a winner.
have marched in protest outside
of Arsenal matches, unfurled
Anti-Wenger signs in the stands
and hammered the coach with
coordinated attacks on social
media. “We lose against the big
teams. We have an appalling re-
cord in Europe. The guys are
just fed up,” he added. “We’ve
THE WALL STREET JOURNAL.
Since China’s real-estate in-
dustry lacked a financial mecha-
nism like Fannie Mae, the U.S.
mortgage-finance company that
buys debt from U.S. banks and
repackages it as financial prod-
ucts, Mr. Xu decided to create
his own. He said he asked him-
self: “Why not jump straight
into real-estate financial ser-
vices?”
Mr. Xu, 47, declined to com-
ment on specific clients but said
Nanjing Financial Assets Ex-
change is in “financial supply-
chain services.” It charges bor-
rowers a fee equal to 2% of an
investment’s total face value.
JAMES T. AREDDY/THE WALL STREET JOURNAL
Shanghai Huarui Bank Co.,
which opened in 2015, has sold
investments created by Mr. Xu’s
firm on the bank’s app as part
of its strategy to be a leader in
financial technology. Another
customer is appliance retailer
Suning Commerce Group Co.,
which collects deposits online
and at retail stores.
Between sips of hot water,
Mr. Xu used a golden Huawei
Technologies Co. mobile phone
to flip through investment deals
created by his finance firm, in-
cluding some promising an an-
nual yield of as much as 17%.
“In China, doing business is
about seizing opportunities,”
Mr. Xu said. Details of individ-
ual contracts are bound in ma-
nila envelopes, filling a few
shelves of a lock box in a stor-
age room with broken chairs
HAN CHUANHAO/XINHUA/ZUMA PRESS
next to his office.
Man over an abyss
Other online financial firms
are located on several floors of
the building in Nanjing where
Mr. Xu’s office is located. Lo-
cal government officials
placed a warning sign near the
elevators, showing a cartoon
Han and his businesses a total man reaching for a certificate
of $815,000. He couldn’t be labeled “high interest rates”
reached to comment. that dangles over an abyss.
Weeks later, property devel- In January 2016, Nanjing Fi-
oper Henan Oriental Silver Star nancial Assets Exchange’s web-
Investment Co. rejected an ac- site offered $15 million in in-
quisition offer from Mr. Han. vestment products issued by
The company cited the regula- Shanghai Chongming Yushang
tory sanctions as evidence of Real Estate Co. That firm was
dishonesty and alleged that Mr. controlled by Mr. Han, accord-
Han had slandered Silver Star’s ing to business records re-
corporate officers. viewed by the Journal.
Before becoming a real-estate An offering document said
Chongming Yushang was
building Elegant Villa, as well
as high-rises in a small Chi-
nese city.
To reassure potential inves-
tors that the debt and 8.8%
annual return would be repaid,
the offering document re-
developer, Mr. Han, 52, was a ferred to a letter of guarantee
car dealer in his home province from Mr. Han’s son and busi-
of Henan. According to legal re- ness partner, named Han Xiao.
cords, courts sided at least The offering sold out, accord-
twice with former employees in ing to the exchange’s website.
lawsuits alleging contractual Construction cranes rose at the
breaches such as illegal dis- Elegant Villa site, between a
missal. He disputed the allega- gravel pit, an empty ecotourism
tions. visitor center and neighboring
A spokeswoman for Mr. kindergarten development.
Han’s holding company, Hywin Investors in the $15 million
Group, and its financial unit, deal got the option to forgo
Shanghai Five Bulls Fund Man- their interest payment in re-
agement Co., said his businesses turn for an 8.5% discount on a
are “low-key” and have com- new home in Elegant Villa. Mr.
plied with local laws. She de- Han’s company wouldn’t com-
clined to comment further. ment on how many investors
The overall cost of the Ele- opted for the discount.
gant Villa project isn’t clear. In Mr. Han paid back the inves-
April 2014, Mr. Han’s companies tors last fall. A month earlier, he
paid $154 million for the land, refinanced the real-estate proj-
property records show. ect by borrowing from one of
When he went looking for fi- the Chinese government’s debt-
nancing, Mr. Han turned to Nan- restructuring agencies, public
jing Financial Assets Exchange, filings show. His family’s com-
which says it repackages com- pany is now raising money on-
mercial bills, accounts receiv- line to build apartments in an-
able and factory assets into in- other Shanghai suburb.
vestment products that have Homes in Elegant Villa are
raised more than $1.5 billion. still under construction and
Real-estate developer Xu went on sale recently for more
Chaojun said he started the firm than $500,000. Potential buyers
in late 2014 when he sensed lo- can visit showrooms with min-
cal bankers getting skittish iature replicas that have work-
about real-estate construction ing lights and elevators.
loans because land prices kept —Yifan Xie and Zhou Wei
climbing. contributed to this article.
air raid began to leak out on
social media, a group of Arse-
nal supporters 6,000 miles
away in Hong Kong, calling
themselves Gooners20—Arse-
nal is known, informally, as
the Gunners—decided to hatch
a counterplot to support Mr.
Wenger, who has unfailingly
kept Arsenal among the top
four teams in the Premier
League during his career.
Since England has only a
handful of banner-flying com-
panies, it wasn’t much of a co-
incidence that they ended up
dialing Mr. Moores.
On the day of the dueling
AIRADS
planes, Arsenal lost, dropping
to sixth in the standings. Mr.
Wenger, 67, whose contract is
up this summer, was in no
had 10 years of misery.” mood to talk light aircraft.
After laying out “the stan- “We lose game after game at
dard Scrabble kit” of up to 32 the moment and that is for me
characters in red or black, in- much more important than my
cluding spaces, Mr. Moores future,” he said.
factored in fuel, distance, and Wenger In, Wenger Out, it
landing fees. The quote for a didn’t really matter to Mr.
job like this: $935. Moores. “I kind of support
As word of the Wenger Out Manchester United,” he said.
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THE WALL STREET JOURNAL. Wednesday, March 29, 2017 | A9

LIFE&ARTS
ART REVIEW

Memorial for a Master

On the 100th anniversary of Rodin’s death, a major exhibition explores his creative universe and influence on modern art
BY A.J. GOLDMANN

Paris
CAN ANYTHING MORE be said
about Auguste Rodin (1840-1917)?
Few artists are as universally re-
vered and celebrated as this icono-
clastic titan who brought sculpture
into the modern age. At the same
time, genuinely iconic works like
“The Thinker” and “The Kiss” have
made Rodin instantly recognizable
throughout the world. On the cen-
tenary of his death, France is pull-
ing out all the stops for a yearlong
celebration that will see a newly
minted €2 coin (predictably embla-
zoned with “The Thinker”), com-
memorative stamps, a major fea-
ture film and, of course, numerous Clockwise from left: Rodin’s ‘The
museum exhibits. Burghers of Calais’ (1884-89/2005);
The centerpiece is “Rodin, the ‘The Thinker’ (1904); ‘Mask of
Centenary Exhibition,” a sprawling Camille Claudel With the Left Hand
show at the Grand Palais. A collab- of Pierre de Wissant’ (around 1895)
oration with the Musée Rodin, it
both seeks to immerse the visitor ais the vast majority are in plaster,
CHRISTIAN BARAJA/MUSÉE RODIN

in the artist’s creative universe including two differently sized ver-

and to chart his influence on sions of “The Thinker,” presumably
sculpture, drawing, photography in an effort to present “the real
and mixed-media work since 1900, Rodin.” Most impressively, we
when Rodin was at the height of have the full plaster relief of Ro-
his fame. It’s a daring double-tra- din’s Gesamtkunstwerk “The Gates
jectory to undertake over the of Hell” (1890-1900), whose scores
course of this 300-work show. of subjects Rodin revisited end-
There is, of course, a year-round lessly until his death.
Rodin retrospective at the Musée The plasters have a rough ele-
Rodin, whose current show, An altogether more fruitful “Glass of Absinthe,” a bronze gance all their own. Looking at
“Kiefer Rodin,” is a marvelous view of what Rodin means for Cubist glass topped by an ac- them requires a certain amount of
complement to the centennial ex- sculpture nowadays is pre- tual sugar strainer, to suggest cognitive dissonance. We know
hibition. Featuring mesmerizing sented in the exhibit’s final Rodin as the progenitor of as- these works and yet we don’t
new work inspired by Kiefer’s gallery, with dynamically ex- semblage. know them. They literally have the
reading of Rodin’s book, “The Ca- pressive figurative work by The version “The Burghers” artist’s fingerprint on them, and
thedrals of France,” as well as lit- Markus Lüpertz, Antony Gorm- here is in plaster, the medium we sense Rodin’s virtuosity in a
tle-known plasters by Rodin that ley and Jean-Paul Marcheschi, in which Rodin modeled his way that feels even more personal
echo Kiefer’s exploration, the show displayed alongside better- sculptural work. Virtually all and sometimes even hesitant. By
is an uncommonly fruitful homage known sculptures by Picasso, of Rodin’s sculptures were turns sensual, grotesque and out-
and artistic exchange. The elegant Giacometti and De Kooning. cast in bronze or cut in mar- right erotic, Rodin’s work capti-
house and garden of Musée Rodin Among Rodin’s contempo- ble by assistants. Rodin vates for its emotional rawness
is a far cry from the monumental raries, Camille Claudel and worked and reworked his fig- and immediacy. We have the feel-
and vast Grand Palais, where the Ivan Méstrovic are two art- ures, molding and caressing ing of knowing him and his sub-
presentation of Rodin’s oeuvre ists whose raw, frightening his works into existence with jects intimately. So we immedi-
takes an altogether different form. depictions of aging flesh mir- his fingers. But the majority of ately see Balzac when Rodin
Eschewing fixed chronology and ror Rodin’s own unsentimen- Rodin bronzes found around presents an empty robe, bulging in
following only a loose thematic tal approach to the subject. the world weren’t cast while the middle with the unseen au-
scheme, the exhibit’s guiding princi- The show’s first item, in fact, the artist was alive. Some thor’s paunch in 1897’s “Balzac’s
ple is confrontation. At nearly every is Claudel’s 1892 bust of the casts are as recent as the Dressing Gown.” Finding that work
turn, we come face-to-face with artist: stern, proud and with 1980s, and look very different juxtaposed with Joseph Beuys’s
works that take up themes or em- an intense gaze. It’s quite a from the lifetime casts on “Felt Suit” (1970), on a hanger
ploy techniques that could be de- contrast with his portrait of which he lavished great atten- close by, Rodin’s entry seems the
scribed as Rodinian. One of the ear- her in “Mask of Camille Clau- tion. When the Musée Rodin greater provocation.
liest—and cheekiest—is Georg del With the Left Hand of reopened in late 2015, it added
Baselitz’s “Folk-Thing-Zero” (2009), Pierre de Wissant” (around 1895), longs to one of the subjects of Ro- a significant number of original Rodin, the Centenary Exhibition
a patinated bronze of a blue seated which shows a delicate face quiv- din’s “The Burghers of Calais” plasters from Meudon outside of Grand Palais, through July 31
figure with a white cap and high ering with emotion while, from (1884-89); Rodin loved to break up Paris, where the artist had his
heels who could be “The Thinker”’s behind, a hand gently presses clay and reconfigure his subjects, and country estate. Of the sculptures Mr. Goldmann writes about
dimwitted 21st-century grandson. to her left temple. The hand be- the show displays Picasso’s 1914 by Rodin on view at the Grand Pal- European arts and culture.

BONDS: ON RELATIONSHIPS | Elizabeth Bernstein

DOES YOUR CHILD

NEED THERAPY?
MANY PARENTS have wondered, point of shutting down. Bring them
looking at a nail-biting child or taci- to therapy if a child has trouble fol-
turn teen, if their parenting is ade- lowing rules, frequently argues, re-
quate or if their child would benefit peatedly seeks reassurance, with-
from professional help. draws from family members or
Jacqueline Sperling, a clinical becomes increasingly dependent on
JOSH ANDRUS FOR THE WALL STREET JOURNAL

psychologist in Cambridge, Mass., is caregivers at home.

the director of training and re- I don’t advise parents to assume
search at the McLean Anxiety Mas- behaviors are a phase. Therapy can
tery Program, an intensive group- teach skills that are helpful for ev-
based outpatient program for eryone, so there is no harm in get-
children and adolescents ages six to ting extra support.
19 at McLean Hospital. She also has
a private practice and is an instruc- What issues do you see in children
tor in psychology at Harvard Medi- now?
cal School. I see children with anxiety disor-
Dr. Sperling relies heavily on ders and OCD. These issues often
Cognitive Behavioral Therapy hang together with others, such as
(CBT), which helps a person iden- depression, attention difficulties Jacqueline Sperling, a clinical psychologist in Cambridge, Mass. treats children and adolescents ages six to 19.
tify inaccurate or negative thinking and tics. Children with anxiety dis-
in order to respond to a situation orders often acknowledge they’ve What’s the average length of time sense of control and understand the struggling to function.
more effectively. She treats children always had a tendency to be anx- that a child might be in therapy? limits ahead of time.
with anxiety disorders and Obses- ious but that certain stressors at a CBT is a collaborative short-term What are the more subtle signs that a
sive-Compulsive Disorder (OCD) and particular age caused the anxiety to treatment that aims to teach chil- How do you handle it when children child or teen may be suicidal?
offers guidance to parents on how worsen. dren the tools they need to be their say damning things about their par- Symptoms of depression, such as
to manage children who are strug- own coaches in the future. An aver- ents? loss of interest in hobbies, sadness
gling with their feelings and often Are parents present in a typical ses- age duration of weekly treatment I address the feelings driving those or irritability and hopelessness, as
with behavior problems, as well. sion? may be around 12 to 16 weeks. statements. A child most likely is well as social withdrawal and ges-
Here are excerpts from her inter- For CBT sessions, after an initial really angry with or hurt by par- tures of giving away belongings can
view: evaluation with the family, I start How do you discuss a child’s session ents, and I want to validate these be signs that one is considering kill-
with just the child in the room. Par- with parents? feelings as well as teach children ing oneself.
When should parents bring a child to a ents are invited to contact me be- I talk with children about how what more effective ways of communicat- Major losses, such as deaths or
therapist? forehand to share updates and rele- they share remains private between ing their emotions to get their breakups, and threats to one’s self-
I recommend sooner rather than vant information. the two of us; however, there are needs met. esteem, such as not achieving one’s
later. It is best to seek help when For at least the last 20% of the exceptions. Any evidence of child goals that happen ahead of some of
you start to see signs that behav- session, parents are invited in so abuse has to be reported to author- When is medication appropriate for a the above behaviors can serve as
iors are getting in the way of a the child can teach them the skills ities, as well as any threats to hurt child? red flags. This by no means is an ex-
child’s social, academic or home en- that were learned, review what else a particular person or population. I I always am happy to refer children haustive list.
vironments: If a child starts turning was covered, and discuss the home- also explain that I keep what the to psychopharmacology providers
down playdates or has trouble mak- work plan for the subsequent ses- child says private from the parents for a consultation if the family were Write to Elizabeth Bernstein at
ing friends, if grades start to de- sion. Parents are taught to be except for any threats to the child’s interested. Medication can supple- elizabeth.bernstein@wsj.com or
cline or the child becomes dis- coaches and cheerleaders to sup- safety or health. ment the effectiveness of CBT, follow her on Facebook, Instagram
tressed about schoolwork to the port the treatment. I want children to experience a which can be needed if a child is and Twitter at EBernsteinWSJ.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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A10 | Wednesday, March 29, 2017 THE WALL STREET JOURNAL.

OPINION
REVIEW & OUTLOOK
A ‘New Approach’
Pay for Slay in Palestine To North Korea
R
epublicans in Congress want to stop the says Sen. Lindsey Graham, a co-sponsor.
flow of hundreds of millions of dollars The legislation faces hurdles because some Rex Tillerson was regime change can be pursued—and one
widely criticized earlier can be used in furtherance of the other.
a year in U.S. aid to a state sponsor of Democrats and Israelis argue that cutting aid
this month when he The first type of regime change is pro-
terrorism: the Palestinian Au- could cause the PA to collapse, suggested that “efforts China. Beijing has little sympathy for Kim
thority. That’s the same PA U.S. aid becomes a inviting chaos and a possible of the past 20 years to Jong Un, who brutally purged his regime
that the U.S. and Israel have transfer payment takeover of the West Bank by bring North Korea to a of its China sympathizers after coming to
long supported as a partner Hamas, which already controls point of denucleariza- power five years ago. But Beijing’s distaste
for peace. But the PA is no for terrorists. the Gaza Strip. By this logic GLOBAL
tion have failed.” The is tempered by its interest in the existence
VIEW
such thing, so this is a chance the PA is the devil we know, By Bret
U.S. secretary of state of North Korea as an independent state,
to bring policy into line with and its support for small-scale then promised “a new mainly because it has good reason to fear
Stephens
moral and strategic realities. terrorism must be balanced against its coopera- approach” without of- the strength and example of a unified,
The effort highlights a scandal hiding in plain tion with Israel in combating threats from fering details. democratic Korea led from Seoul.
sight: PA officials tell foreign audiences that they Hamas and Islamic State. Perhaps he doesn’t yet know what Pro-China regime change would take
that new approach is. But recognizing the form of a coup, in which Kim would
oppose terrorism, yet they pay generous rewards These are real concerns, but the PA and its de-
failure is the first step on the road to be given the choice of exile or execution,
to Palestinians who carry out bombings, stab- fenders have a long history of threatening col- wisdom. to be replaced by a pro-Beijing figure
bings and other attacks against innocents in Is- lapse to avoid reform. This is one reason 81-year- Since the end of the Cold War the U.S. willing to move the country from totali-
rael. These payments are codified in Palestinian old PA President Mahmoud Abbas is in the 13th has pursued a three-pronged approach tarianism to authoritarianism—a Korean
law, which dictates that the deadlier an attack, year of a four-year term, still rewarding terror- toward North Korea. First has been a pol- replay of the transition from Mao Zedong
the richer the reward. Payments equaled $315 ism. It’s also why Israeli security veterans in- icy of inducements aimed at getting to Deng Xiaoping. The U.S. would recog-
million last year, or 8% of the PA budget. creasingly support action against the PA. Pyongyang to change its ways. These in- nize the new government in exchange for
Beneficiaries include the family of Bashar “Pressuring the PA to end its ‘murder for hire’ clude the unilateral removal of U.S. nu- verifiable nuclear disarmament, sealing
Masalha, who last year stabbed 11 people near policy is accompanied by political and security clear weapons from South Korea in 1991, the division of the peninsula.
Tel Aviv and killed 28-year-old Taylor Force, a risks, but moral rectitude often entails facing yearly shipments of heavy fuel for most
of the 1990s, South Korea’s construction
U.S. Army veteran visiting Israel on a break from dangers,” former Israeli army chief Moshe It’s time to make regime
of the Kaesong Industrial Complex inside
business school. Police killed Masalha, but his Ya’alon and military intelligence chief Amos Yad- North Korea in 2003, and the removal of
relatives now receive monthly payments equal lin wrote this month. Defense Minister Avigdor North Korea from the U.S. list of state
change the explicit aim
to several times the average Palestinian wage. Liberman recently designated the Palestinian sponsors of terrorism in 2008. of American policy.
With special offices and more than 500 civil ser- National Fund, which disburses the PA’s blood None of it worked. North Korea is too
vants dedicated to disbursing these funds, the money, as a terrorist organization. cynical, greedy and poor to stay bribed
PA’s message is clear: Terrorism pays. President Trump hasn’t commented on the for long. And it knows it cannot abandon The U.S. could support such a policy
The U.S. has effectively endorsed this mes- Taylor Force Act, but Director of National In- its nuclear program, lest it also forsake and work with China to achieve it be-
sage by sending billions of dollars to the PA telligence Dan Coats co-sponsored the original the only reason the West would pay cause it would ease the suffering of
while overlooking its pay-for-slay policy. But bill in the Senate last year. A White House en- bribes in the first place. North Korea’s people and put the coun-
now the Taylor Force Act promises to cut more dorsement would be timely as Mr. Trump has Then there are sanctions. North Korea try’s nuclear arsenal in safer (and more
may be the “most sanctioned” country on negotiable) hands. China should support
than $200 million in annual economic aid to the invited Mr. Abbas to Washington “in the near
earth, as Barack Obama pointed out in it because it would maintain the North
PA unless it stops paying terrorists. “We’re not future.” Whenever that meeting happens, end- 2015, but sanctions on North Korea tend as a buffer state and get rid of a regime
going to invest in a group of people that have ing the PA’s bureaucracy of terror should be to fail because China has generally been that might otherwise collapse in unpre-
laws like this. It’s just not a good investment,” atop the agenda. reluctant to enforce them. China last year dictable and dangerous ways.
imported $1.2 billion of North Korean Achieving such regime change will be
coal, above the level allowed by U.N. sanc- tricky, but China could move things
So Much for Donald Mussolini tions. More recently, Beijing announced along by cutting off fuel supplies to the

W
that it would cut off coal imports from North and “inviting” Kim and his family
ell, that was fast, if predictable. and the President’s nominee for deputy AG is Pyongyang, but only after it had already for an extended luxury vacation.
We’re referring to the conventional held up in a Republican Senate. purchased its annual quota. And politi- And if the Chinese aren’t amenable to
wisdom that has moved without a The permanent bureaucracy is leaking like cally influential Chinese individuals con- this strategy? In that case, the U.S.
tinue to help the North evade sanctions should support the anti-China model of
moment of self-reflection a tent in a monsoon, and Mr.
through front companies. regime change, aiming not only at the
from declaringDonald Trump Remember when Trump Trump is getting the worst Finally there is what the Obama ad- end of the Kim regime but of North Ko-
to be a dangerous fascist to a was going to roll over U.S. press of any President since ministration called “strategic pa- rea itself.
hopeless incompetent. the final days of Richard tience”—a policy of waiting for the re- That would mean a formal U.S. decla-
Not too long ago our lead- checks and balances? Nixon. Mr. Trump may rage gime to collapse or change course. ration in favor of unification. Other steps
ing media lights were using against the press, but the Strategic patience would be a more might include cutting off Chinese banks
Mussolini and Hitler analogies Alien and Sedition Acts plausible policy if time weren’t working and companies that do business with
to describe the new American President’s threat aren’t coming back. Rest assured that if Mr. against us. The North is now preparing Pyongyang from access to U.S. dollars,
to “democratic norms.” The Washington Post Trump’s Internal Revenue Service ever does its sixth nuclear test. Its ability to marry undertaking a campaign to highlight Chi-
rolled out a portentous new slogan, “Democracy to liberal groups what President Obama’s did a nuclear warhead to an intercontinental nese mistreatment of North Korean refu-
Dies in Darkness.” Academics like Yale’s Timothy to the tea party, the media will provide non- ballistic missile capable of hitting the gees, and further speeding the deploy-
U.S. mainland is no longer a theoretical ment of antiballistic missile systems to
Snyder and Dartmouth’s Brendan Nyhan have stop coverage. risk. A state-of-the-art uranium-enrich- South Korea. As another inducement,
used the theme to become minimedia celebrities The greater likelihood has always been that, ment plant gives it the ability to produce Donald Trump could return to his sugges-
predicting that America in 2017 is ripe for 1930s as a rookie politician, Mr. Trump would be too as many as eight bombs a year. Some of tion last year that the South should have
European tyranny. weak and ineffective, not too strong. He lacks those bombs could be shared with or an independent nuclear deterrent.
So much for all that. The real story of the a solid party base, and the inertial forces of gov- sold to Iran or other malign actors. Mr. Trump is scheduled to meet Xi
Trump Presidency so far is that the normal ernment resist any change that means lost So what’s the alternative? Jinping at Mar-a-Lago next month. It
checks and balances of the American system are power. His Presidency is young, and perhaps It’s time to make regime change in would be a good occasion for the presi-
working almost to a fault. The courts have Mr. Trump will still find his bearings and make North Korea the explicit aim of U.S. pol- dent to ask his Chinese counterpart
blocked Mr. Trump’s immigration order, albeit some progress on his reform agenda. icy, both on strategic and humanitarian which kind of regime change he’d prefer.
with some faulty legal reasoning. Congress has We can’t say the same about the lost credi- grounds. But there are two ways in which Write bstephens@wsj.com.
rejected the House health-care bill, his first big bility of the many worthies who sold American
legislative priority. institutions short while predicting fascist LETTERS TO THE EDITOR
The FBI and the House and Senate Intelli- doom. They were always more partisan than
gence Committees are investigating the Trump principled. As for those quaking Yale and Dart-
campaign’s ties to Russia. Mr. Trump’s Attorney mouth professors, their students should de-
Trump, Comey: Who Is Monitoring Whom?
General has recused himself from the FBI probe, mand a tuition refund. Regarding your editorial: “Comey should be finding who broke the law,
Doesn’t Say Much” (March 22): It’s not on implicating a Trump-Russian
true that FBI Director James Comey collusion.
The GOP Entitlement Caucus was reticent and evasive, but what he
did say had a strong partisan bias
At the very end of his administra-
tion President Obama changed the

T
he full dimensions of the GOP’s self- duce the worst health outcomes of any insurance and ramifications. rules on how widely such secret and
A FISA court approval is required sensitive information can be shared.
defeat on health care will emerge over in the U.S. A pioneering New England Journal of
for surveillance of Americans, and He did so by dramatically increasing
time, but one immediate consequence is Medicine study in 2013 found that Medicaid “gen- one was obtained under Obama’s the number from what used to be per-
giving up block grants for Medicaid. This trans- erated no significant improvement” across mea- presidency. This wasn’t needed to haps 20 individuals to hundreds. Was
formation would have put the program on a bud- sures like mortality, high blood pressure or diabe- monitor the Russians, so was it ob- this done to increase the likelihood of
get for the first time since it was created in 1965, tes compared to the uninsured. tained to monitor Donald Trump or a leak or was it done to make it more
and the bill’s opponents ought to be held ac- The House bill would have transitioned to a his advisers? Add to this, as you say, difficult to identify the leaker?
countable for the rising spending that they could per capita block grant that would grow with an President Obama’s former Director Mr. Comey wouldn’t confirm any in-
have prevented. index of medical infla- of National Intelligence James Clap- vestigation into what was a known fel-
The members of the tion. The change would per and former CIA Director Michael ony crime, but he was comfortable in
House Freedom Caucus Federal Medicaid Outlays have broken the direct Morell “have said publicly that they repeatedly stating the FBI was investi-
who killed ObamaCare’s $500 billion have seen no such evidence” of “col- gating a Trump-Russian collusion. As
link between state
lusion between Trump officials and such, he supplied fodder for Demo-
repeal and replacement spending and federal Russia.” crats and undermined Republicans.
claim to be fiscal 400 subsidies and started Someone, at a minimum, leaked RYAN SEARLE
hawks. Most of them to make more of a de- information about the surveillance Newburyport, Mass.
support a balanced fined contribution. In and “unmasked” an American who
Projections
budget amendment. Yet 300 exchange, Governors was talking to the Russians. Such a I agree with your editorial “A Pres-
they gave zero credit to would have gained re- leak is a felony that could result in ident’s Credibility” (March 23) that
a reform that would form flexibility. Fed- up to 10 years in prison. It seems to President Trump is his own worst en-
200 me the focus on this investigation emy and that his rash behavior could
have restored Medic- eral Medicaid rules
aid—a safety net origi- strictly limit state free- compromise future communications
nally intended for poor 100 dom to try new ideas, of grave import. But let’s also recall it
women, children and and the poor would be It May Make the World Go was President Obama, caught on an
open mic, passing the message that
the disabled—to its better off if decisions Round, but What’s Money? he could do more for Vladimir Putin
original, more limited 0 about their welfare are “Inflation Premises May Be All after the 2012 election.
purposes. 2001 2005 2010 2015 made locally instead of Wrong” (Markets, March 7) misses the Obama administration shenanigans
Over the years lib- Source: Congressional Budget Office in Washington. States most critical issue regarding the de- have included: IRS targeting of conser-
eral and some other- would have been better termination of prices. Monetary mea- vative organizations, Justice Depart-
wise conservative states opened Medicaid benefits off as Medicaid crowds out other state priorities surements are wrong, not the theory. ment failure to enforce a contempt of
to new populations. And in 2010 ObamaCare added like education and public safety. Milton Friedman argued that money Congress citation against the official
working-age, able-bodied adults above the poverty The bill wasn’t perfect. Per capita block supply is the sum of currency and involved, the FBI whitewash of Hillary
level. The result is that Medicaid now insures more grants that rise with medical inflation is insuf- bank deposits—not simply how much Clinton’s email server, expanded ac-
than 72 million people, or one of every five Ameri- ficient fiscal discipline, and the bill would have money a central bank prints. Since cess to intelligence reports, suspected
Friedman’s day, the construct of as the source of leaks about Mike
cans. In six states it’s one of every four or higher. added to the political pressure to join new Med-
money has changed as distant substi- Flynn’s Russian contacts and former
Medicaid is now the third-largest program in the icaid in the 19 states that haven’t. Block grants tutes for money have evolved. government officials now coalescing
federal budget and the fastest growing. Federal also would have been delayed until 2020, and Today, Prof. William A. Barnett ad- into a “resistance.”
outlays are nearly three times higher today than the danger of waiting is that they get over- vocates an even more expansive defi- Though not yet specifically sub-
in 2000, as the nearby chart shows. turned by a future Congress or become a new nition of money as well as quantita- stantiated (maybe it’s all smoke and
Republicans had a rare opening to change the version of the old “sustainable growth rate” tively differentiating among various no fire), President Trump’s claims
projected trajectory, by limiting the federal gov- recipe in Medicare—an orphan that Congress contributors to money in the econ- aren’t implausible.
ernment’s open-ended commitment. The federal defers year after year. omy. When evaluated through the DEL COON
government “matches” between 50% and 74% of But the Freedom Caucus decided to wait not proper lens, the absence of inflation Crown Point, Ind.
costs for the pre-ObamaCare population, while until 2020 but forever. A fragile compromise coincident with quantitative easing is
readily explained. Money growth was
new Medicaid earns 90% to 95%. This formula that could attract majority support was rejected Letters intended for publication should
either negative or well below rates be addressed to: The Editor, 1211 Avenue
rewards states that spend more and means they in favor of sustaining Medicaid’s march into in- associated with inflation. Similarly, of the Americas, New York, NY 10036,
are less accountable for controlling spending or solvency. Republicans may not get a better today with money growth over 5%, or emailed to wsj.ltrs@wsj.com. Please
allocating resources toward high-quality care for chance for decades to modernize Medicaid in a global reflation should be no surprise. include your city and state. All letters
the most vulnerable. way that helps the poor and taxpayers, and vot- LAWRENCE GOODMAN are subject to editing, and unpublished
These disincentives, combined with price con- ers would be right to doubt the Freedom Cau- Center for Financial Stability letters can be neither acknowledged nor
returned.
trols and low provider reimbursement rates, pro- cus’s evanescent fiscal bona fides. New York
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL.
How to Engineer a Trump Boom
By Robert J. Barro
W
ith Republican efforts
to replace ObamaCare
in tatters, President
Trump now says that
he should have started
with tax reform. Better late than
never. With the right mix of policy to
stimulate the economy, the Trump
administration could realistically
generate 3% to 4% growth in gross
domestic product.
Cut taxes, deregulate,
build roads, bridges and
airports—and don’t start
a 1930-style trade war.
Any package proposed by Mr.
Trump will probably cut corporate-
tax rates, reduce individual marginal
rates and broaden the tax base. This
could be the biggest overhaul to the
tax system since the Reagan reforms
of 1986, which lowered households’
average marginal income-tax rates
by 2 percentage points each in 1987
and 1988.
Since 1930, these types of tax-rate
cuts have stimulated economic
growth. If Mr. Trump lowers average
marginal individual tax rates by 2
percentage points, I estimate that the
boost to real growth in GDP would be
about 0.5% a year for the next two
Saudi Stress Test Unleashed the Power of American Shale Oil
By Mark P. Mills
O
nly a few years ago Amer-
ica’s policy makers were
wringing their hands about
“peak oil” and dependence on im-
ported fuels. Now headlines feature
the return of oil gluts. What hap-
pened? Saudi Arabia undertook a
“stress test” of America’s oil-and-
gas industry that produced unin-
tended consequences.
We’re witnessing the first signs
of a new normal in oil markets. Call
it Shale 2.0, characterized by a po-
tent combination: eager and liquid
capital markets funding hundreds of
experienced (now-lean) small to
midsize companies that can respond
to modest upticks in price with a
velocity unseen in oil markets in
eons—all using shale technology
that is shockingly better than before
and poised to keep improving.
This year sees the U.S. not only
filling storage tanks to the brim but
also exporting more than a million
barrels of crude oil a day. Exports
are at the highest level in American
history, twice the previous crude ex-
port peak in 1958. The U.S. is ex-
porting more oil than five of the Or-
ganization of the Petroleum
Exporting Countries’ 13 members.
America Is Ill-Prepared to Counter Russia’s Information Warfare
By Mike Rogers
W
hen historians look back
at the 2016 U.S. election,
they will likely determine
that it represented one of the
most successful information opera-
tion campaigns ever conducted. A
foreign power, through the tar-
geted application of cyber tools to
influence America’s electoral pro-
cess, was able to cast doubt on the
election’s legitimacy, engender
doubts about the victor’s fitness
for office, tarnish the outcome of
the vote and frustrate the presi-
dent’s agenda.
Historians will also see a feck-
less Congress—both Democrats and
Republicans—that focused on play-
ing partisan “gotcha” and funda-
mentally failed in its duty to gather
information, hold officials account-
able and ultimately serve the coun-
try’s interests.
Whether or not the Trump cam-
paign or its staff were complicit in
Moscow’s meddling is missing the
broader point: Russia’s intervention
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years. This doesn’t factor in the stim-
ulative effects from reduced corpo-
rate rates.
Reforming energy, environmental
and financial regulations could also
boost growth. Predicting the effects
is difficult, but the World Bank’s
rankings on the ease of doing busi-
ness are a good place to start. The
U.S. stood at third overall in 2006 but
slipped to eighth in 2017.
Empirical analysis across countries
shows a substantial positive effect on
economic growth from a more favor-
able business climate, as measured by
the World Bank’s overall indicator. In
research for an upcoming American
Enterprise Institute paper, my col-
leagues and I have found that improv-
ing America’s business conditions to
match those of the top performer
(New Zealand in 2017, Singapore in
2012), would boost annual economic
growth by about 0.3%.
Investing in infrastructure could
help, too. The job-creating aspects of
the construction phase of a building
spree wouldn’t matter as much as the
productivity effects—such as more-ef-
ficient transportation due to improved
highways. An infrastructure program
should focus narrowly on useful proj-
ects: roads, bridges, airports and
maybe railroads. Avoid “bridges to no-
where” and building for its own sake,
for which Japan has become famous
over the past couple of decades.
It’s difficult to quantify the growth
effects from an infrastructure pro-
gram, but given the poor state of
The stress test that brought this
about began two years ago, when
Saudi Arabia decided it would try
to tame American shale oil and gas
production. The technology of hy-
draulic fracturing, which began to
emerge barely over a decade ago,
led to the fastest and largest in-
crease in hydrocarbon production
in history.
Oil prices started to collapse in
2014 because American shale busi-
nesses oversupplied markets. The
Saudis responded by increasing pro-
duction, which drove prices even
lower. Their theory was that this
would wreak havoc on small and
midsize petroleum upstarts in states
from Texas and Oklahoma to Penn-
sylvania and North Dakota.
The fall from the $120-a-barrel
stratosphere to less than $30 did
take a toll on producers every-
where. Businesses reduced invest-
ments and staffing. Many went
bankrupt. It also deprived OPEC
member states—and Russia, it bears
noting—of hundreds of billions of
dollars in revenues, forcing them to
tap sovereign-wealth funds and cut
domestic budgets.
Something else happened. Little
noticed outside the petroleum cog-
noscenti, shale technologies kept
has affected how Americans view
the peaceful transition of power
from one president to the next.
About this we shouldn’t be sur-
prised. Far from it.
Propaganda is perhaps the sec-
ond- or third-oldest profession. Us-
ing information as a tool to affect
outcomes is as old as politics. Pro-
paganda was familiar to the ancient
Greeks and Romans, the Byzantines,
and the Han Dynasty. Each genera-
tion applies the technology of the
day in trying to influence an adver-
sary’s people.
What’s new today is the reach of
social media, the anonymity of the
internet and the speed with which
falsehoods and fabrications can
propagate. Twitter averaged 319
million monthly active users in the
fourth quarter of 2016. Instagram
had 600 million accounts at the
end of last year. Facebook’s
monthly active users total 1.86 bil-
lion—a quarter of the global popu-
lation. Yet even these staggering
figures don’t fully capture the in-
ternet’s reach.
Robert Thomson
Chief Executive Officer, News Corp
William Lewis
Chief Executive Officer and Publisher
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DJ Media Group:
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Professional Information Business:
Christopher Lloyd, Head;
Ingrid Verschuren, Deputy Head
OPINION
The president meeting small-business owners at the White House on Jan. 30.
America’s transportation networks,
they are likely to be substantial.
Mr. Trump hopes some of his in-
frastructure program can be privately
funded. But the rest could put signifi-
cant strain on the federal budget, a
consideration heightened by the al-
ready high ratio of U.S. public debt to
GDP, about 78% for privately held fed-
eral debt.
Acknowledging this fiscal reality,
the 2010 Simpson-Bowles report
touted entitlement reform, including
raising the age of eligibility for Social
Security. That’s important to get
done. Raising the age for Medicare
would also be a good idea. So far, the
only entitlement reform that seems
getting better. The productivity—
output per shale drilling rig—has
been rising by more than 20% a
year. That means every 3½ years the
average rig produces twice as much
oil or gas. No other energy technol-
ogy of any kind is improving at that
rate. Put another way, the cost to
produce shale oil keeps falling.
It’s entirely feasible for
the U.S. to become a far
bigger oil exporter, even
one of the biggest.
As a result, with an assist from
the recent modest increase in oil
prices, shale investors and drillers
are returning. Bad as that is for
OPEC, the really frightening pros-
pect is that software tools and tech-
niques will now start to invade the
shale domain, one of the least-
computerized industrial sectors.
“The cloud” will be just as much of
an economic accelerant for shale as
it has been for other complex and
distributed industries.
Established tech companies such
as IBM, Microsoft, Splunk and Tera-
In February, Russia’s minister of
defense, Sergei Shoigu, announced a
realignment in Russia’s cyber and
digital assets. “We have information
troops who are much more effective
and stronger than the former ‘coun-
ter-propaganda’ section,” Mr.
Shoigu said, according to the BBC.
Russia, more than any other coun-
try, recognizes the value of informa-
tion as a weapon. Moscow deployed
it with deadly effect in Estonia, in
Georgia and most recently in
Ukraine, introducing doubt into the
minds of locals, spreading lies about
their politicians and obfuscating
Russia’s true intentions.
A report last year by RAND
Corp., “The Russian ‘Firehose of
Falsehood’ Propaganda Model,”
noted that cyberpropaganda is
practically a career path in Russia.
A former paid troll told Radio Free
Europe that teams were on duty
around the clock in 12-hour shifts.
He was required to post at least
135 comments of not fewer than
200 characters each.
In effect, Moscow has developed
a high-volume, multichannel propa-
ganda machine aimed at advancing
its foreign and security policy.
Notable & Quotable: No News Is Good News?
From “Elite Press Offers Readers
Advice on How to Avoid News of
President Trump” by Ira Stoll, New
York Sun, March 27:
A New York Times magazine
travel article about Hawaii carries a
subheadline describing the journey
as “a desperate bid to escape the
news.” The Times Sunday etiquette
column led with a question from a
reader who wrote in a letter that be-
gan, “Lately I’ve been feeling de-
pressed about the news, so I decided
to avoid it.”
The Times technology columnist,
Farhad Manjoo, wrote a column
about how he spent an entire week
Wednesday, March 29, 2017 | A11
GETTY IMAGES
to interest the Trump administration
is scaling back the Medicaid expan-
sion under ObamaCare.
The president’s economic package
may also include restrictions on
trade and immigration. These are
negatives for economic growth. In
this context, a border-adjusted tax
levied on imports and used to subsi-
dize exports, as House Republicans
have proposed, could be a good idea.
Theory holds that such a tax would
not have much effect on trade vol-
umes, because the value of the dollar
would rise to compensate. But the
U.S. runs a substantial trade deficit,
so the border-adjusted tax would
raise around $100 billion a year in
data see the opportunity. The digital
oilfield is also the animating logic of
the huge merger of oil services gi-
ant Baker Hughes with General Elec-
tric’s “industrial internet” and oil-
and-gas business. Even more
portentous, a new ecosystem of tech
startups is chasing the prize of un-
locking value in petabytes of un-
tapped shale data.
Venture capitalists like to talk
about unmet needs in big markets.
Oil is the world’s biggest market in
a traded commodity, and America’s
shale market went from near zero to
$150 billion in a decade, largely
without help from software.
For the Saudis and other oil oli-
garchs, the worrisome feature of
Shale 2.0 is that software enhances
the most remarkable feature of
shale production: velocity. The
thousands of small to midsize shale
operators and investors make rapid
individual decisions, each involving
a tiny fraction of capital for every
decision compared with the super-
majors. This fluid, chaotic, very
American entrepreneurial environ-
ment operates in private markets,
largely on private land, and can ex-
pand or pull back with a volume
and velocity unseen in oil markets
in a century.
Along with the traditional propa-
ganda tools—favoring friendly out-
lets and sponsoring ideological
journals—this represents an incred-
ibly powerful tool.
Now extrapolate one step fur-
ther: Apply botnets, artificial in-
telligence and other next-genera-
tion technology. The result will be
Propaganda is nothing
new. But Moscow is
frighteningly effective—
and worse is on the way.
automated propaganda, rapid
spamming and more. We shouldn’t
be surprised to see any of this in
the future.
Imagine an American senator
who vocally advocates a new strate-
gic-forces treaty with European al-
lies. Moscow, feeling threatened,
launches a directed information
campaign to undermine the senator.
His emails are breached and pub-
lished, disclosing personal details
and family disputes, alongside draft
in which he “didn’t read, watch or
listen to a single story about any-
thing having to do with our 45th
president.”
A Times shopping column about a
store that sells men’s pajamas at
prices starting at $266 a pair in-
cludes this complaint from the work-
from-home journalist who wrote it:
“the house no longer feels like such
a safe space. There are CNN and all
the other news channels on my TV,
alerts from The New York Times and
The Washington Post on my phone
screen. Anxiety is persistent.”
The president of the American En-
terprise Institute, Arthur Brooks,
wrote a New York Times op-ed piece
federal revenue. That would help re-
store the fiscal balance.
A different, perhaps cynical argu-
ment is that a border-adjusted tax
would allow the president to claim to
be protectionist (taxing imports as
promised) while not really being so
(because of the offsetting adjust-
ments of exchange rates). A value-
added tax, which is a levy on con-
sumption, would be better according
to economic theory. But the border-
adjusted tax is still a good idea.
America’s economy hasn’t recov-
ered from the Great Recession. Real
GDP has been growing at around 2%
a year. This weak performance
mostly reflects the lack of productiv-
ity growth since 2010. If Mr. Trump
can raise annual productivity growth
from zero to 2%, that alone would be
a huge favor to the economy.
With reduced tax rates, regulatory
reform and infrastructure invest-
ment, economic growth could hit 3%
to 4% a year for the next couple of
years. It will all be wasted, however,
if the U.S. ends up in a 1930-style
trade war.
With any luck, the coming focus
on tax reform—and then on regula-
tions and infrastructure—will lead
the Trump administration away from
the idea of adding impediments to in-
ternational trade.
Mr. Barro is a professor of eco-
nomics at Harvard and a visiting
scholar at American Enterprise Insti-
tute.
The U.S. still imports oil (for
now), but net imports have declined
by half. America is now the world’s
biggest natural-gas producer and has
become a net exporter. Other places
can gush hydrocarbons into markets.
But they’re all slow-moving, in some
cases monopolistic, leviathans. As Ed
Morse, Citi’s head of global commod-
ities, recently observed, OPEC “has
lost its clout.”
With all the hype over energy al-
ternatives, one might conclude that
hydrocarbons don’t matter much. You
can be sure that neither Russia nor
OPEC thinks that. Nor does the U.S.
Energy Information Administration
or the International Energy Agency,
whose forecasts see hydrocarbon de-
mand rising for decades regardless of
subsidies for alternatives.
It’s hard to imagine a more po-
tent combination than huge mar-
kets, willing investors and galloping
software technology. It’s entirely
feasible for America to become a far
bigger oil exporter, even one of the
biggest. Such is the power of shale
and software. It’s not what the Sau-
dis had in mind when they launched
that stress test.
Mr. Mills is a senior fellow at the
Manhattan Institute.
policy papers without context. So-
cial media is spammed with seem-
ingly legitimate comments opposing
the senator’s position. The senator’s
phone lines are flooded with robo-
calls. Fake news articles are pushed
out on Russian-controlled media
suggesting that the senator has bro-
ken campaign-finance laws.
Can you imagine the disruption
to American society? The confusion
in the legislative process? The ero-
sion of trust in democracy? Unfor-
tunately, this is the reality the U.S.
faces, and without a concerted ef-
fort it will get worse.
Congress is too focused on the
trees to see the frightening forest.
Rather than engaging in sharp-
edged partisanship, lawmakers
should be investigating Russian
propaganda operations and infor-
mation warfare. They should be fig-
uring out how to reduce the influ-
ence of foreign trolls, and teaching
Americans about Moscow’s capabil-
ities. That would go a long way to
save the republic.
Mr. Rogers was chairman of the
House Permanent Select Committee
on Intelligence from 2011to 2015.
under the headline, “Depressed By
Politics? Just Let Go.” . . .
It all amounts to a statement
about journalism today. The press
has gotten away from its traditional
job of just telling readers what the
news is. Its new, self-appointed role
involves advising people how they
should feel about the news and how
to get away from it.
In so doing, the Times discloses a
certain set of assumptions about the
ideological uniformity of its own read-
ership. After all, there may have been
some Americans who could have used
all this advice about dealing with
news-related anxiety and depression
back during the Obama administration.
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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A12 | Wednesday, March 29, 2017 THE WALL STREET JOURNAL.

LIFE & ARTS

Jon Shuler and his wife Cynthia, bottom left,

plan to drive their 1952 MG to his 50th college
reunion at the U.S. Military Academy. The car’s
steering wheel, above, and rear, below.
RACHEL SHULER FOR THE WALL STREET JOURNAL

MY RIDE

An MG Gets to Join the Reunion

Jon Shuler, an Anglican priest from Paw-
leys Island, S.C., on his 1952 MG TD, as told
to A.J. Baime.
For more years than I can remember, I
have had a fantasy brewing in my mind. My
wife Cynthia and I would drive our MG TD
to West Point, N.Y., for my 50th reunion [at
the U.S. Military Academy]. We were mar-
ried the day after I graduated, in 1967. This
was the car we drove through the gates at
West Point after graduation, to go on our
honeymoon.
My plan has been to put a sign on the ve-
hicle: “Same Car, Same Wife, Same Weight.”
This May, that dream will come true,
though I will have to put an asterisk next to
the word weight. I still weigh the same, but
the pounds have been redistributed.
I first saw an MG TD when I was in the
eighth grade. I thought, “Man, if I could
ever own one of those cars someday.” The
British-built MG T-series had a huge impact
on the history of cars. It was one of the first
European sports cars to arrive in the U.S., in
the years after World War II, and it helped
spark a passion for sports cars that remains
with us today.
I bought mine my senior year at West
Point, for $1,500. It was a lot of money. My
dad fronted me $700, and Cynthia and I had
the other $800. We named the car Hannah,
after an old relative of mine. For many
years, my MG sat languishing in my garage.
In 2003, I began a restoration. It is an ex-
pensive endeavor, and I had to nickel and
dime my way through. In September of
2016, the finished car arrived home.
When I was 22, I would drive this car ev-
erywhere. My wife and I drove it to my first
job, in Kentucky. I drove it to Texas, and to
New York twice. If the car had any trouble,
I would push it to the side of the road and
fix it. Now that I’m 71, it’s a little more anx-
iety-provoking. It strains to get up to 60
mph, but at about 55, it purrs like a sewing
machine.
It will be a great moment, to drive onto
the West Point campus with Cynthia. The
car has always been a symbol of our happy
marriage. We have three children, and this
car feels like a fourth.
Contact A.J. Baime at
Facebook.com/ajbaime.

Weather The WSJ Daily Crossword | Edited by Mike Shenk

Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.
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14 15 16
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Solve this puzzle online and discuss it at WSJ.com/Puzzles.
s

Frankfurt 19 9 pc 20 8 c Orlando 33 17 pc 32 18 pc Zurich 20 5 s 19 5 pc B O S S E N D S D A T E S

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BUSINESS & FINANCE
© 2017 Dow Jones & Company. All Rights Reserved.
Yen vs. Dollar 110.6470 g 0.01%
SoftBank Weighs New Rides Deal Link Lost
Between
Company considers
$6 billion investment
to help China’s Didi
make self-driving push
BY KANE WU
AND MAYUMI NEGISHI
SoftBank Group Corp. has
approached Didi Chuxing
Technology Co. of China
about investing roughly $6 bil-
lion to help the ride-hailing
firm expand in self-driving-car
technologies, two people fa-
miliar with the matter said.
The bulk of the investment
would likely come from Soft-
Bank’s planned $100 billion Vi-
sion Fund, in hopes of unlock-
ing new value in China’s
expanding ride-hailing market,
Real Risk
Remains in
European
Politics
Politics has been a big
driver of markets, but inves-
tors may be worrying about
the wrong politics. Squab-
bling over health care hurts
the chance of a big U.S. tax
cut, and the neurotic can
find plenty to fear in the
French presidential election.
Much less attention has
been paid to
the biggest
political
threat on
the horizon
for inves-
STREETWISE tors: Italy.
JAMES Italian
MACKINTOSH elections
are events
investors
have learned to disregard af-
ter 44 governments in 50
years. The next election
might be different, thanks to
the potential for a nasty
three-way feedback loop be-
tween populist politics, the
European Central Bank and
the bond market.
To see how it could go
wrong, think about things
from the point of view of
holders of Italian govern-
ment bonds. Their ever-pres-
ent worry is a repeat of 2011,
when a standoff between a
populist Italian prime minis-
ter and the rest of Europe
pushed 10-year yields above
7%. (They are now at just
2.37%, even after more than
doubling since last summer.)
Reassurance comes from
the ECB, which is buying
€60 billion ($65 billion) of
eurozone bonds every
month. It has also pledged
to buy an unlimited amount
in a crisis via an untested
backstop that requires the
country in trouble to sign up
to International Monetary
Fund oversight.
Unfortunately, both are in
doubt. The ECB is widely ex-
pected to “taper” its bond
buying early next year, just
as the Italian election is due.
The election, which must be
held by May, makes the crisis
backstop worthless, as invit-
ing in the IMF would surely
scuttle the governing Demo-
cratic Party’s chances and
boost Beppe Grillo’s 5 Star
Movement, which wants a
vote on leaving the euro.
“It’s an environment in
which the rug of QE is being
pulled out from under the
Italian economy,” said An-
drew Bosomworth, head of
portfolio management in
Germany for Pacific Invest-
ment Management Co.
An ECB taper could be the
trigger for rising bond yields,
which help populists in the
polls, scaring investors and
pushing yields higher still.
The reward for holding
Italian 10-year bonds
amounts to 2 percentage
points extra on top of safe
German yields. It is impossi-
ble to put a probability on
the risk of a self-fulfilling
spiral of decline, but given
Please see STREET page B2
TECHNOLOGY: AMAZON TO BUY MIDEAST E-COMMERCE SITE SOUQ.COM B4
Hang Seng 24345.87 À 0.63%
one of the people said. The
technology fund, originally
slated for a launch in January,
has been delayed as SoftBank
considers different demands
from investors such as Saudi
Arabia’s Public Investment
Fund, Abu Dhabi’s Mubadala
Development Co., Apple Inc.,
Qualcomm Inc. and Oracle
Corp., according to another
person close to the fund.
Didi became China’s ride-
hailing champion after it
merged with rival Uber Tech-
nologies Inc.’s China opera-
tions last year. SoftBank—like
Tencent Holdings Ltd., Ali-
baba Group Holding Ltd. and
Baidu Inc.—has been hunting
for stakes in car-hailing apps.
The Japanese group led a $750
million fundraising push last
year in Singapore-based Grab,
Wine Boom Spreads in New Zealand
An inspection at LVMH-owned Cloudy Bay Vineyards in Marlborough, a region in the country renowned for its Sauvignon Blanc.
Sheep and dairy farms
give way to vineyards
as New Zealand wines
gain following abroad
BY MIKE CHERNEY
MARLBOROUGH, New Zea-
land—A growing taste for
more expensive wine in the
U.S. and elsewhere is encour-
aging the world’s biggest
winemakers to turn New Zea-
land’s sheep and dairy farms
into vineyards.
Among major exporters,
wine from New Zealand com-
mands the highest prices of
any country after France, ac-
cording to the International
Organisation of Vine and
Wine, as the antipodean na-
SpaceX Takes Aim at Another Milestone
BY ANDY PASZTOR
Elon Musk’s SpaceX aims to
make history once again this
week, highlighting the benefits
of reusable boosters with the
scheduled launch of the first
large liquid-fueled rocket pow-
ered by engines previously
fired in space.
Relying on the Falcon 9’s re-
A SpaceX blastoff last month. The company plans to launch a rocket this week with reusable boosters.
THE WALL STREET JOURNAL.
Gold 1255.90 À 0.04% WTI crude 48.68 À 1.99%
SoftBank Chief Executive
Masayoshi Son hopes to target
multimillion-dollar invest-
ments in areas such as autono-
mous driving and artificial in-
QILAI SHEN/BLOOMBERG NEWS
telligence.
Since announcing the fund,
SoftBank has invested in
shared-office-space firm We-
Work Cos. and satellite opera-
tor Intelsat SA, with plans to
have the Vision Fund take
stakes in the companies as
Didi Chuxing’s ride-hailing app well. It also plans to sell a
on a smartphone screen. stake in its U.K. semiconductor
designer ARM Holdings PLC
which is locked in a price war to the fund, people familiar
in Southeast Asia. Grab also with the matter have said.
counts Didi as an investor. Didi was valued at roughly
SoftBank also led a $600 mil- $36 billion after the Uber
lion financing round in Kuaidi China merger. As part of the
Dache in 2015, which later deal, Uber also became the
merged with Didi. largest shareholder in Didi.
Through the Vision Fund, Didi counts all three of China’s
tion’s cooler climate is more New Zealand farmland, seek-
suitable to growing smaller ing to ensure access to pre-
volumes of higher-quality mium fruit as part of a global
grapes. strategy to make higher-qual-
Exports to the U.S. have ity wine.
nearly tripled in volume since Constellation, the world’s
2009. At a time when Ameri- biggest publicly traded wine-
can drinkers are willing to maker by volume, added 1,800
spend more per bottle, last acres of vineyards between
year U.S. wine imports from 2014 and 2016, a nearly 50%
New Zealand overtook Austra- increase in its New Zealand
lia to rank the third highest by footprint. The Victor, N.Y.-
total value, after No. 1 Italy based company, which makes
and runner-up France, accord- Kim Crawford and Nobilo
ing to the National Association wines in New Zealand, is also
of Beverage Importers. spending NZ$50 million
Despite the rapid pace of (US$35 million) to double the
growth, winemakers see size of its main winery in
plenty of room for further ex- Marlborough, allowing it to
pansion in New Zealand. produce 40 million liters of
Companies such as Constella- wine annually.
tion Brands Inc. and Treasury Treasury Wine, Australia’s
Wine Estates Ltd. continue to second-biggest wine company
snap up thousands of acres of Please see WINE page B2
purposed lower stage—includ- Space Exploration Technolo-
ing nine refurbished main en- gies Corp. hope to demon-
gines intended to propel a strate the viability of such
European commercial satellite “flight-proven” hardware,
into Earth’s orbit—the blastoff which they argue will help
slated for Thursday from Flor- usher in an unprecedented era
ida’s Kennedy Space Center will of frequent, inexpensive flights
mark the culmination of years of into orbit and beyond. They
planning, testing and public ad- and other space entrepre-
vocacy by the company. neurs, including Amazon.com
Mr. Musk and his team at Inc. Chairman Jeff Bezos, see
10-Year JGB yield 0.060%
largest technology compa-
nies—Alibaba, Tencent and
Baidu—as shareholders.
A SoftBank investment
could give Didi a boost when
the company is facing hurdles
in China. Several cities issued
proposed industry regulations
late last year that would re-
strict the types of vehicles
that can be used and who can
drive them. Meanwhile, the
country’s antitrust regulators
opened an investigation on
Didi’s deal to acquire U.S.-
based Uber’s China unit. It
isn’t clear whether the investi-
gation has concluded.
SoftBank’s possible invest-
ment in Didi was reported ear-
lier by Bloomberg.
 Heard: SoftBank’s fund flexes
its muscles................................ B10
Uncorked
The value of New Zealand’s wine
exports to the U.S. surged past
Australia last year.
Top wine exporters to U.S. in
2016, in millions
Italy
France
New Zealand $400
Australia $349
Chile $273
Note: Excludes sparkling, fortified wine and
vermouth
Source: National Association of Beverage
Importers, U.S.
THE WALL STREET JOURNAL.
re-flying rockets as the Holy
Grail for exploring the solar
system.
“Full reusability is a game
changer,” said Mr. Bezos,
whose Blue Origin LLC also
has signed up commercial cus-
tomers willing to put expen-
sive satellites on top of reus-
able rockets.
Regardless of the outcome
of Thursday’s long-awaited,
first-of-its-kind mission, in-
dustry and government ex-
perts say ambitious projec-
tions of cost savings and other
operational gains wouldn’t pan
out for at least several years,
and likely much longer.
SpaceX, which has suggested
its launch prices may drop
about 10% early on, expects
roughly 30% overall price cuts
in later years. But the com-
pany’s internal financial projec-
tions, reviewed by The Wall
Street Journal, anticipate reus-
CRAIG BAILEY/ASSOCIATED PRESS
ing rockets having only a mar-
ginal positive impact on
SpaceX’s profitability through
the end of the decade.
With the advantages of re-
duced operating costs partly
offset by lower per-launch
prices, the documents project
Please see SPACEX page B2
Wednesday, March 29, 2017 | B1
10-Year Treasury yield 2.385%
MIKE CHERNEY/THE WALL STREET JOURNAL
$1,332
$916
Dairy and
Co-Owner
China Huishan Dairy Hold-
ings Co. has been under the
gun, lately battling a report al-
leging financial irregularities
and on Friday suffering an
85% share-price plunge.
By Wayne Ma in Beijing
and Kane Wu and Julie
Steinberg in Hong Kong
On Tuesday, Huishan dis-
closed more trouble: It said it
has lost contact with a top
executive and co-owner who
had abruptly left the company
last week.
Ge Kun oversaw sales, gov-
ernment affairs and human re-
sources for Huishan, which
lost $4.1 billion in market
value on the Hong Kong ex-
change on Friday.
“The Board has been unable
to contact Ms. Ge Kun since
last Tuesday,” March 21, the
company said in a statement
filed with the exchange, add-
ing that Huishan Chairman
and contolling shareholder
Yang Kai had received a letter
from her “indicating that the
recent work stress had taken a
toll on her health [and] that
she would take a leave of ab-
sence and does not want to be
contacted at this time.”
Ms. Ge couldn’t be reached
for comment, and Huishan
didn’t immediately respond to
requests for comment. Repre-
sentatives of the Hong Kong
exchange and its regulator, the
Securities and Futures Com-
mission, declined to comment.
Huishan, based in the
northeastern Chinese city of
Shenyang, came under a spot-
light Dec. 15 when short seller
Muddy Waters Research is-
sued a research report claim-
ing the company had over-
stated its profit and falsely
claimed to be self-sufficient in
producing alfalfa. It said it
based those findings on visits
to 35 farms and five produc-
tion facilities as well as
“drone flyovers of selected
Huishan sites.”
Huishan disputed the re-
port at the time, saying it
produces at least 90% of its
own alfalfa and that its finan-
cial statements are accurate.
In its statement Tuesday, the
company “categorically de-
nied” what it described as
“market rumors” that Bank of
China had conducted an audit
after finding that Mr. Yang
had misappropriated three
billion yuan ($436 million) in
company funds to invest in
real estate.
Bank of China didn’t imme-
diately respond to a request
for comment.
Ms. Ge and Mr. Yang to-
gether own more than 70% of
Huishan’s shares through a
private company that is 90%-
owned by Mr. Yang and 10%-
owned by Ms. Ge, Huishan
statements show. Ms. Ge holds
the stake “on behalf of Mr.
Yang,” according to Huishan
statements. Virtually all their
shares have been pledged to
creditors as collateral for
loans, statements show.
Ms. Ge was appointed to
Huishan’s board of directors in
2011, after holding executive
roles in the local dairy and
Please see DAIRY page B2
INSIDE
CONDOS
CONQUER
LOS ANGELES
PROPERTY REPORT, B9
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B2 | Wednesday, March 29, 2017
INDEX TO BUSINESSES
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
A
Akzo Nobel..................B4
Alibaba Group
Holding................A8,B1
Allianz ......................... B6
Alphabet....................B10
Amazon.com.....B4,B5,B9
Ant Financial Services
Group ........................ A8
Apple......................A2,B1
ARM Holdings.............B1
B
Baidu ........................... B1
Bertelsmann ............... B2
Blue Origin..................B1
C L
China Huishan Dairy
Holdings....................B1
Constellation Brands..B1
D Mubadala
Didi Chuxing ........ B1,B10
Douglas Elliman Real
Estate........................B9
Dufry ........................... B3
E Oceanwide Holdings...B9
Elliott
Management.....B4,B10
Elon Musk...................B4
F-G
Facebook......................B4
Fininvest ..................... B4
Ford Motor..................A6
General Motors...........A1
INDEX TO PEOPLE
B Goncalves, George....B10
Berlusconi, Silvio......B10
Boone, Laurence.........B2
Bosomworth, Andrew B1
D H
DiClemente,
Anthony .................. B10
E Hodak, Max.................B4
Einhorn, David............A1
F Ivascyn, Dan................B6
Feng, Thomas ............. B9
G Jacobs, Jay..................B6
Gailani, Fawaz.............B9
Garber, Miles .............. B9
Gardner, Timothy........B4
WINE
Continued from the prior page
by volume, recently bought
1,400 acres of land in Marlbor-
ough, a region renowned for
its Sauvignon Blanc. And
Cloudy Bay Vineyards, owned
by European luxury goods
company LVMH Moët Hen-
nessy-Louis Vuitton SE, re-
ceived regulatory approval in
November to buy 52 acres
there for an undisclosed sum.
The U.S. was the world’s
biggest wine consumer in
2015, the OIV says, and drink-
ers there have been willing to
pay more for higher-quality
product. U.S. sales of wine
priced at less than $7.99 a bot-
tle fell in 2016, while sales of
more expensive wines in-
creased, according to data
from Nielsen. It says drinkers
in Britain have shown similar
behavior, with consumers
shifting toward bottles priced
from £6 to £7 ($7.3 to $8.6)
and away from the £4 to £5
range.
The change in consumer
preferences has companies
snaring higher-quality wine
assets outside New Zealand,
too.
Constellation last year
bought California-based Pris-
oner Wine Co. for $285 mil-
lion, adding “fast-growing,
higher-margin, superluxury
wine brands” to the company’s
portfolio, it said. Also last
year, Treasury Wine bought
Diageo PLC’s U.S. and U.K.
wine business for $552 mil-
lion, increasing its offering of
premium wines.
Nearly 20 years ago, New
Zealand wine barely registered
with U.S. drinkers. Its wine ex-
ports to the U.S. have risen
from about 2.5 million liters in
the 2000 fiscal year to about
61 million liters in 2016, ac-
cording to New Zealand Wine-
growers.
In Marlborough, on the
northern end of New Zealand’s
windswept south island, it is
becoming harder to find suit-
able land for new plantings,
industry participants say. And
there is debate over how many
more vineyards the valley-dot-
Bottoms Up
The U.S. has become New Zealand’s biggest wine market by volume.
New Zealand’s wine exports, in millions of liters
60 U.S.
50
40
30
20
10
0 government debt pile.
FY2012 ’14 ’16 FY’12
Note: Fiscal years end June 30.
Source: Statistics New Zealand
GIC...............................B3
Greenlight Capital......A1
H
S
Shanghai Five Bulls
Fund Management...A8
Shanghai Huarui
Henan Oriental Silver
Star Investment.......A8 Bank.........................A8
HNA Group..................B3 Shanghai
QianShengQian
Huawei
Technologies......A8,B3 Financial Information
Services .................... A8
Hywin Group...............A8
Snap.............................B4
I SoftBank..............B1,B10
Intelsat........................B1 Souq.com.....................B4
J Space Exploration
Technologies.............B4
Janus Capital Group...B6
SpaceX.........................B1
J.P. Morgan Chase......B5
Suning Commerce
Group.......................A8
LVMH Moët Hennessy- Swissport
Louis Vuitton............B2 International............B3
M T
Telefon L.M. Ericsson.B3
Development.............B1 Temasek Holdings ...... B3
N Tencent Holdings .. A1,B1
Tesla............................B4
Neuralink.....................B4
Treasury Wine
O Estates .................... B1
U aggressively to boost growth
Oracle .......................... B1
Uber Technologies ...... B1
P-Q Union Pacific...............B5
Penguin Random V
House........................B2
PPG Industries............B4
Verizon
Communications......B5
Pricewaterhouse
Coopers.....................B5 Z sales by 2020, Chief Executive
Qualcomm...................B1 ZTE..............................B3
R which was widely reported to
Grillo, Beppe ............... B1 Rabe, Thomas.............B2
Grindal, Alejandra.....B10 Roman, Emmanuel ..... B6
Gross, Bill....................B6 S of the deal’s value, when asked
Sabes, Philip...............B4
Son, Masayoshi .......... B1
Han Hongwei..............A1
Hearing, Arden............B9 T ever paid in the history of
Thiel, Peter ................. B4
I Tolosa, Vanessa..........B4
W quarters in the provincial Ger-
J Weiss, Cory.................B9
Y than 24 hours.
Johnson, Bryan...........B4 Yang Kai......................B1
M Z
Musk, Elon.............B1,B4 Zeger, Paul..................B9
ted region can accommodate,
with the conversion of land
previously devoted to dairy
cows, sheep and other crops.
A 2016 study found large
grape growers in Marlborough
expected to plant nearly
6,500 hectares—or about
16,000 acres—of new vine-
yards by 2020, increasing the
region’s production area by
nearly 25%, according to Wine
Marlborough, a local industry
group.
Meanwhile, tastes are shift-
ing toward lighter styles, ben-
efiting varietals like Sauvignon
Blanc, analysts say. The wine
made up 85% of New Zealand’s
exports last year.
Tim Heath, senior wine-
maker at Cloudy Bay, said the
region’s Sauvignon Blanc
wines offer characters of pas-
sion fruit, grapefruit and box-
wood. A cooler climate and
longer growing season con-
tribute to the wine’s flavors. A
Sauvignon Blanc from Napa
Valley in California, in com-
parison, would be “more tropi-
cal, like rock melon and melon,
and mangoes, and fruit salad
sort of things,” Mr. Heath said.
Phillip Neal, who is convert-
ing his farm to vineyards un-
der an agreement with Cloudy
Bay, used to have some 2,000
breeding ewes on his property,
where he also grows garlic, al-
falfa and sweet corn. Now he
is down to about 700 ewes,
with the figure bound to de-
cline further as he switches
over most of his roughly 180
hectares to grapes. He already
grows grapes on 70 hectares
and has been supplying Cloudy
Bay for decades.
A short drive away from its
winery in Marlborough, Con-
stellation recently planted
grapes on land that was previ-
ously a dairy farm. Rows of
tiny vines in green plastic
guards stand near an open-air
shed holding dormant milk
pumps.
“New Zealand is still rela-
tively under-penetrated in the
U.S. market, even though it’s
been growing at double dig-
its,” said Simon Towns, man-
aging director at Constellation
Brands New Zealand, the local
subsidiary. “We think the run-
way’s pretty long.”
Rest of
U.K. Australia the world
’14 ’16 FY’12 ’14 ’16 FY’12 ’14
THE WALL STREET JOURNAL.
Bertelsmann Turns Focus on U.S.
German publisher
says deal for Obamas’
books is part of plan
to boost its growth
BY ZEKE TURNER
BERLIN—Penguin Random
House pulled off what may be
the publishing industry’s big-
gest deal of 2017 when it won
an auction in February for the
rights to books by former U.S.
President Barack Obama and
ex-First Lady Michelle Obama.
Bertelsmann SE, the Ger-
man publisher that controls
Penguin Random House,
sealed the deal as it pushes
in the U.S. It has picked up
other U.S. assets in a deal-
making binge in recent years
and aims to boost revenue in
the country to 30% of overall
Thomas Rabe said.
Speaking Tuesday as the
company reported results, Mr.
Rabe didn’t give further de-
tails of the Obama books deal,
have cost $60 million.
“I’m not denying it,” he said
by reporters. In an interview,
Mr. Rabe said the deal came
with “the highest advance
book publishing.” It was ap-
proved at the company’s head-
man town of Gütersloh in less
For Bertelsmann and other
publishers, a recent upsurge in
interest in U.S. politics has
provided an attractive oppor-
tunity. “The interest in politi-
DAIRY
Continued from the prior page
food industry, according to the
company’s website, which lists
her age as 38. On Tuesday, Hu-
ishan disclosed that Ms. Ge
also oversaw the company’s
treasury, as well as its cash
operations and bank relation-
ships. Huishan said this was
because she had been part of
Mr. Yang’s team before the
company was publicly listed in
2013.
The company said Tuesday
that it has missed some bank
loan payments and has
reached out for assistance to
the government of its home
province of Liaoning. It said
Mr. Yang had met with 23
creditors and discussed a gov-
ernment proposal to service
the loans within two weeks
SPACEX
Continued from the prior page
a relatively modest $200 mil-
lion boost to profit through
2020. Total launch revenue is
anticipated to be around $3.2
billion by then.
By contrast, the Pentagon
has routinely paid $500 mil-
lion or more to launch just one
of its biggest, most-advanced
spy satellites on a conven-
tional rocket flown by a joint
venture between Boeing Co.
and Lockheed Martin Corp.
In decades to come, how-
ever, SpaceX’s goals are strik-
ing. “We want to be launching
rockets just like airlines fly
airplanes,” Gwynne Shotwell,
SpaceX’s president and chief
operating officer, said at a
space conference in 2015.
“If you don’t get reusability
to work,” she told a different
audience in fall 2016, “it’s a
one-way trip to Mars.”
In a presentation last year
STREET
Continued from the prior page
how bad it could get, that
seems too little reward.
There are four main
sources of hope for Italian
bonds: economic, financial,
political and monetary. It-
aly’s economic output per
person has shrunk since the
euro was created in 1999, a
performance worse even
than Greece, according to
IMF data. But it has looked a
bit perkier recently, and la-
bor overhauls have made
progress. Stronger growth
makes it easier to service the
’16 The pile is easier to han-
dle, too. For bonds that have
been bought by the central
BUSINESS & FINANCE
CEO Thomas Rabe says the company wants U.S. assets to make up 30% of revenue by 2020.
cal books is increasing…that’s
positive,” Mr. Rabe said.
Penguin Random House’s
business imprint, Portfolio, is
set to publish Ivanka Trump’s
“Women Who Work” at the
beginning of May and its Bal-
lantine Books imprint owns
the rights to U.S. President
Donald Trump’s “The Art of
the Deal.”
Bertelsmann is refocusing
on the U.S. after years spent
figuring out the right portion
of U.S. business in its portfolio
of education, television, pub-
lishing, services and printing
operations.
Lately, it has been bulking
up again. “Think about the €4
billion [$4.3 billion] we in-
vested on M&A since 2011,
about half of that went to the
Huishan dairy products at a grocery store in the company’s home
city of Shenyang, China. Huishan’s shares tumbled 85% on Friday.
and improve the company’s
cash position within four
weeks.
Huishan’s statement didn’t
say whether the proposal was
accepted.
about long-term plans to oper-
ate a fleet of next-generation
reusable rockets—intended to
be refueled in space and trans-
port a steady stream of set-
tlers to the red planet—Mr.
Musk said it is reasonable to
contemplate launch costs fall-
ing to roughly $200,000 per
person, or “equivalent to a
median price house in the
U.S.” Russia—the only nation
whose rockets and capsules
can ferry astronauts to the in-
ternational space station—
charges more than $80 million
a seat.
Before anything close to
that can become reality, how-
ever, technical advances must
shorten today’s four-month re-
furbishment timetable to sev-
eral days, or even less. Satel-
lite makers and insurance
companies also need to be-
come significantly more com-
fortable with reused space
systems. And SpaceX, which is
initially looking at reusing its
boosters once, has to deter-
mine how many more times it
bank, Italy is basically paying
interest to itself.
Italian politics might work
out; 5 Star is leading in the
polls but is unlikely to win
by enough to form a govern-
ment if it sticks to its refusal
to work with other parties. If
5 Star does take power, it
will still be hard to leave the
euro, as last year’s failed at-
tempt to make a much more
minor change to the consti-
tution showed.
Finally, there is the poli-
tics of the central bank. Call
it “ItExit” or just say “ciao,”
either way The euro is toast
if Italy leaves, and the ECB
would vanish, too. Central
bankers in Frankfurt have
shown they will do anything
to avoid that outcome.
Unfortunately, these reas-
suring arguments don’t work
THE WALL STREET JOURNAL.
KRISZTIAN BOCSI/BLOOMBERG NEWS
U.S. and that will continue to targeting €20 billion in reve-
be the case,” Mr. Rabe said. nue by around 2020, with 30%
“For the simple reason that
the U.S. [is] the most innova-
tive media, services and edu-
coming from the U.S. Bertels-
mann competes with News
Corp, which owns book pub-
cation market in the world.” lisher HarperCollins, and Dow
The company recently Jones & Co., the publisher of
jumped headlong into online The Wall Street Journal.
education and training Bertelsmann runs Penguin
through Relias Learning, tar- Random House—the world’s
geting the U.S. health-care in- largest book publisher—as
dustry. It also owns a stake in part of a 2012 partnership
Udacity, a company that offers agreement with Pearson PLC.
online degrees for the technol- The British company said in
ogy sector, including one January it wanted to sell its
geared toward engineers 47% stake. The company is
working on self-driving cars. courting potential minority in-
The company said sepa- vestors, mainly “long-term
rately Tuesday its net profits funds, including pension
rose 2.6% in 2016, boosted by funds, family offices and the
strong performance in its digi- like,” Mr. Rabe said, adding
tal education and services that there was “plenty of in-
businesses. The company is terest” in the U.S. and the U.K.
profit shrank to 593 million
yuan for the six months ended
Sept. 30, down 24% from the
year-earlier period.
Over the past year, Huis-
han has tried to raise cash by
selling and leasing back its
farms.
In its IPO prospectus, Huis-
han said it was the only com-
CHINATOPIX/ASSOCIATED PRESS
pany among major competi-
tors in China growing its own
alfalfa—a protein and vitamin-
rich cattle feed—saying it did
so on fields as big as Hong
Kong Island. The company
said it is involved in all as-
pects of the dairy supply
chain, from growing feed and
raising cows on its own farms
to producing dairy products.
Huishan’s bank loans In the past few years, com-
reached 10.8 billion yuan at pany statements show, Huis-
the end of September, more han has dabbled in businesses
than 11 times its 909 million from solar power to beef pro-
yuan in loans at the end of duction, in which it made an
March 2013. Huishan’s net unsuccessful push.
will be able to safely fly the
same engines.
In the interim, skepticism
among Pentagon brass, policy
terview. But so far, he said, the
concept “has not been shaken
out” and its “impact isn’t any-
where near” as significant as
makers at the National Aero- proponents contend.
nautics and Space Administra- Claire Leon, the Pentagon’s
tion and the bulk of SpaceX’s top launch-acquisition official,
commercial customers seems told reporters in early March
bound to impede widespread that existing military launch
adoption of reused boosters. contracts specifically prohibit
reusing flight hardware. “If it
proves successful for commer-
cial” customers, she said, “we
Total launch revenue might consider it for the fu-
is anticipated to be ture.”
Still, early adopters such as
around $3.2 billion SES SA, the Luxembourg-
by 2020. based satellite operator that
agreed to the maiden launch
on a refurbished Falcon 9, are
enthusiastic. “It is good for
For example, satellite-services the industry,” Martin Halliwell,
provider Hughes Network Sys- the chief technology officer for
tems, a unit of EchoStar Corp., SES, said in an interview. “It is
supports the initiative but has good for us. I am sure there
doubts about near-term bene- will be a queue behind us.”
fits. Weather or other factors
“It’s going to help a little,” could delay the launch past
Paul Gaske, general manager Thursday.
of the unit’s North American —Robert Wall
business, said in a recent in- contributed to this article.
well in the face of a panic.
Debt is sustainable only until
bond yields rise so much that
it is unsustainable. Like a
rozone means there will be a
“very slow tapering” by the
ECB to avoid a surge in
yields triggering problems.
bank run, panic can become Another option would be a
self-fulfilling, because higher taper with added flexibility
yields become a reason to about which bonds are
sell, not a reason to buy. Af- bought, abandoning the cur-
ter the Brexit vote and Don- rent fixed allocations be-
ald Trump’s surprise election tween countries, so Italian
win, investors have become purchases continue and Ger-
cautious about political pros- man buying winds down.
pects, too, making them Another crisis still isn’t
more likely to overestimate 5 the most likely outcome. A
Star’s chances. Relying on shaky Italian coalition and a
the ECB to step in eventually, little economic improvement
as it did in 2012, isn’t much could push Italy’s date with
of a case for buying bonds destiny back a few years. But
now, as we can be sure that it doesn’t take that many
the central bank will only bondholders deciding the
break its rules in a deep cri- risks are too great for the
sis. problems to spiral. For now,
Laurence Boone, chief investors are focusing else-
economist at Axa Group, where. When attention turns
thinks the fragility of the eu- back to Italy, watch out.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL. Wednesday, March 29, 2017 | B3

BUSINESS NEWS

HNASeeks
ToBuyStake Ford Adds New U.S. Investments
InSwissFirm Bulk of factory
upgrades in Michigan
Chinese conglomerate HNA were first disclosed
Group is seeking to buy a
stake in Swiss airport retailer in 2015 labor pact
Dufry AG, which is currently
valued at $7.6 billion, people BY CHRISTINA ROGERS
familiar with the plans said. AND JOHN D. STOLL

By P.R. Venkat in Ford Motor Co. outlined in-

Singapore and Kane vestments in three Michigan
Wu in Hong Kong factories that include $200
million to build a new data-
HNA, which has business storage center and an extra
interests spanning from air- $150 million to retool a small-
craft and hotels to asset car plant to build pickup
managers, has approached trucks and sport-utility vehi-
some existing Dufry share- cles.
holders, including Singapore President Donald Trump
state-investment company early Tuesday trumpeted the
Temasek Holdings Pte. Ltd. commitments on Twitter, spot-
and Singapore sovereign- lighting U.S. manufacturing

JEFF KOWALSKY/EUROPEAN PRESSPHOTO AGENCY

wealth fund GIC Pte. Ltd.,
these people said.
A stake in Dufry would al-
low the Chinese conglomer-
ate to further consolidate its
position in sectors linked to
transportation and tourism.
HNA has spent billions of
dollars to buy assets such as
airport caterers, travel agen-
cies and high-end hotel
chains overseas.
Last year it spent nearly
$4.3 billion to purchase air
cargo handler Swissport In-
ternational and Swiss air-
travel logistics company gat-
egroup Holding AG. This
month, it completed the $6.5
billion purchase of a 25%
stake in Hilton Worldwide
Holdings Inc. from Black-
stone Group LP.
It isn’t clear if HNA has ap-
proached Dufry’s management.
According to Dufry’s annual
report, Temasek owns a 8.55%
stake and GIC has a 7.79% in-
terest in the Swiss company.
Qatar Holdings LLC, owned by
Qatar Investment Authority,
holds a 6.92% stake.
Dufry operates 2,200 duty-
free and duty-paid shops in
airports, cruise lines, seaports,
railway stations and down-
town tourist areas. It has a
presence in 64 countries. Last
year, it reported a gross profit
of $4.6 billion, up 58.6% from
a year earlier.
and jobs investments as he
faces a historically low ap-
proval rating, probes of al-
leged ties between his cam-
paign and Moscow, and a
major legislative defeat on
health care last week.
While Mr. Trump portrayed
Ford’s moves as supporting
U.S. jobs, much of the Dear-
born, Mich., auto maker’s com-
mitments had been previously
disclosed as part of a 2015 la-
bor agreement with the United
Auto Workers union. Ford on
Tuesday highlighted a total of
$1.2 billion of commitments to
Michigan factories, of which
$850 million had been previ-
ously outlined.
The company is seeking a
$30 million tax-incentive pack-
age from the state of Michigan
for planned upgrades, said
Ford’s North American chief,
Joe Hinrichs.
Ford on Tuesday confirmed
it would begin retooling a fac-
tory in Wayne, Mich., next
year to build a new Ranger
pickup and Bronco sport-util-
ity vehicle, adding another
$150 million to the $700 mil-
lion it committed to the proj-
ect two years ago in the union
contract. It also reaffirmed
$150 million in spending it had
outlined in that contract to ex-
pand another engine plant.
The auto maker plans to be-
gin building the new pickup
A Ford Focus assembly line in Wayne, Mich. Ford plans to make $350 million in investments at three Michigan factories.
trucks at the 3,600-worker
Wayne factory in late 2018
with production rising through
2020 as it adds the SUV manu-
facturing.
In addition, Ford again
highlighted $700 million
pledged in January to convert
another Michigan plant to
build electric and autonomous
cars, creating 700 jobs.
“These announcements en-
capsulate all that is going on
with our business now and in
the future,” Mr. Hinrichs said
in an interview.
Ford’s new $200 million in-
vestment is for the second of
two data-storage centers that
aim to prepare for a future of
increasingly connected and
computerized cars. It is invest-
ing billions of dollars to de-
velop electric vehicles and
self-driving cars, aiming to
keep pace with Silicon Valley
rivals looking to upend the tra-
ditional auto business.
The planned investments
come as Ford’s U.S. sales
growth has stalled amid a
broader industry slowdown
following seven years of unin-
terrupted growth.
Ford, coming off a string of
record profits, is already pre-
dicting a tougher road ahead.
The company expects full-year
adjusted operating profit to
fall 14% this year to $9 billion
because of higher costs and
continued investment in new
technologies.
Ford also warned last week
that first-quarter per-share
earnings would be between 30
cents and 35 cents, lower than
the prior-year period and far
below analysts’ expectations of
47 cents. The company is fac-
ing numerous headwinds, in-
cluding higher engineering
costs, a strong dollar, rising
warranty expenses and com-
modity-price increases.
Ford in 2015 committed
about $5 billion in investments
for Michigan factories, includ-
ing facilities making compo-
nents. Those investments, part
of about $9 billion the union
said the company had pledged
to invest, were to roll out over
the life of the four-year con-
tract, expiring in 2019.
“Major investment to be
made in three Michigan
plants,” Mr. Trump’s tweet
said Tuesday before Ford’s an-
nouncement. “Car companies
coming back to U.S. JOBS!
JOBS! JOBS!”
The announcement follows
Mr. Trump’s visit to Michigan
earlier in March to announce a
review of federal emissions
standards that many auto
makers characterize as strin-
gent. During that visit, Mr.
Trump said to expect a big an-
nouncement coming from an
auto maker.
The move hands a positive
talking point to Mr. Trump fol-
lowing last week’s failure by
House Speaker Paul Ryan to
get backing for a bill to repeal
and replace the Affordable
Care Act, President Barack
Obama’s signature health-care
legislation.
Mr. Trump, once a critic of
Ford’s plans for producing
small cars in Mexico, has re-
cently held up the auto maker
as an example of a company
adding jobs in the wake of the
November election. The com-
pany recently shelved its plan
to build a new plant in Mexico
and said it was rerouting in-
vestment to the Michigan
plant that it plans to convert
to build electric vehicles.

Thank You
The Wall Street Journal’s Heard on the Street Live series brought
together WSJ editors and leading executives from Morgan
Stanley, Goldman Sachs and more for in-depth discussions
on the opportunities and risks in markets driven by the
U.S. administration’s new domestic and foreign policies.

WSJ would like to thank the moderator and speakers who made each of these events a success.

HONG KONG SINGAPORE TOK YO

Ken Brown: Editor, Heard on the Street,
The Wall Street Journal (moderator)
Louis Kuijs: Head of Asia Economics,
Oxford Economics
Andrew Tilton: Chief Asia Pacific Economist,
Goldman Sachs
Anjani Trivedi: Columnist, Heard on the Street,
The Wall Street Journal
Ken Brown: Editor, Heard on the Street,
The Wall Street Journal (moderator)
Karby Leggett: Head of Asia Public Sector, Client
Coverage–Financial Institutions, Standard Chartered Bank
Steve Okun: Vice Chairman, Asia Pacific Council,
American Chambers of Commerce (APCAC)
Ashley Perrott: Managing Director, Head of Pan Asia
Fixed Income, UBS Global Asset Management
Ken Brown: Editor, Heard on the Street,
The Wall Street Journal (moderator)
Robert Feldman: Chief Economist,
Morgan Stanley MUFG Securities
Naoki Kamiyama: Chief Strategist,
Nikko Asset Management
William Pesek: Executive Editor, Barron’s Asia

© 2017 Dow Jones & Co., Inc. All rights reserved. 6DJ5266
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B4 | Wednesday, March 29, 2017
Amazon to Make Brain Is Elon Musk’s New Frontier
Mideast Purchase
BY NICOLAS PARASIE
DUBAI—Amazon.com Inc.
said Tuesday it is acquiring
Dubai-based Souq.com, plac-
ing one of its biggest global
bets in recent years on the
small but rapidly expanding
Middle Eastern online shop-
ping market.
Amazon didn’t give a value,
but a banker familiar with the
deal said it was valued at
roughly $700 million. The ac-
quisition is unusual for the
global giant, which has spent
heavily on expanding its global
footprint but doesn’t often
take over whole companies as
large as Souq.com.
“We’re looking forward to
both learning from and sup-
porting them with Amazon
technology and global re-
sources,” said Russ Grandi-
netti, Amazon’s senior vice
president for international
consumer.
Souq.com, founded in 2005
by Syrian-born entrepreneur
Ronaldo Mouchawar, has
grown into one of the region’s
biggest e-commerce busi-
nesses—offering over 8.4 mil-
lion products across categories
such as consumer electronics,
fashion and household goods—
with about 6,000 employees
and local operations in Saudi
Arabia, the United Arab Emir-
ates and Egypt.
AHMED JADALLAH/REUTERS
Souq.com’s Dubai office. Amazon is buying the e-commerce firm.
2017 Dow Jones & Company, Inc. All rights reserved.
Amazon beat Dubai’s shop-
ping-center heavyweight,
Emaar Malls, which made a
last-ditch $800 million offer to
acquire Souq.com. Amazon’s
acquisition of video technol-
ogy company Twitch Interac-
tive Inc. for about $842 mil-
lion, after adjustments, in
2014 was its last publicly an-
nounced deal of a larger size.
“We are guided by many of
the same principles as Ama-
zon, and this acquisition is a
critical next step in growing
our e-commerce presence on
behalf of customers across the
region,” Mr. Mouchawar said.
“We’ll be able to vastly expand
our delivery capabilities and
customer selection much
faster.”
The acquisition is expected
to close this year.
Amazon has been looking
abroad for growth as it in-
creasingly dominates the U.S.
market. It has launched Prime
offerings—a service giving
members access to perks such
as free, fast shipping for a flat
annual fee—in 13 countries in-
cluding China and Mexico. An-
alysts estimate the total num-
ber of Prime members world-
wide at over 60 million, a
figure Amazon doesn’t release.
—Laura Stevens in San
Francisco and Sam
Schechner in Paris
contributed to this article.
TECHNOLOGY
BY ROLFE WINKLER
Building a mass-market
electric vehicle and colonizing
Mars aren’t ambitious enough
for Elon Musk. The billionaire
entrepreneur now wants to
merge computers with human
brains to help people keep up
with machines.
The founder and chief exec-
utive of Tesla Inc. and Space
Exploration Technologies
Corp. has launched another
company called Neuralink
Corp., according to people fa-
miliar with the matter.
Neuralink is pursuing what
Mr. Musk calls “neural lace”
technology, implanting tiny
brain electrodes that may one
day upload and download
thoughts.
Mr. Musk has taken an ac-
tive role setting up the Cali-
fornia-based company and
may play a significant leader-
ship role, according to people
briefed on Neuralink’s plans, a
bold step for a father of five
who already runs two techno-
logically complex businesses.
Mr. Musk didn’t respond to
a request for comment.
Max Hodak, who said he is
a “member of the founding
team,” confirmed the com-
pany’s existence and Mr.
Musk’s involvement. He de-
scribed the company as “em-
bryonic” and said plans are
still in flux but declined to
provide additional details. Mr.
Hodak previously founded
Transcriptic, a startup that
provides robotic lab services
accessible over the internet.
Mr. Musk, 45 years old, is
part businessman, part futur-
ist. He splits his time between
Tesla, which is under pressure
to deliver its $35,000 Model 3
sedan on time, and SpaceX,
which aims to launch a satel-
lite-internet business and a
rocket that can carry humans
to Mars. He is also pushing de-
velopment of a super-high-
speed train called Hyperloop.
Somewhere in his packed
schedule, he has found time to
start a neuroscience company
that plans to develop cranial
computers, most likely to treat
intractable brain diseases
Treating Depression,
Enhancing Cognition
It is unclear what sorts of
products Neuralink Corp. might
create, but people who have
had discussions with the com-
pany describe a strategy similar
to SpaceX and Tesla, where
Elon Musk developed new
rocket and electric-car technolo-
gies, proved they work and is
now using them to pursue
more ambitious projects.
These people say the first
first, but later to help human-
ity avoid subjugation at the
hands of intelligent machines.
“If you assume any rate of
advancement in [artificial in-
telligence], we will be left be-
hind by a lot,” he said at a
conference last June.
The solution he proposed
was a “direct cortical inter-
face”—essentially a layer of
artificial intelligence inside
the brain—that could enable
humans to reach higher levels
of function.
Mr. Musk has teased that he
is developing the technology
himself. “Making progress [on
neural lace],” he tweeted last
August, “maybe something to
announce in a few months.”
In January he tweeted that
an announcement might be
Facebook Looks to Snapchat
BY DEEPA SEETHARAMAN
Facebook Inc. is taking an-
other shot at rival Snapchat.
On Tuesday, the social-me-
dia giant introduced three new
camera-centric features to its
main Facebook app, including
one that allows users to create
photo and video montages
that vanish within 24 hours—
just like Snapchat’s Stories.
Facebook is also making the
camera accessible with one
swipe to the right and adding
a variety of filters and masks.
The third feature is a di-
rect-messaging tool.
The features, which roll out
globally later this week, are
intended to lower the bar for
what kind of content can be
shared on Facebook and coun-
ter a yearslong decline in
posting.
Facebook aims to carve out
an informal space within the
app that allows for off-the-cuff
sharing without the perma-
nence of the news feed.
“Every piece of content is
not created equal in terms of
who you want to share it with
and where you want it to go,”
said Connor Hayes, Facebook
product manager overseeing
SOCCER
Hedge Fund Backs
Deal to Buy AC Milan
U.S. hedge fund Elliott Man-
agement Corp. has agreed to
provide part of the financing for
Chinese investor Yonghong Li’s
deal to buy Italian soccer team
AC Milan, according to people fa-
miliar with the matter.
The development revives
hopes of closing the deal signed
in August to buy the team,
which is owned by former Italian
Prime Minister Silvio Berlusconi,
valuing it at €740 million ($804
million). That transaction nearly
fell through due to tighter capi-
tal controls recently introduced
by Beijing.
On Monday, Elliott and Mr.
Li’s investment vehicle, Rosson-
eri Lux, agreed on €253 million
of financing, one of the people
said. Of that amount, Elliott will
provide €180 million for the pur-
THE WALL STREET JOURNAL.
products could be advanced im-
plants to treat intractable brain
disorders like epilepsy or major
depression, a market worth bil-
lions of dollars. Such implants
would build on simpler electrodes
already used to treat brain disor-
ders like Parkinson’s disease.
If Neuralink can prove the
safety and efficacy of technology
it develops and receive govern-
ment approval, perhaps it then
could move on to cosmetic brain
surgeries to enhance cognitive
function, these people say. Mr.
Musk alluded to this possibility in
comments last June, describing
coming shortly. He hasn’t
made an official announce-
ment, but Neuralink registered
in California as a “medical re-
search” company last July.
Mr. Musk has discussed fi-
nancing Neuralink primarily
himself, including with capital
borrowed against equity in his
other companies, according to
a person briefed on the plans.
Neuralink has also dis-
cussed a possible investment
from Founders Fund, accord-
ing to people familiar with the
matter. The venture firm was
started by Peter Thiel, with
whom Mr. Musk co-founded
payments company PayPal.
In recent weeks, Neuralink
hired leading academics in the
field, according to another
person familiar with the mat-
the launch. User research
showed that people want to
share both private moments
with one person and the
“monumental moment” with
everyone on Facebook, he
added.
Over the past two years,
Facebook has closely studied
Snapchat to better understand
its appeal among younger us-
ers. On Snapchat, the camera
Facebook Stories
marks the company’s
fourth clone of
Snapchat Stories.
is available from the moment
users open the app, encourag-
ing them to create richer con-
tent than on Facebook, which
still opens to a text box.
Facebook is trying to en-
courage the same kind of ac-
tivity by making the camera
accessible with just one swipe.
Facebook’s mimicry casts a
shadow over Snap Inc., which
has said its growth has slowed
since Facebook ramped up the
BUSINESS WATCH
chase of the club from Fininvest
SpA, the Berlusconi family hold-
ing company that controls AC
Milan. The remainder will be
used to cover Milan’s debt and
provide short-term financing for
the club.
The purchase is scheduled to
be finalized on April 14, accord-
ing to one of the people.
In November, China put re-
strictions on yuan spending out-
side the country. The move sta-
bilized the yuan’s value but left
several deals—including the AC
Milan transaction—in limbo be-
cause the buyers lacked cash.
—Manuela Mesco
AKZO NOBEL
Firm to Detail Plan
For Chemicals Unit
Paint giant Akzo Nobel NV
said Tuesday that it would an-
nounce in April specific plans for
the separation of its specialty
WSJ.com/Tech
‘If you assume
any rate of
advancement in
[artificial
intelligence], we
will be left
behind by a lot.’
PATRICK FALLON/REUTERS
how humans struggle to process
and generate information as
quickly as they absorb it.
Others pursuing the idea in-
clude Bryan Johnson, the
founder of online payments
company Braintree, who plans
to pump $100 million into a
startup called Kernel, which has
20 people and is pursuing a
similar mission.
Mr. Johnson said he has
spoken to Mr. Musk and that
both companies want to build
better neural interfaces, first to
attack big diseases and then to
expand human potential.
ter. They include Vanessa To-
losa, an engineer at the Law-
rence Livermore National
Laboratory and an expert in
flexible electrodes; Philip Sa-
bes, a professor at the Univer-
sity of California in San Fran-
cisco, who studies how the
brain controls movement; and
Timothy Gardner, a professor
at Boston University who is
known for implanting tiny
electrodes in the brains of
finches to study how the birds
sing.
Reached by phone, Dr.
Gardner confirmed he is work-
ing for Neuralink, but declined
to elaborate on its plans.
Dr. Sabes declined to com-
ment. Dr. Tolosa didn’t re-
spond to a request for com-
ment.
pressure. Facebook Stories
marks the company’s fourth
clone of Snapchat Stories—in-
troduced three years ago—
since last summer.
Facebook’s photo-sharing
app, Instagram, first copied
the format last August. Its
success prompted Facebook to
start testing similar versions
across its suite of apps. Last
month, Facebook adapted the
format to WhatsApp with a
feature called Status. Earlier
this month, it launched Day
within Facebook Messenger.
Mr. Hayes acknowledges
Snap as the pioneer of the for-
mat. He said that users are
sharing more often in markets
where both Instagram and
Facebook Stories have been
available in testing.
“Our view is that over time,
as people create mostly photos
and videos and share mostly
photos and videos, that Sto-
ries is going to be the way
that they’re going to want to
do it,” he said.
Facebook Stories initially
won’t be available to verified
accounts from publishers and
celebrities. Facebook said it
wants Stories to focus first on
connecting friends.
chemicals business, in the Dutch
company’s latest effort to ward
off a $24 billion takeover ap-
proach from U.S. rival PPG In-
dustries Inc.
The plan, announced earlier
this month, comes on the heels
of Akzo’s rejection of a second,
sweetened offer by PPG last
week of €88.72 a share, up from
an initial bid of €83 a share.
Akzo said it would outline
plans for the separation of the
specialty chemicals unit from
the paints business, along with a
fresh financial guidance, when it
reports first-quarter results on
April 19.
The announcement comes
amid efforts by some of Akzo’s
largest investors to push the
Amsterdam-based company to
engage in negotiations with
Pittsburgh-based PPG Industries.
On Tuesday, Akzo’s stock fell
0.9%, to €77.60.
—Ben Dummett
and Christopher Alessi
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
THE WALL STREET JOURNAL.
Soldiering On
In Business
Isn’t Easy
Military veterans can struggle settling
into corporate jobs, but mentoring helps
BY VANESSA FUHRMANS
After a collective push to
hire more than a million U.S.
military veterans in recent
years, business is wrestling
with a new challenge: hold-
ing on to them.
Hiring initiatives by Veri-
zon Communications Inc.,
Amazon.com Inc., Union Pa-
cific Corp. and hundreds of
other companies have helped
cut unemployment among
younger veterans—in the
double digits six years ago—
to close to the 4.7% national
average, according to the Bu-
reau of Labor Statistics. But
many veterans stumble in
the transition to civilian ca-
reers, landing in jobs in
which they don’t earn
enough, encounter culture
clashes or struggle to trans-
late military skills to the cor-
porate world.
A 2016 U.S. Chamber of
Commerce Foundation sur-
vey of 1,000 veterans found
44% left their first post-mili-
tary jobs within a year—a
finding similar to that of a
2014 Syracuse University
study involving more than
1,400 veterans. The result,
company recruiters say, can
mean delays before veterans
find meaningful employment
and high turnover costs for
employers.
“One of the biggest mis-
takes employers can make is
not understanding how to
take advantage of veterans’
skills” despite wanting to
hire them, said Brian Stann,
a former captain in the Ma-
rines and head of Hire He-
roes USA, a nonprofit that
helps veterans find jobs and
College Degree Criticized as ‘Blunt’ Hiring Tool
BY KELSEY GEE
Companies struggling to
hire and retain millennials
may be looking for talent in
the wrong places.
That is according to results
from a new survey in which
1,200 c-suite executives, hu-
man resources officers and
people ages 18 to 26 were
asked how they viewed the en-
try-level job market.
Some 70% of the employers
told surveyors from the Rocke-
feller Foundation and Edelman
Intelligence, a division of pub-
lic-relations firm Edelman,
that they screen entry-level
applicants’ resumes for bache-
lor’s degrees.
Meantime, 40% of compa-
nies complained that high em-
ployee turnover is the result
of workers feeling overquali-
fied for their beginning roles.
Most of the recent college
grads confirmed that their
jobs tapped skills they picked
Wednesday, March 29, 2017 | B5
MANAGEMENT
Wharton
To Widen
Pool for
M.B.A.
BY KELSEY GEE
Even William Shakespeare
could have benefited from an
M.B.A.—or so the nation’s old-
est business school would like
prepare for the corporate young poets to think.
world. University of Pennsylvania’s
JARED SOARES FOR THE WALL STREET JOURNAL
Some companies are ad- Wharton School of Business
justing their veteran strate- was expected to launch a pro-
gies to smooth the entry spe- gram Tuesday for undergradu-
cifically for those coming ates studying liberal arts, sci-
into their first civilian jobs. ence and nursing at the Ivy
J.P. Morgan Chase & Co. League institution and looking
recently launched a pilot to gain early admission to its
project dubbed “Pathfinder” graduate business school.
that pairs newly recruited Investment banker Ken
veterans with a more experi- Moelis and his wife, Julie Taf-
enced veteran peer to guide fet Moelis, gave a $10 million
them through areas in which gift to their alma mater to cre-
company research showed Navy veteran LaTesha Ford says a support network at PricewaterhouseCoopers helped her greatly. ate the program, which is
they often need more sup- open to Penn seniors aiming
port. Those include setting jobs, such as financial ana- dismissed his problem-solv- trol of some 600 detainees in to work for as many as four
first-year goals and navigat- lyst. The recruits go through ing initiatives—such as a Iraq. years after graduation before
ing corporate nuances such a 12-month program covering proposal to better acclimate Hired by PwC just over six returning to campus to study
as forgoing “sir” or “ma’am” everything from how the new hires—as coming from years ago as a consultant, management.
when addressing colleagues company’s lines of business someone who “doesn’t un- she turned to her assigned The initiative, called the
and the how-tos of network- intersect with one another to derstand how things work mentor frequently, including Moelis Advance Access Pro-
ing, a largely foreign practice “flexing your leadership style here,” he said. for communication help. She gram, will make financial aid
in the military, where hierar- when you don’t have your “In the military, you see a and her team “weren’t click- available for each fellow, offer-
chy typically sets career rank on your collar,” said problem, you fix it,” said Mr. ing 100%,” she said, and she ing tuition costs for students
paths. Sean Passmore, USAA’s head Klein, now an operations worried she was too short who work for nonprofits, or in
PricewaterhouseCoopers of military hiring. manager at a Dallas-area en- and direct, a style to which jobs with relatively low pay
LLP is rolling out a program Even well-paying white- gineering and architecture she was accustomed. She for recent college graduates.
for hires who recently left collar jobs can discourage firm he says is a better fit. said her mentor from the The idea is to broaden the mix
the service that applies qual- some veterans. “I felt like “Corporate America some- veteran network helped her of students beyond typical
ity-control-like checklists to [my employer] didn’t know times moves a bit slower.” adjust her delivery to a more M.B.A.-seekers, who tend to
their coaching, such as regu- how to utilize me,” said Before PwC’s public-sector conversational tone, such as apply after working in finance
lar chats with a veteran James Klein, a retired lieu- group launched a veteran prefacing requests by asking or consulting roles.
“buddy” for advice. Later tenant commander in the support network roughly a colleagues about what work “We don’t want students to
this year, the firm plans to U.S. Coast Guard. After 23 decade ago, only about 20% they already had on their have to choose between fol-
systematically train human- years with the service, he of the practice’s veteran plates. “Before, I thought, lowing their intellectual pas-
resource managers on the joined a Fortune 500 telecom hires were staying a year or ‘That’s flowery—let’s just get sion or social values and get-
challenges veterans face, in- company in 2014 but left the longer, according to Michael it done,’” she said. ting a good job,” said Wharton
cluding, in rarer cases, the next year after his project- Donoghue, a PwC principal Now a senior associate Dean Geoffrey Garrett.
stresses of grappling with manager position was out- who helped start the net- working on cybersecurity University of Pennsylvania
physical combat injuries or sourced overseas. work. Within several years, and other projects for PwC’s administrators are marketing
post-traumatic stress disor- In the Coast Guard, his that improved to more than government clients, she says the program to students who
der. work included commanding a 95%. PwC has since estab- she gives pointers to other will enter their senior year in
Financial-services firm patrol boat in the Persian lished the network company- veteran hires and attends fall 2017; it is expected to ad-
USAA—where veterans and Gulf. In contrast, much of his wide. veteran career fairs to help mit around 10 students. If the
military spouses are nearly a 15 months at the telecom The network “is one of the identify where potential re- program is successful, the
quarter of its 30,000-em- company was spent on main reasons I’m still at the cruits can find the best fit in school might invite applicants
ployee workforce—began last spreadsheets and writing firm,” said LaTesha Ford, the firm. “We retain veterans from other universities, Dean
fall targeting exiting service equipment-installment in- whose nearly five years as a a lot longer,” she said, “be- Garrett said.
members with business lead- structions. It was a frustrat- naval officer included over- cause we try to put in that Business schools at Harvard
ership potential for specific ing comedown. Supervisors seeing care, custody and con- legwork at the beginning.” University, University of Vir-
ginia and other elite institu-
tions also offer deferred-en-
rollment programs for their
current students. But Whar-
ton’s new program is unusual
in that it targets nonbusiness
up outside of school. are paying a significant price undergraduates, including stu-
“I’ve heard of employers re- because companies don’t use Degrees of Separation dents who might otherwise be
quiring college experience and more efficient mechanisms,” Portion of entry-level job posts requesting bachelor's degrees:* inclined to pursue alternatives
months of recent work experi- such as personality tests, to 2011 2016 to an M.B.A., such as certifica-
ence for jobs at a call center. identify those qualities in job tion from a coding academy or
Twenty years ago that seekers, Mr. Sigelman said. Hotel manager a specialty master’s degree.
wouldn’t have been the case,” The mismatch between em- 29% Mr. Moelis, the 58-year-old
said Abigail Carlton, a manag- ployer requirements and the 47% founder of the boutique in-
ing director at the Rockefeller underlying skills entry-level vestment bank Moelis & Co., is
Foundation. Only a third of roles demand could be exacer- Intensive/critical care nurse a big recruiter of graduates
Americans ages 25 to 34 have bating labor shortages, Ms. 22% from Wharton’s graduate busi-
graduated from college, but a Carlton said, especially consid- 33% ness program. He received an
university degree has become ering that young people with- undergraduate degree from
Social media strategist/specialist
a “blunt proxy” for ability, she out a degree reported feeling Wharton in 1980 and an
82%
said, leaving behind many less comfortable job-hopping. M.B.A. from the school in 1981,
young people who are capable While the U.S. unemploy- 92% and said he came to appreciate
of learning on the job. ment rate hovers near a his- Registered nurse the value of science and litera-
Employers rely on college toric low under 5%, jobless- 23% ture later in his career, while
degrees because they often ness among those between 25 enrolling in courses offered by
signal that applicants possess and 34 is slightly higher, and 30% online educational platforms.
so-called soft skills, like dedi- nearly twice as high for people Bookkeeper/accounting clerk “I’m a huge believer in
cation or resilience—attributes under 24, according to the Bu- 23% business education, but look-
that can be harder for employ- reau of Labor Statistics. 30% ing back, maybe five years of
ers to measure than technical The disconnect between job it in a row was a lot—though
skills, said Matt Sigelman, requirements and applicants’ All entry-level job listings obviously, it didn’t hurt me,”
chief executive of Burning skills is even more pronounced 37% said Mr. Moelis. “If I had to do
Glass Technology, a labor-mar- in regions of the country with *Based on listings analyzed from it again I would be a history
35% more than 40,000 websites
ket analysis firm. large concentrations of college major, and then gotten a
“It’s clear that many people graduates. Source: Burning Glass Technologies THE WALL STREET JOURNAL. Wharton M.B.A.”
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact our reprints and licensing department at +1 800-843-0008 or www.djreprints.com
B6 | Wednesday, March 29, 2017 THE WALL STREET JOURNAL.

FINANCE & MARKETS

Plan Aims to Ease Hedging Rules Aviva Is

Accounting overseer corporate controller and prin- Shopping
A Wealth
cipal accounting officer, in a
looks to simplify and letter to FASB.
broaden the range of Still, several companies said

Division
the changes could have gone
activities that qualify further. Deutsche Bank AG
called for better alignment be-
BY TATYANA SHUMSKY tween U.S. and international
hedge accounting guidelines in BY KANE WU
One of the most Byzantine a comment letter, saying that AND JULIE STEINBERG
areas of corporate accounting significant differences be-
is about to get simpler. tween the two impede compa- U.K.-based insurer Aviva
The Financial Accounting rability of financial state- PLC is looking to sell Friends
Standards Board is putting the ments. Provident International Ltd.,
finishing touches on new rules All companies that attempt its unit that serves high-net-

governing how companies re-
port hedging activities, such
as using futures and options
to insulate profits from cur-
rency or interest-rate swings.
Current rules allow compa-
nies to delay recording the
economic impact of a hedge
on their income statement un-
til the same period as the
transaction involved is com-
pleted. This typically results in
less volatile earnings quarter
to quarter.
The FASB’s proposal aims
to give companies more time
to meet the strict documenta-
tion requirements needed to
qualify for hedge accounting.
The new rules also expand its
application to a broader range
of circumstances, simplify the
way hedges are recorded and
offer relief for companies that
made small errors in applying
the rules.
At stake for companies is
the treatment of futures, op-
tions and other derivatives
valued at billions of dollars
that don’t currently qualify for
hedge accounting.
“It will simplify the docu-
mentation process, saving us
time and money.” said Tom
Timko, vice president, control-
Grain trucks at an ADM plant in Illinois. The company would benefit from the accounting changes.
ler and chief accounting offi-
cer at General Motors Co.
GM uses futures and other
derivatives to hedge its for-
eign currency, commodity and
interest-rate risk, but not all
of these qualify for hedge ac-
counting. At the end of 2016,
GM held derivatives not desig-
nated as hedges with $47.7 bil-
lion in total notional value, a
measure of the amount cov-
ered when the hedge is trig-
gered. The fair value of these
contracts was insignificant at
the end of 2016, according to
regulatory filings.
GM is one of roughly three
dozen companies, including
Verizon Communications Inc.
and Archer Daniels Midland
Co., that have thrown their
support behind the effort to
make hedge accounting easier.
The new rules are expected to
be completed this summer and
become effective as early as
2018. “There’s still going to be
rules, there’s still going to be
hurdles, but it’s not going to
be as onerous as it is now,”
said Rob Royall, partner in fi-
nancial accounting and advi-
sory services practice at Ernst
& Young.
The commodities sector is
expected to benefit from the
proposal. When a company
such as Archer Daniels Mid-
land agrees to mill wheat into
flour and sell it to its custom-
ers in the future, the company
might lock in the wheat price
using futures, as no flour fu-
tures exist.
Current rules require com-
panies like ADM to hedge the
total price of its flour sales
contract, without singling out
the wheat-price risk on its
own, and so such hedges may
not qualify for hedge account-
ing treatment.
Changes in the price of de-
DANIEL ACKER/BLOOMBERG
hedge accounting under the
new rules will benefit from
having to do less math, said
Mark Scoles, partner in charge
of the accounting principles
group at Grant Thornton. For
example, FASB won’t require
companies to measure and re-
cord any discrepancy in how
rivatives that don’t qualify as effective the hedge is at miti-
hedges must be recorded in gating the relevant risks each
the income statement each quarter, as it currently does.
quarter, which can result in “If they’re applying hedge
large earnings swings. accounting now, they’re doing
The result is that ADM’s a lot of math every quarter,”
losses on derivatives not des- Mr. Scoles said.
ignated as hedges reduced FASB is making it easier to
earnings by $352 million, to avoid restatements for compa-
$1.28 billion in 2016. The com- nies attempting the simpler,
pany held derivatives not des- shortcut hedge accounting
ignated as hedges with a fair method. Currently, a small er-
value of $1.26 billion at the ror would trigger a restate-
end of 2016. ment, but the new rules allow
By contrast, the economic companies to avoid this if the
impact of qualified hedges for hedges are still effective.
expected sales or purchases is “If you missed something,
only recognized in the income or there was a misunderstand-
statement at the same time as ing of the fact pattern, you
the relevant transaction is had an error on your hands,”
concluded, like the delivery of
flour to the customer.
said Peter Kwan, executive di-
rector of accounting at Veri-
The proposal “would allow zon, adding that the new rule
ADM increased ability to
adopt accounting models that
gives companies a safety net.
“You don’t necessarily have to
reflect the way risk is actually go back and blow up the ac-
managed,” said John Stott, counting.”
worth clients in Asia and the
Middle East, in a deal that
could fetch up to $750 million,
according to people familiar
with the situation.
Aviva’s sale of Friends
Provident International comes
less than two years after it
bought the business in April
2015, as part of a £5.6 billion
($8.8 billion) deal to acquire
Friends Life Group Ltd., which
at the time created the U.K’s
largest insurance, savings and
asset-management company.
Based on the Isle of Man, a
self-governing island situated
between the U.K. and Ireland
that many consider a tax ha-
ven, Friends Provident Inter-
national provides life assur-
ance and investment products
to global expatriate and do-
mestic affluent customers in
Hong Kong, Singapore, United
Arab Emirates and other mar-
kets.
Analysts say the
U.K. insurer sees
little growth coming
from the unit.

Pimco Makes Peace With Former Manager

BY JUSTIN BAER to Mr. Gross and ordered the
money manager to make many
Pacific Investment Man- of its top executives available
agement Co. settled its for depositions. Some of those
breach-of-contract suit filed by depositions, including inter-
Aviva said in its full-year
2016 financial report that
Friends Provident Interna-
tional is under strategic re-
tate, hedge funds and other Mr. Gross said Monday in the view. The insurer sees little
strategies that could enhance joint statement with his for- growth in the unit, whose
the firm’s reputation as a top mer firm. main clientele are British ex-
fixed-income investor. Mr. Gross, who now man- patriates, analysts say. Aviva’s
Last month, the flagship ages money for Janus Capital gross operating profit in Asia
PATRICK T. FALLON/BLOOMBERG NEWS

former star manager Bill Gross
for $81 million, people familiar
with the matter said, ending a
feud that shook the investing
world.
Mr. Gross abruptly left
Pimco in September 2014 after
disagreements with the firm’s
other executives. In 2015, he
sued the manager for at least
$200 million in damages, al-
leging he was forced out.
The settlement resolves
what had been a bruising legal
skirmish for both Mr. Gross
and the firm he co-founded.
The two sides traded sharp ac-
cusations, with Pimco contend-
ing in a September filing that
Mr. Gross harbored a “sad ob-
session with attacking his for-
mer employer and colleagues.”
A California judge’s Septem-
ber ruling compelled Pimco to
turn over a slew of documents
views with officers such as
Pimco President Jay Jacobs,
have occurred already, one
person familiar with the case
said.
Inside Pimco, executives
feared some of the emails and
other documents revealed at
trial could cast the firm, them
and Mr. Gross in a poor light,
people familiar with the mat-
ter said. Some clients told the
firm they were concerned the
lawsuit would remain a dis-
traction to the money man-
ager, one person said.
Pimco, which appointed for-
mer hedge-fund manager Em-
manuel Roman as its chief ex-
ecutive last year, has been
eager to move past any ves-
tiges of the Gross era. Mr. Ro-
man’s arrival signaled that
Pimco would further its push
into distressed debt, real es-
fund Mr. Gross managed at
Pimco, Pimco Total Return,
dropped below the Pimco In-
come Fund as the firm’s big-
gest. Total Return had once
stood as the world’s largest
bond fund. Mr. Gross’s exit,
though, accelerated the flow of
client money to other invest-
ments.
The two sides released a
joint statement Monday con-
firming their settlement. Nei-
ther disclosed the amount that
Pimco, a unit of Allianz SE,
agreed to pay, but the state-
ment described other steps be-
ing taken by the money man-
ager.
For one, there will be a new
Founders Room at Pimco’s
Newport Beach, Calif., head-
quarters. The Pimco Founda-
tion also is naming Mr. Gross a
director emeritus and will es-
Group, intends to donate the dropped 4% year over year in
proceeds to charity through 2016, compared with a 12% in-
his Bill and Sue Gross Family crease in gross operating
Foundation, one person said. profit globally.
“Bill Gross has always been Aviva has received a num-
larger than life,” said Dan Ivas- ber of offers for the unit, al-
cyn, Pimco’s chief investment though a formal bidding pro-
officer, in a statement. “He has cess hasn’t started, the people
a well-deserved stellar reputa- said. Chinese conglomerates
tion as an investor and a phi- Fosun Group and HNA Group
Bill Gross had sued the lanthropist.” are among those evaluating
investment firm in 2015 The two sides had held the unit, according to two of
for breach of contract. sporadic discussions over a the people. Both companies
settlement for more than a declined to comment.
tablish an annual Bill Gross year, people familiar with the A spokeswoman for Aviva
Award for community organi- matter said. As 2016 drew to a said there is no update on the
zations. close, Mr. Roman began to review and declined to com-
“Pimco has always been zero in on the firm’s ongoing ment further.
family to me, and, like any legal battles. Overseas insurance compa-
family, sometimes there are In late January, Pimco’s nies are attractive to Chinese
disagreements. I’m glad that lawyers approached Mr. buyers as they can then rein-
we have had the opportunity Gross’s legal team with a vest the premiums collected
to work through those, and see much better offer, paving the without going through China’s
the Pimco founders receiving way for the final agreement, foreign-exchange approval
the recognition they deserve,” the people said. process.

FINANCE WATCH Advertisement INTERNATIONAL INVESTMENT FUNDS

COMMODITIES [ Search by company, category or country at asia.WSJ.com/funds ]
India Reinstates Tax NAV —%RETURN—
FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YR
On Wheat Imports VP Classic-B Units AS EQ HKG 03/27 USD 127.89 11.6 21.2 0.5
VP Classic-C Units AS EQ HKG 03/27 USD 16.15 11.8 21.4 0.6
VP Classic-C Units AUD H AS EQ HKG 03/27 AUD 13.31 11.5 22.3 1.1
India has reinstated a 10% VP Classic-C Units CAD H AS EQ HKG 03/27 CAD 12.90 11.4 21.7 0.3
import tax on wheat that was VP Classic-C Units HKD H
VP Classic-C Units NZD H
AS
AS
EQ HKG
EQ HKG
03/27 HKD
03/27 NZD
10.96
13.48
11.3
11.8
20.2
22.3
NS
2.2
Data as shown is for information purposes only. No offer is being made by
scrapped four months ago, a se- Morningstar, Ltd. or this publication. Funds shown aren’t registered with the VP Classic-C Units RMB AS EQ HKG 03/27 CNH 11.38 9.2 26.4 NS
U.S. Securities and Exchange Commission and aren’t available for sale to United VP Classic-C Units RMB H AS EQ HKG 03/27 CNH 10.81 12.5 23.1 NS
nior government official said States citizens and/or residents except as noted. Prices are in local currencies. VP Multi-Asset Fund Cls A HKD OT OT HKG 03/27 HKD 10.07 4.7 NS NS
Tuesday. All performance figures are calculated using the most recent prices available. VP Multi-Asset Fund Cls A USD OT OT HKG 03/27 USD 10.21 4.5 7.2 NS
VP Taiwan Fund AS EQ CYM 03/27 USD 18.72 11.8 24.4 7.5
The decision comes just NAV —%RETURN—
FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YR
ahead of the domestic wheat For information about listing your funds,
harvest season as a surge in im- n Chartered Asset Management Pte Ltd - Tel No: 65-6835-8866 please contact: Freda Fung tel: +852 2831
Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg
ports was threatening earnings CAM-GTF Limited OT OT MUS 03/24 USD 310782.95 2.6 7.3 -2.1 2504; email: freda.fung@wsj.com
of Indian farmers. India, one of
the world’s largest wheat pro-
ducers, had scrapped the import
tax in anticipation of shortages
due to a drought.
The government also im-
n Website: Https://Www.Valuepartners-Group.Com/ Tel: (852) 2143 0688
China A-Share Fund Cls A AUD H OT OT HKG 03/27 AUD 12.62 7.0 14.4 -0.1
LIST YOUR
AMIT DAVE/REUTERS

China A-Share Fund Cls A AUD UnH OT OT HKG 03/27 AUD 11.46 4.8 9.5 -0.4
China A-Share Fund Cls A CAD H OT OT HKG 03/27 CAD 11.65 6.7 12.6 -1.2
posed a 10% import tax on tur, a China A-Share Fund Cls A EUR H OT OT HKG 03/27 EUR 12.23 6.4 11.4 -1.4
variety of lentils, again to pro- China A-Share Fund Cls A EUR UnH OT OT HKG 03/27 EUR 12.25 6.2 13.5 NS

tect domestic farmers’ income

during the harvest period.
China A-Share Fund Cls A GBP H OT
China A-Share Fund Cls A GBP UnH OT
China A-Share Fund Cls A HKD H OT
China A-Share Fund Cls A HKD UnH OT
OT HKG
OT HKG
OT HKG
OT HKG
03/27 GBP
03/27 GBP
03/27 HKD
03/27 HKD
12.27
14.36
12.45
12.38
6.5
7.2
6.7
11.0
15.5
23.8
13.0
10.6
0.6
9.3
-1.0
-1.5
FUNDS
—Biman Mukherji China A-Share Fund Cls A NZD H OT
China A-Share Fund Cls A NZD UnH OT
OT HKG
OT HKG
03/27 NZD
03/27 NZD
12.44
10.88
7.2
9.2
14.8
5.8
1.5
NS
A farmer winnowed wheat outside Ahmedabad, India, in 2016. China A-Share Fund Cls A RMB (CNH) OT OT HKG 03/27 CNH 13.60 8.5 16.8 2.1
China A-Share Fund Cls A USD OT OT HKG 03/27 USD 12.34 10.9 11.7 -1.5
CHINA EVERGRANDE India had scrapped an import tax on the grain four months ago. China A-Share Fund Cls A USD H OT OT HKG 03/27 USD 12.41 6.8 13.3 -0.9
China Greenchip-A Units AS EQ CYM 03/27 HKD 56.91 11.9 19.9 -5.2

Net Profit Declines AGRICULTURAL BANK OF CHINA the 0.6% gain it posted in 2015,
China Greenchip-A Units AUD H AS
China Greenchip-A Units CAD H AS
EQ CYM
EQ CYM
03/27 AUD
03/27 CAD
9.61
9.34
11.9
11.7
20.6
19.1
-5.7
-6.8
China Greenchip-A Units NZD H AS EQ CYM 03/27 NZD 9.88 12.0 21.4 -4.9
As Finance Costs Rise Earnings Rise 1.8% but the bank has had to write China Greenchip-A Units USD AS
China Greenchip-A2 QDIs Units AS
EQ CYM
EQ CYM
03/27 USD
03/27 HKD
9.41
10.37
11.8
11.9
19.9
19.9
-6.0
-5.2
off large volumes of bad loans GC Hi Yield Inc - Cls A MDIs GBP H OT OT CYM 03/27 GBP 9.93 5.8 20.7 NS
China Evergrande Group’s net as slower growth makes it GC Hi Yield Inc-Cls A MDIs AUD H OT
GC Hi Yield Inc-Cls A MDIs CAD H OT
OT CYM
OT CYM
03/27 AUD
03/27 CAD
9.49
9.56
6.3
6.1
22.9
21.5
14.4
13.0 In print & online. Contact:
profit fell 51% in 2016 as higher Agricultural Bank of China harder for customers to repay GC Hi Yield Inc-Cls A MDIs NZD H OT OT CYM 03/27 NZD 9.84 6.5 23.7 15.4
GC Hi Yield Inc-Cls P HKD Acc sh OT OT CYM 03/27 HKD 14.99 6.3 22.0 13.1
finance costs and reduced gains Ltd. said its net profit rose 1.8% what they have borrowed. GC Hi Yield Inc-Cls P HKD MDIs sh OT OT CYM 03/27 HKD 9.45 6.4 22.1 13.2
GC Hi Yield Inc-Cls P MDIs SGD H OT OT CYM 03/27 SGD 10.37 6.1 21.7 13.5
on changes in the fair value of last year to 183.94 billion yuan Net interest income fell 8.7% GC Hi Yield Inc-Cls P USD Acc sh OT OT CYM 03/27 USD 15.09 6.2 21.9 13.1
its assets more than offset ($26.71 billion), buoyed by com- to 398.1 billion yuan, while net GC Hi Yield Inc-Cls P USD MDIs sh OT OT CYM 03/27 USD 9.49 6.2 21.8 13.0 wsja.advertising@dowjones.com
GC Hi Yield Inc-ClsA MDIs EUR H OT OT CYM 03/27 EUR 10.38 5.7 19.9 11.9
higher property sales. missions and fees. fee and commission income rose Hi-Div Stk Cls A RMB H Acc OT OT HKG 03/27 CNH 11.33 13.3 20.8 5.3
Hi-Div Stk Cls A RMB UnH Acc OT OT HKG 03/27 CNH 13.48 10.0 23.2 7.3
The Chinese real-estate de- The result was slightly higher 10.2% to 90.94 billion yuan. Hi-Div Stk Cls A1 OT OT HKG 03/27 USD 80.53 12.3 18.5 2.9
veloper said after markets than the median net-profit fore- The bank also reported Hi-Div Stk Cls A2 AUD H MDIs OT
Hi-Div Stk Cls A2 CAD H MDIs OT
OT HKG
OT HKG
03/27 AUD
03/27 CAD
9.68
9.80
12.0
12.2
18.4
17.3
3.1
1.9
closed Tuesday that full-year net cast of 179.03 billion from ana- 230.83 billion yuan of nonper- Hi-Div Stk Cls A2 GBP H MDIs OT OT HKG 03/27 GBP 9.27 13.2 17.7 1.5
Hi-Div Stk Cls A2 HKD MDIs OT OT HKG 03/27 HKD 10.09 12.7 18.9 2.9
profit was 5.09 billion yuan lysts polled by S&P Global Mar- forming loans at the end of Hi-Div Stk Cls A2 MDIs OT OT HKG 03/27 USD 11.02 12.1 18.3 2.8
Hi-Div Stk Cls A2 NZD H MDIs OT OT HKG 03/27 NZD 9.90 12.1 19.0 4.0
($740.6 million), compared with ket Intelligence. 2016, up from 229.82 billion Hi-Div Stk Cls A2 RMB H MDIs OT OT HKG 03/27 CNH 9.59 13.7 21.1 5.2
10.46 billion yuan a year earlier. China’s banks are still dealing yuan three months earlier. Hi-Div Stk Cls A2 RMB UnH MDIs OT
Hi-Div Stk Cls A2 SGD H MDIs OT
OT HKG
OT HKG
03/27 CNH
03/27 SGD
10.00
10.64
10.3
NS
24.5
NS
7.7
NS
Its revenue rose 59% to with the effects of a broad The bank’s bad-loan ratio fell Intel-China Converg Fund-A AUD H AS EQ CYM 03/27 AUD 10.06 14.3 17.2 NS
Intel-China Converg Fund-A CAD H AS EQ CYM 03/27 CAD 10.83 6.5 10.1 NS
211.44 billion yuan from 133.13 slowdown in economic growth. slightly to 2.37% from 2.39% at Intel-China Converg Fund-A NZD H AS EQ CYM 03/27 NZD 11.36 10.7 12.9 NS
billion yuan a year ago. The 1.8% increase in Agricultural the end of September. Intel-China Converg Fund-A Units AS
Intel-Chinese Mainland Foc Fund AS
EQ CYM
EQ CYM
03/27 USD
03/27 USD
150.30
42.68
12.6
15.2
16.7
21.1
-2.3
0.0
—Joanne Chiu Bank’s profit was an uptick from —Chuin-Wei Yap VP Classic-A Units AS EQ HKG 03/27 USD 284.51 11.8 21.8 1.0
 For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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THE WALL STREET JOURNAL. Wednesday, March 29, 2017 | B7

FINANCE & MARKETS

Crude-Oil Prices
Rise as Supplies
From Libya Drop
BY ALISON SIDER
AND NEANDA SALVATERRA
Crude-oil prices rose Tues-
day amid disrupted supply in
Libya, rallying from near four-
month lows Monday.
U.S. crude futures were up
89 cents, or 1.86%, at $48.62 a
barrel in
COMMODITIES m i d d a y
ANDY WONG/ASSOCIATED PRESS
time high reached in 1970,”
said Barclays analysts in a re-
cent note.
But investors haven’t aban-
doned all hope that OPEC’s
cuts will be successful.
Data from ICE showed that
traders are largely holding on
to their record-high specula-
tive position that Brent prices
will rise. According to ICE fig-

trading on ures, speculative net long po-

the New
York Mercantile Exchange.
Brent, the global benchmark,
rose 90 cents, or 1.77%, to
$51.65 a barrel on London’s
ICE Futures Exchange.
A militia has shut key pipe-
China Southern Airlines’ stock fell 2.7% after rallying on Monday in response to news of a deal with American Airlines. lines connected to Libyan oil
fields, choking off some
sitions in Brent declined 8,200
to 397,700 contracts in the
week to March 21.
“We’ve been working
steadily higher since the mid-
dle of last night,” said John
Saucer, vice president of re-
search and analysis at Mobius
Risk Group. While crude prices

Global Stocks Edge Higher

BY CHRISTOPHER WHITTALL
recovery in oil prices.
ter sinking Monday to its low-
and they jumped back in,” said
250,000 barrels of oil a day
amid a dispute over wage ar-
rears, Libyan oil officials said
Tuesday.
The supply disruption
comes as investors are weigh-
ended Monday lower, they set-
tled at the upper end of the
day’s range—a signal to
would-be buyers.

AND AKANE OTANI
Global stock markets stead-
ied Tuesday, inching higher af-
ter the Dow Jones Industrial
Average posted its eighth con-
secutive session of declines a
day earlier.
Near midday in New York,
the Dow was up 82 points, or
0.4%, to 20633,
TUESDAY’S buoyed by
MARKETS gains in shares
of energy, fi-
nancial and in-
dustrial companies. The S&P
500 rose 0.4%, and the Nasdaq
Composite added 0.2%.
The uptick followed gains in
both Europe and Asia. The
Stoxx Europe 600 index rose
2.29 points, or 0.6%, to 377.30,
with sectors including autos,
mining, media, technology and
banks all ticking higher.
In Asia, energy and mining
shares helped push Australia’s
S&P/ASX 200 index up 1.3% to
close at its highest level in
nearly two years following a
Hong Kong’s Hang Seng In-
dex ended the day up 0.6% at
24345.87 with China heavy-
weights including tech giant
Tencent leading gains. Shares
of China Southern Airlines, the
nation’s biggest airline by rev-
enue, fell 2.7% after news the
carrier is entering a deal to
sell shares to American Air-
lines boosted the stock on
Monday.
Japan’s Nikkei Stock Aver-
age ended 1.1% higher at
19202.87, partly recouping
losses recorded Monday, when
the yen soared as investors
sought haven assets due to
concern that the Trump ad-
ministration won’t be able to
follow through with key policy
initiatives.
The dollar was steady on
Tuesday at ¥110.6310, com-
pared with ¥110.66 late in New
York on Monday.
The WSJ Dollar Index,
which measures the greenback
against a basket of 16 curren-
cies, was flat near midday af-
est level since Nov. 11, shortly
after Mr. Trump’s election.
Expectations for a tax over-
haul and large-scale infra-
structure spending had under-
pinned gains in global markets
since the U.S. election. Stocks
have slipped as doubts have
grown over whether the ad-
ministration can deliver.
Many investors believe
stocks were in need of a pull-
back given the speed of the re-
cent rally.
“It’s a healthy part of a con-
tinuing, positive market,” said
Kevin O’Nolan, a portfolio
manager at Fidelity Interna-
tional, who remains slightly
overweight in equities.
Others say stocks are likely
to climb higher yet, given im-
provement in global economic
growth and accommodative
central bank policies.
“It seems like as soon as
the market pulled back, the
buyers sitting on the sidelines
decided they couldn’t take a
chance of missing the rally
Dan Miller, director of equities
at GW&K Investment Manage-
ment. “Stocks are still quite
attractive compared to every-
thing else out there.”
Energy shares rose with oil
prices Tuesday.
The S&P 500 energy sector
added 1%.
Shares of financial and in-
dustrial companies, among the
biggest gainers in the post-
election rally, climbed. Finan-
cial stocks jumped 1.1% in the
S&P 500 and industrial stocks
rose 0.8%.
The S&P 500 is still up
about 9% since Election Day
despite declining in recent
sessions. The relative resil-
ience of U.S. equities “has to
do with the underlying
strength of the global econ-
omy and the picking-up in
[corporate] earnings data,”
said Jeroen Blokland, a senior
portfolio manager at Dutch as-
set manager Robeco.
—Kenan Machado
contributed to this article.
ing whether production cuts
by the Organization of the Pe-
troleum Exporting Countries
and 11 outside suppliers are
helping to shrink the oversup-
ply of oil that has weighed on
prices. Libya was exempt from
the cuts, and its output had
returned to about 700,000
barrels a day—partially offset-
ting cutbacks by other produc-
ers.
Oil prices have faced selling
pressure lately as rising crude
production in the U.S. threat-
ens to frustrate a continuing
effort to reduce global stock-
piles.
Data show U.S. production
has remained above 9 million
barrels a day for the past four
weeks, and the number of
drilling rigs at work has
steadily risen this year, reach-
ing its highest level since Sep-
tember 2015.
“We now forecast U.S.
crude-oil production to reach
a multidecade high by Decem-
ber, within sight of the all-
250K
Daily barrels of oil interrupted by
North Africa pipelines closure
Still, Mr. Saucer said the
prices may face resistance on
their way back up, as U.S. pro-
ducers take advantage of any
rally to lock in higher prices
for their output by selling fu-
tures.
“This market will have
some work to do to locate sup-
port to move back above $50,”
he said.
Some analysts said OPEC is
at risk of failing to make a
dent in global inventories un-
less the cartel decides to ex-
tend its cuts into the second
half of 2017 at its meeting
May 25.
—Benoit Faucon
and Jenny W. Hsu
contributed to this article.

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B8 | Wednesday, March 29, 2017 THE WALL STREET JOURNAL.

MARKETS DIGEST
Nikkei 225 Index STOXX 600 Index S&P 500 Index Data as of 12 p.m. New York time
Last Year ago
19202.87 s 217.28, or 1.14% Year-to-date s 0.46% 377.30 s 2.29, or 0.61% Year-to-date s 4.39% 2354.58 s 12.99, or 0.55% Trailing P/E ratio * 24.52 23.53
High, low, open and close for each 52-wk high/low 19633.75 14952.02 High, low, open and close for each 52-wk high/low 378.32 308.75 High, low, open and close for each P/E estimate * 18.27 17.55
trading day of the past three months. All-time high 38915.87 12/29/89 trading day of the past three months. All-time high 414.06 4/15/15 trading day of the past three months. Dividend yield 1.97 2.23
All-time high: 2395.96, 03/01/17

* P/E data based on as-reported earnings from Birinyi Associates Inc.

20000 385 2390

19500 375 2350

19000 365 2310

18500 355 2270

Session high
DOWN UP 65-day moving average
18000 345 2230
t

Session open Close

65-day moving average
65-day moving average Close Open
t

17500 335 2190

Session low
Bars measure the point change from session's open
17000 325 2150
Dec. Jan. Feb. Mar. Dec. Jan. Feb. Mar. Dec. Jan. Feb. Mar.

International Stock Indexes Data as of 12 p.m. New York time Global government bonds
Latest 52-Week Range YTD Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year
Region/Country Index Close NetChg % chg Low Close High % chg and 10-year government bonds around the world. Data as of 12 p.m. ET
World The Global Dow 2697.83 17.51 0.65 2193.75 • 2720.47 6.7 Country/ Spread Over Treasurys, in basis points Yield
MSCI EAFE 1809.05 11.21 0.62 1471.88 • 1956.39 5.4 Coupon Maturity, in years Yield Latest Previous Month Ago Year ago Previous Month ago Year ago
MSCI EM USD 970.43 4.72 0.49 691.21 • 1044.05 22.2 5.250 Australia 2 1.746 47.2 47.5 55.0 110.6 1.732 1.814 1.975
4.750 10 2.711 32.7 33.6 34.3 70.7 2.713 2.737 2.593
Americas DJ Americas 567.65 3.10 0.55 480.90 • 577.65 5.0
3.000 Belgium 2 -178.2 -172.8 -184.0 -130.2 -0.471 -0.576 -0.433
-0.508
Brazil Sao Paulo Bovespa 64443.74 135.35 0.21 47873.65 • 69487.58 7.0
0.800 10 0.857 -152.7 -150.0 -169.3 -144.5 0.877 0.701 0.441
Canada S&P/TSX Comp 15594.90 88.68 0.57 13217.17 • 15943.09 2.0
0.000 France 2 -0.485 -175.9 -172.1 -179.7 -128.5 -0.464 -0.533 -0.416
Mexico IPC All-Share 49428.92 115.93 0.24 43902.25 • 49523.94 8.3
0.250 10 0.969 -141.5 -139.5 -150.6 -135.0 0.981 0.888 0.536
Chile Santiago IPSA 3730.33 56.69 1.54 2998.64 • 3733.02 15.7
0.000 Germany 2 -0.700 -197.4 -197.1 -216.5 -134.6 -0.714 -0.901 -0.477
U.S. DJIA 20650.11 99.13 0.48 17063.08 • 21169.11 4.5
0.250 10 0.389 -199.5 -197.6 -218.6 -170.3 0.401 0.209 0.184
Nasdaq Composite 5861.45 21.08 0.36 4574.25 • 5928.06 8.9
0.300 Italy 2 -0.078 -135.2 -130.6 -129.2 -83.5 -0.049 -0.028 0.035
S&P 500 2354.58 12.99 0.55 1991.68 • 2400.98 5.2
1.250 10 2.152 -23.2 -17.6 -30.6 -58.7 2.201 2.089 1.299
CBOE Volatility 11.64 –0.86 –6.88 9.97 • 26.72 –17.1
0.100 Japan 2 -0.261 -153.5 -151.5 -153.4 -109.4 -0.258 -0.270 -0.225
EMEA Stoxx Europe 600 377.30 2.29 0.61 308.75 • 378.32 4.4 0.100 10 0.060 -232.4 -231.5 -234.0 -197.6 0.061 0.055 -0.090
Stoxx Europe 50 3135.75 17.88 0.57 2626.52 • 3151.89 4.2 4.000 Netherlands 2 -0.725 -199.9 -196.2 -209.7 -136.5 -0.705 -0.833 -0.496
France CAC 40 5046.20 28.77 0.57 3955.98 • 5054.91 3.8 0.750 10 0.627 -175.7 -173.1 -191.5 -161.3 0.646 0.480 0.273
Germany DAX 12149.42 153.35 1.28 9214.10 • 12158.72 5.8 4.450 Portugal 2 -0.128 -140.1 -132.2 -128.4 -59.0 -0.065 -0.020 0.279
Israel Tel Aviv 1401.00 5.91 0.42 1372.23 • 1504.42 –4.7 2.875 10 3.732 134.9 137.6 147.2 89.8 3.752 3.866 2.784
Italy FTSE MIB 20330.42 206.23 1.02 15017.42 • 20330.42 5.7 2.750 Spain 2 -0.213 -148.7 -148.1 -152.5 -84.3 -0.224 -0.261 0.026
Netherlands AEX 512.15 2.83 0.56 409.23 • 518.88 6.0 1.500 10 1.658 -72.6 -68.8 -85.6 -43.6 1.689 1.539 1.450
Russia RTS Index 1125.58 10.92 0.98 835.75 • 1196.99 –2.3 4.250 Sweden 2 -0.595 -186.9 -182.8 -193.6 -151.1 -0.571 -0.672 -0.642
Spain IBEX 35 10389.00 86.10 0.84 7579.80 • 10394.80 11.1 1.000 10 0.632 -175.2 -173.5 -186.5 -136.8 0.642 0.529 0.518
Switzerland Swiss Market 8597.02 2.48 0.03 7475.54 • 8704.11 4.6 1.750 U.K. 2 0.181 -109.3 -108.7 -117.8 -38.4 0.170 0.086 0.486
South Africa Johannesburg All Share 52309.23 584.31 1.13 48935.90 • 54704.22 3.3 4.250 10 1.194 -119.0 -120.7 -124.3 -42.9 1.169 1.151 1.457
Turkey BIST 100 90181.73 486.68 0.54 70426.16 • 91497.00 15.4 1.250 U.S. 2 1.274 ... ... ... ... 1.257 1.264 0.869
U.K. FTSE 100 7343.42 49.92 0.68 5788.74 • 7447.00 2.8 2.250 10 2.384 ... ... ... ... 2.377 2.394 1.886
Asia-Pacific DJ Asia-Pacific TSM 1567.56 14.30 0.92 1308.52 • 1570.38 10.2
Australia S&P/ASX 200 5821.20 74.50 1.30 4924.40 • 5821.20 2.7 Commodities Prices of futures contracts with the most open interest 12 p.m. New York time
China Shanghai Composite 3252.95 –14.01 –0.43 2806.91 • 3282.92 4.8 EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.; MDEX: Bursa Malaysia
Hong Kong Hang Seng 24345.87 152.17 0.63 19694.33 • 24593.12 10.7 Derivatives Berhad; TCE: Tokyo Commodity Exchange; COMEX: Commodity Exchange; LME: London Metal Exchange;
NYMEX: New York Mercantile Exchange; ICE-EU: ICE Futures Europe. *Data as of 3/27/2017
India S&P BSE Sensex 29409.52 172.37 0.59 24673.84 • 29648.99 10.5 One-Day Change Year Year
Indonesia Jakarta Composite 5541.20 … Closed 4704.22 • 5567.13 4.6 Commodity Exchange Last price Net Percentage high low
357.00 1.25 0.35% 387.25 354.25
Japan Nikkei Stock Avg 19202.87 217.28 1.14 14952.02 • 19633.75 0.5 Corn (cents/bu.) CBOT
Soybeans (cents/bu.) 972.25 0.75 0.08 1,088.25 968.25
Malaysia Kuala Lumpur Composite 1754.42 9.47 0.54 1614.90 • 1754.67 6.9
Wheat (cents/bu.)
CBOT
CBOT 423.00 2.25 0.53 477.00 416.25
New Zealand S&P/NZX 50 7065.23 2.52 0.04 6664.21 • 7571.11 2.7
Live cattle (cents/lb.) CME 111.875 0.425 0.38 114.200 103.150
Pakistan KSE 100 48523.41 –156.75 –0.32 32879.67 • 50192.36 1.5
Cocoa ($/ton) ICE-US 2,131 -19 -0.88% 2,273 1,869
Philippines PSEi 7331.46 85.49 1.18 6563.67 • 8102.30 7.2
Coffee (cents/lb.) ICE-US 138.55 -0.65 -0.47 159.30 136.20
Singapore Straits Times 3157.82 30.94 0.99 2729.85 • 3169.38 9.6
Sugar (cents/lb.) ICE-US 17.56 -0.14 -0.79 21.21 17.02
South Korea Kospi 2163.31 7.65 0.35 1925.24 • 2178.38 6.8
Cotton (cents/lb.) ICE-US 77.37 0.43 0.56 79.46 71.55
Taiwan Weighted 9876.45 –0.32 –0.003 8053.69 • 9972.49 6.7 Robusta coffee ($/ton) ICE-EU 2164.00 -22.00 -1.01 2,279.00 2,093.00
Thailand SET 1576.72 6.22 0.40 1356.69 • 1591.00 2.2
Copper ($/lb.) COMEX 2.6650 0.0330 1.25 2.8360 2.4800
Source: SIX Financial Information;WSJ Market Data Group Gold ($/troy oz.) COMEX 1258.10 -0.70 -0.06 1,268.10 1,152.20
Silver ($/troy oz.) COMEX 18.210 0.102 0.56 18.540 16.000
Currencies London close on March 28 Aluminum ($/mt)* LME 1,924.50 -5.50 -0.28 1,939.00 1,688.50
Tin ($/mt)* LME 19,535.00 -575.00 -2.86 21,225.00 18,760.00
Yen, euro vs. dollar; dollar vs. major U.S. trading partners US$vs,
Tue YTDchg Copper ($/mt)* LME 5,694.00 -121.50 -2.09 6,156.00 5,518.00
Country/currency in US$ per US$ (%) Lead ($/mt)* LME 2,318.00 -37.00 -1.57 2,445.00 2,022.00
20%
s Europe Zinc ($/mt)* LME 2,778.00 -54.00 -1.91 2,958.50 2,555.00
Yen Bulgaria lev 0.5556 1.7997 –3.2 Nickel ($/mt)* LME 9,750.00 -200.00 -2.01 11,095.00 9,430.00
10
Croatia kuna 0.1459 6.855 –4.4 Rubber (Y.01/ton) TCE 240.90 3.40 1.43 n.a. n.a.
s
Euro Euro zone euro 1.0849 0.9218 –3.0
0 Palm oil (MYR/mt) MDEX 2706.00 11.00 0.41 3068.00 2642.00
Czech Rep. koruna-b 0.0401 24.907 –3.0
s WSJ Dollar index Denmark krone 0.1458 6.8588 –3.0 Crude oil ($/bbl.) NYMEX 48.71 0.98 2.05 57.50 47.01
–10 0.003504 285.40 –3.0
Hungary forint NY Harbor ULSD ($/gal.) NYMEX 1.5349 0.0264 1.75 1.7770 1.4825
Iceland krona 0.009057 110.41 –2.3 RBOB gasoline ($/gal.) NYMEX 1.6525 0.0262 1.61 1.9065 1.5824
–20 Norway krone 0.1177 8.4966 –1.7
0.2561 3.9047 –6.7
Natural gas ($/mmBtu) NYMEX 3.156 0.025 0.80 3.5070 2.7370
2016 2017 Poland zloty
Russia ruble-d 0.01757 56.904 –7.1 Brent crude ($/bbl.) ICE-EU 51.88 0.98 1.93 59.89 50.00
US$vs, US$vs,
YTDchg YTDchg Sweden krona 0.1138 8.7903 –3.5 Gas oil ($/ton) ICE-EU 461.00 9.75 2.16 523.50 444.00
Tue Tue
Country/currency in US$ per US$ (%) Country/currency in US$ per US$ (%) Switzerland franc 1.0146 0.9856 –3.3
Turkey lira 0.2752 3.6335 3.1 Sources: SIX Financial Information; WSJ Market Data Group
Americas Hong Kong dollar 0.1287 7.7677 0.2
Ukraine hryvnia 0.0369 27.1300 0.2
Argentina peso-a 0.0644 15.5206 –2.2
India rupee
Indonesia rupiah
0.0154
0.0000751
65.0457
13312
–4.3
–1.6
U.K. pound 1.2495 0.8003 –1.2 Cross rates London close on Mar 28
Brazil real 0.3194 3.1304 –3.8 Middle East/Africa
Japan yen 0.009038 110.65 –5.4
Canada dollar 0.7485 1.3361 –0.6 USD GBP CHF JPY HKD EUR CDN AUD
Kazakhstan tenge 0.003172 315.26 –5.5 Bahrain dinar 2.6525 0.3770 –0.0
Chile peso 0.001502 665.70 –0.6 Australia 1.3077 1.6337 1.3268 0.0118 0.1684 1.4185 0.9788 ...
Macau pataca 0.1250 8.0023 1.1 Egypt pound-a 0.0548 18.2443 0.6
Colombia peso 0.0003438 2908.26 –3.1 Canada 1.3361 1.6693 1.3557 0.0121 0.1720 1.4495 ... 1.0218
Malaysia ringgit-c 0.2266 4.4135 –1.6 Israel shekel 0.2770 3.6095 –6.2
Ecuador US dollar-f 1 1 unch
New Zealand dollar 0.7032 1.4221 –1.5 Kuwait dinar 3.2834 0.3046 –0.3 Euro 0.9218 1.1518 0.9351 0.0083 0.1187 ... 0.6899 0.7048
Mexico peso-a 0.0530 18.8739 –9.0
Pakistan rupee 0.0095 104.817 0.4 Oman sul rial 2.5970 0.3851 0.02 Hong Kong 7.7677 9.7063 7.8810 0.0702 ... 8.4274 5.8139 5.9398
Peru sol 0.3084 3.2430 –3.3
Philippines peso 0.0199 50.164 1.1 Qatar rial 0.2746 3.642 0.04 Japan 110.6470 138.2500 112.2700 ... 14.2450 120.0400 82.8100 84.6100
Uruguay peso-e 0.0352 28.430 –3.1
Singapore dollar 0.7175 1.3938 –3.7 Saudi Arabia riyal 0.2666 3.7503 –0.01 0.9856 1.2315 ... 0.0089 0.1269 1.0694 0.7376 0.7538
Venezuela bolivar 0.100150 9.99 –0.1 Switzerland
South Korea won 0.0008985 1112.91 –7.9 South Africa rand 0.0774 12.9193 –5.7
U.K. 0.8003 ... 0.8120 0.0072 0.1030 0.8684 0.5991 0.6120
Asia-Pacific Sri Lanka rupee 0.0065794 151.99 2.4 Close Net Chg % Chg YTD % Chg
0.7647 1.3077 –5.8 Taiwan dollar 0.03313 30.188 U.S. ... 1.2495 1.0146 0.0090 0.1287 1.0849 0.7485 0.7647
Australia dollar –7.0 WSJ Dollar Index 89.73 0.07 0.08 –3.45
China yuan 0.1453 6.8802 –0.9 Thailand baht 0.02910 34.370 –4.0 Sources: Tullett Prebon, WSJ Market Data Group Source: Tullett Prebon

Key Rates Top Stock Listings 12 p.m. New York time

Latest 52 wks ago % YTD% % YTD% % YTD%
Libor Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Cur Stock Sym Last Chg Chg Asia Titans 50
One month 0.98222% 0.43290% ¥ TakedaPharm 4502 5267.00 1.39 8.93 £ RoyDtchShell A RDSA 2111.00 1.59 -5.86 Last: 154.90 s 1.66, or 1.08% YTD s 9.9%
Three month 1.15222 0.63085 Asia Titans HK$ TencentHoldings 0700 226.00 0.53 19.14 € SAP SAP 90.61 1.35 9.42
Six month 1.42489 0.91390 HK$ AIAGroup 1299 49.30 ... 12.69 ¥ TokioMarineHldg 8766 4841.00 1.23 0.94 € Sanofi SAN 83.94 0.56 9.15 High 155
One year 1.79817 1.23865 66.73 0.59 0.94
¥ AstellasPharma 4503 1513.00 0.87 -6.81 ¥ ToyotaMtr 7203 6218.00 0.97 -9.60 € SchneiderElectric SU Close 150
Euro Libor AU$ AustNZBk ANZ 31.94 1.56 5.00 AU$ Wesfarmers WES 44.38 0.86 5.32 € Siemens SIE 125.15 2.00 7.15 Low t 145
One month -0.39786% -0.33000% AU$ BHP BHP 23.90 1.49 -4.63 AU$ WestpacBanking WBC 34.70 2.06 6.44 CHF Syngenta SYNN 433.90 0.14 7.80
Three month -0.35786 -0.24900 3.91 € Telefonica TEF 10.51 0.57 19.16 50–day 140
HK$ BankofChina 3988 1.03 13.66 AU$ Woolworths WOW 26.25 1.20 8.92
moving average
Six month -0.25014 -0.13943 HK$ CKHutchison 0001 96.90 0.05 10.24 € Total FP 46.41 0.63 -3.78 135
One year -0.11900 -0.01729 HK$ CNOOC 0883 9.31 0.76 -4.02 Stoxx 50 CHF UBSGroup UBSG 15.60 1.04 -2.19
130
Euribor AU$ CSL CSL 123.00 0.16 22.50 € Unilever UNA 46.50 -0.43 18.88
CHF ABB ABBN 23.15 0.96 7.77
One month -0.37300% -0.33200% ¥ Canon 7751 3492.00 0.90 5.98 £ Unilever ULVR 4006.00 -0.29 21.67 30 6 13 20 27 3 10 17 24 3 10 17 24
€ ASMLHolding ASML 123.60 1.27 15.89
Three month -0.33000 -0.24200 ¥ CentralJapanRwy 9022 18745 1.13 -2.52 € Vinci DG 73.93 -0.56 14.27 Jan. Feb. Mar.
€ AXA CS 23.88 0.72 -0.46
Six month -0.24200 -0.13400 HK$ ChinaConstructnBk 0939 6.38 0.79 6.87 £ VodafoneGroup VOD 210.25 -0.17 5.20
€ AirLiquide AI 106.20 -0.23 0.52
One year -0.11000 -0.00600 HK$ ChinaLifeInsurance 2628 24.05 1.05 19.06 CHF ZurichInsurance ZURN 283.50 0.04 1.11
171.55
Yen Libor HK$ ChinaMobile 0941 86.80 0.70 5.60
€
€
Allianz
AB InBev
ALV
ABI 102.95
1.15
0.54
9.27
2.39 DJIA Stoxx 50
One month -0.01271% -0.08529% HK$ ChinaPetro&Chem 0386 6.28 1.13 14.18 £ AstraZeneca AZN 4960.00 -0.29 11.77 Last: 3135.75 s 17.88, or 0.57% YTD s 4.2%
Three month 0.02079 -0.00500 AU$ CmwlthBkAust CBA 85.26 2.23 3.46 € BASF BAS 91.54 1.68 3.66
$ AmericanExpress AXP 78.36 0.98 5.78
Six month 0.04357 0.02293 ¥ EastJapanRailway 9020 9866.00 1.04 -2.32 € BNP Paribas BNP 61.92 2.58 2.26
$ Apple AAPL 142.40 1.08 22.95 3175
One year 0.14900 0.10700 ¥ Fanuc 6954 22955 0.95 15.85 £ BT Group BT.A 324.25 -0.22 -11.62
$ Boeing BA 177.12 0.58 13.77
$ Caterpillar CAT 92.58 1.17 -0.17 3100
Offer Bid ¥ Hitachi 6501 621.40 2.42 -1.68 € BancoBilVizAr BBVA 7.27 1.04 13.28
TW$ Hon Hai Precisn 2317 91.20 0.77 8.31 $ Chevron CVX 107.13 0.80 -8.98 3025
Eurodollars € BancoSantander SAN 5.76 1.68 16.15
¥ HondaMotor 7267 3403.00 0.38 -0.35 $ CiscoSystems CSCO 33.99 -0.01 12.47
One month 1.1000% 1.0000% £ Barclays BARC 228.10 1.74 2.08 2950
KRW HyundaiMtr 005380 160000 -1.23 9.59 $ Coca-Cola KO 42.38 0.14 2.22
Three month 1.3000 1.2000 € Bayer BAYN 106.90 0.28 7.84
2875
HK$ Ind&Comml 1398 5.15 0.59 10.75 $ Disney DIS 112.48 0.09 7.93
Six month 1.4000 1.3000 £ BP BP. 453.45 1.24 -11.02
$ DuPont DD 81.34 0.94 10.82
One year 1.7500 1.6500 ¥ JapanTobacco 2914 3726.00 0.03 -3.07 £ BritishAmTob BATS 5219.00 -0.17 12.93 2800
¥ KDDI 3016.00 1.48 1.91
$ ExxonMobil XOM 81.69 0.54 -9.49
Latest 52 wks ago 9433 € Daimler DAI 71.63 1.63 1.29 $ GeneralElec GE 29.50 0.22 -6.63 30 6 13 20 27 3 10 17 24 3 10 17 24
¥ Mitsubishi 8058 2465.00 1.75 -1.00 € DeutscheTelekom DTE 16.32 0.80 -0.24 $ Jan. Feb. Mar.
Prime rates GoldmanSachs GS 229.15 1.63 -4.30
¥ MitsubishiElectric 6503 1622.50 0.59 -0.43 £ Diageo DGE 2306.00 0.37 9.29 $
U.S. 4.00% 3.50% HomeDepot HD 146.57 -0.20 9.32
¥ MitsubishiUFJFin 8306 713.90 1.32 -0.87 € ENI ENI 15.05 0.53 -2.71 $
Canada 2.70 2.70 Intel INTC 35.45 0.18 -2.25
1652.00 1.54 2.80 1677.00
Japan
Hong Kong
1.475
5.00
1.475
5.00
¥
¥
Mitsui
Mizuho Fin
8031
8411 210.90 1.35 0.52
£
£
GlaxoSmithKline
HSBC Hldgs
GSK
HSBA 655.30
... 7.36 $
1.38 -0.24 $
IBM
JPMorganChase
IBM
JPM
173.76
88.47
-0.01
1.41
4.68
2.53
Dow Jones Industrial Average P/E: 21
¥ NTTDoCoMo 9437 2704.50 1.08 1.56 € INGGroep INGA 13.91 1.35 4.04 $ J&J JNJ 125.14 -0.52 8.62 Last: 20650.11 s 99.13, or 0.48% YTD s 4.5%
Policy rates
ECB 0.00% 0.00%
AU$ NatAustBnk NAB 32.84 1.96 7.08 £ ImperialBrands IMB 3827.00 0.18 8.03 $ McDonalds MCD 129.21 -0.22 6.15
Britain 0.25 0.50
¥ NipponTeleg 9432 4980.00 1.01 1.38 € IntesaSanpaolo ISP 2.54 0.32 4.70 $ Merck MRK 63.14 -0.08 7.25 21100
Switzerland 0.50 0.50
¥ NissanMotor 7201 1134.00 0.89 -3.53 € LVMHMoetHennessy MC 201.45 -0.05 11.05 $ Microsoft MSFT 64.81 -0.45 4.30
¥ Panasonic 6752 1232.00 3.05 3.57 £ LloydsBankingGroup LLOY 66.79 -0.24 6.85 $ Nike NKE 56.40 0.83 10.95
20450
Australia 1.50 2.00
HK$ PingAnInsofChina 2318 43.80 0.69 12.89 € LOreal OR 178.70 -0.45 3.06 $ Pfizer PFE 34.20 0.06 5.30
U.S. discount 1.50 1.00 19800
Fed-funds target 0.75-1.00 0.25-0.50
$ RelianceIndsGDR RIGD 38.30 -0.13 21.39 £ NationalGrid NG. 1013.50 -0.15 6.50 $ Procter&Gamble PG 90.42 -0.08 7.54
Call money 2.75 2.25
KRW SamsungElectronics 005930 2074000 0.68 15.09 CHF Nestle NESN 77.05 -0.45 5.48 $ 3M MMM 190.75 0.17 6.82 19150
¥ Seven&I Hldgs 3382 4390.00 0.71 -1.41 CHF Novartis NOVN 73.75 -0.14 -0.47 $ Travelers TRV 120.99 -0.02 -1.17
Overnight repurchase rates 18500
U.S. 0.82% 0.48%
¥ SoftBankGroup 9984 7932.00 0.89 2.15 DKK NovoNordiskB NOVO-B 235.10 0.69 -7.70 $ UnitedTech UTX 112.38 0.49 2.52
Euro zone n.a. n.a.
¥ Sony 6758 3605.00 0.78 10.08 £ Prudential PRU 1722.50 1.26 5.84 $ UnitedHealth UNH 164.22 -0.23 2.61 30 6 13 20 27 3 10 17 24 3 10 17 24
¥ Sumitomo Mitsui 8316 4203.00 1.20 -5.76 £ ReckittBenckiser RB. 7320.00 -0.42 6.30 $ Visa V 89.12 0.19 14.23 Jan. Feb. Mar.
Sources: WSJ Market Data Group, SIX HK$ SunHngKaiPrp 0016 114.40 ... 16.73 £ RioTinto RIO 3220.00 2.81 1.95 $ Verizon VZ 48.99 -0.31 -8.22 Note: Price-to-earnings ratios are for trailing 12 months
Financial Information, Tullett TW$ TaiwanSemiMfg 2330 194.50 0.78 7.16 CHF RocheHldgctf ROG 253.10 0.08 8.81 $ Wal-Mart WMT 69.95 0.42 1.20 Sources: WSJ Market Data Group; Birinyi Associates
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THE WALL STREET JOURNAL.
Amazon Gobbles Up U.K. Warehouses
E-commerce giant
leads way as demand
for logistics properties
has surged in Europe
BY ART PATNAUDE
The warehouse property
market in Europe just
wouldn’t be the same without
Amazon.com Inc.
Amazon has become a ma-
jor force in a logistics real-es-
tate sector that is being re-
shaped by online shopping,
according to investors and
property brokers. In the U.K.
alone, the U.S. online retail gi-
ant accounted for nearly a
quarter of all warehouse prop-
erty space leased last year, ac-
cording to property broker
Savills.
Once a dull corner of the
commercial real-estate sector,
warehouses have become vital
for businesses offering same-
day deliveries. E-commerce re-
quires efficient networks link-
ing massive distribution
centers to smaller properties
in towns and cities, a system
often likened to a wheel with
spokes.
Demand for space hit a re-
cord last year in Europe’s big-
gest markets. In all, 230 mil-
lion square feet of logistics
space was leased in the region,
up from 205 million square
feet in 2015, according to
property broker CBRE.
As Amazon and other e-
commerce companies pile into
warehouses, investors increas-
ingly are rushing to buy the
properties. While overall com-
mercial real-estate investment
volumes fell in Europe last
year, industrial and logistics
volumes hit a record €25 bil-
lion ($27.2 billion), up from
Condo Market Is Booming
In Downtown Los Angeles
BY PETER GRANT
New condominiums are
sprouting in downtown Los
Angeles at the fastest pace
since the 2008 crash, in a sign
that a city synonymous with
sprawl is embracing dense ur-
ban living.
Almost 2,000 new luxury
condos are under development
or being sold on or ahead of
schedule, according to brokers,
developers and other market
participants. Many are going for
more than $1,000 a square foot.
Condo resale prices, mean-
while, are up 3.3% in the past
year to $628 a square foot in
downtown Los Angeles, ac-
cording to Polaris Pacific, a
San Francisco-based real-es-
tate sales and marketing firm.
By comparison, resale prices
for all condos in L.A. County
were flat during the same pe-
riod, Polaris said.
“Developers who have gone
out and done deals have done
very well,” said Paul Zeger, a
Polaris partner.
Chinese developers are
among the busiest in downtown
Los Angeles. They include a
subsidiary of Greenland Group,
which is building a $1 billion
cluster of towers named Me-
tropolis, and Oceanwide Hold-
ings, which plans to complete a
complex in 2019 that will in-
clude 504 condos, a Park Hyatt
hotel and seven floors of retail.
Downtown Los Angeles once
was a financial district that
largely emptied out at night. It
has been enjoying a broader
development surge over the
past few years with a mush-
rooming of stores, restaurants
and bars. The Wilshire Grand
Center, a 73-story skyscraper
with a 900-room InterConti-
nental hotel, is scheduled to
open later this year, becoming
the tallest building in the U.S.
west of the Mississippi River.
But almost all of the residen-
tial development since the 2008
downturn has been rental proj-
ects, not condos. In all, the
number of rental units in down-
town Los Angeles has swelled
to 20,361 from 14,365 in 2012,
according to CoStar, while ask-
ing rents rose to $2.71 a month
per square foot from $2.14.
Condo developers had been
reluctant to make a postcrash
RINGO CHIU/ZUMA PRESS
bet on the willingness of Los
Angelinos to buy boxes in the
sky for the same price they
could land a house with a yard
and swimming pool.
Only recently, as developers
saw downtown become more
Warehouses are vital for businesses offering same-day deliveries. Here, an Amazon warehouse in Peterborough, U.K., in November.
€23.3 billion in 2015, accord-
ing to CBRE.
“E-commerce is forcing in-
vestors to look at logistics and
warehousing completely dif-
ferently,” said Andrew Jones,
chief executive at LondonMet-
ric Property PLC, a U.K. real-
estate investment trust.
In Europe, online retailing
has taken hold most strongly
in the U.K., where last year, in-
ternet purchases accounted
for 15% of retail purchases, ac-
cording to data firm Global-
of a 24-hour community, did
they make their move.
“The [rental] apartment
guys proved there was a mar-
ket for people who want to
live there,” said Arden Hear-
ing, managing director of Tru-
mark Urban, which recently
opened a 25-story condo
tower with 151 units in down-
town L.A. Trumark already has
sold 100 units in the project,
named TEN50, at prices rang-
ing from $600,000 to $4 mil-
lion, putting the project ahead
of schedule, Mr. Hearing said.
When the firm bought the
site in 2014, the entire block
consisted of parking lots and a
mannequin sales center, he said.
“Flash forward to today:
You have almost 1,000 people
living on that same block,” Mr.
Hearing said.
Fawaz Gailani, a retired on-
cologist, sold his house on 1.3
acres in Riverside, Calif., to buy
a $1.6 million unit on the 17th
floor of TEN50. He said he likes
the quick access to food, enter-
tainment and other amenities.
“You don’t need a car at all,”
he said. “That’s the beauty.”
Greenland is set to open the
first of Metropolis’s three tow-
ers later this year and is already
in contract for 80% of its 308
units, at prices averaging more
than $1,000 a square foot, ac-
cording to Cory Weiss, an exec-
utive vice president at Douglas
Elliman Development Market-
ing, the project’s sales agent.
Roughly 30% of the units in
the second tower, which is
scheduled to open in 2018, are
in contract, Mr. Weiss said. Buy-
ers include foreign investors and
The 73-story Wilshire Grand Center is scheduled to open this year.
THE PROPERTY REPORT
Data. Germany followed at 9%,
the data show.
Amazon, which dominates
online shopping around the
world, accounted for 27% of
all U.K. online sales last year,
according to consumer-market
research firm Euromonitor. In
Germany, Amazon’s market
share was even bigger, ac-
counting for 40% of internet
shopping sales, the data show.
Amazon leased 18 units last
year in the U.K., 11% of the to-
tal number of units leased, ac-
existing Los Angeles residents
who like the lifestyle and are
getting increasingly frustrated
with the city’s traffic, he said.
Brokers and developers be-
lieve Chinese buyers will help
fuel demand for downtown Los
Angeles condos, just as they
have in cities like New York
and Vancouver, British Colum-
bia. “The connection between
Chinese investors and the U.S.
real-estate market is certainly
a strong one,” said Thomas
Feng, Oceanwide Plaza’s chief
executive, in an email.
The roots of the city’s
downtown renaissance go back
to the development of the Sta-
ples Center in 1999 and the
L.A. Live entertainment com-
plex in 2007. There was a surge
of condo and rental develop-
ment before the downturn, but
disappointing condo sales at
several high-profile projects
discouraged developers from
returning to the market.
Instead, rental apartment
developers snapped up many of
the sites that had been assem-
bled for condo development.
But new rental units are
now being delivered at such a
fast pace that developers are
being forced to offer more in-
centives and even cut rents in
some cases, according to bro-
kers. Average rents are down
4% compared with this time
last year, according to Polaris.
“Everything went rental for
a while and not enough condo
product was built to meet
market demand,” said Miles
Garber, head of research for
Polaris Pacific. “The pendulum
swung too far.”
cording to Savills, but the 8
million square feet accounted
for more than 23% of the total
space leased.
The level “is largely unprec-
edented,” said Kevin Mofid, a
Savills research analyst.
In recent months, Amazon
has said it would open several
fulfillment centers across the
region, including in France,
Germany, Slovakia and Poland.
Amazon might not be as
dominant in the U.K. this year
after an exceptional 2016, bro-
Retail landlords are trying to lure medical practitioners. Here, a dentistry office in Bradenton, Fla.
Curing Vacancies With Doctors
BY ESTHER FUNG
As demand grows for
health-care services to be
more accessible, landlords are
trying to attract medical prac-
titioners to their slumping
malls and strip centers.
The lure: customizable
space that is often close to
where clients live and work.
In the past, doctors, dentists
and other practitioners pre-
ferred to hole up in hospitals
and traditional office buildings.
But the success of “doc-in-a-
box” clinics in strip centers
that provide quick fixes for
people suffering from minor
ailments is prompting them to
start identifying themselves as
retail tenants, brokers and
health-care providers said.
“Instead of hiding them in a
medical office complex, we’re
transitioning to better loca-
tions so that the community is
more aware of them,” said Ja-
cob Niebrugge, vice president
of development at Heartland
Dental LLC. “It’s all about ex-
posure for the doctors and
their teams.”
Heartland Dental, which
provides business and prac-
tice-management services to
dentists, supports 775 clinics
across 34 states. It stopped
opening new clinics in medical
office buildings in 2011, and
plans to open 36 this year in
retail centers. So far, the or-
ganization has opened new
dental offices in grocery-an-
chored shopping centers
rather than enclosed malls, as
the former draws more daily
foot traffic.
Wednesday, March 29, 2017 | B9
Warehouses near cities are
known as the “last mile” of a
delivery network, which has
become increasingly important
to firms such as Amazon offer-
ing same-day services.
Blackstone Group LP,
among the most active inves-
tors in European warehouses,
has picked up on the trend.
The U.S. private-equity firm
last week agreed to buy,
alongside U.K.-based real-es-
tate group M7 Real Estate, a
portfolio of last-mile ware-
houses in Germany and the
Netherlands for €1.28 billion,
according to Hansteen Hold-
ings, the seller.
Blackstone also is selling
its expansive European ware-
house arm, Logicor. The pri-
vate-equity firm is marketing
the sale at €13 billion, while
simultaneously working on
an initial public offering.
While the sale is Black-
stone’s preferred route, ex-
SIMON DAWSON/BLOOMBERG NEWS
perts said, either path would
result in one of the biggest
real-estate transactions ever
in Europe.
In one of the biggest Euro-
pean real-estate deals last
year, GIC Pte. Ltd., Singapore’s
sovereign-wealth fund, bought
warehouse-property company
P3 Logistic Parks for €2.4 bil-
lion.
kers said, but it has continued Strong investor demand has
to scoop up space. London- sent yields sharply lower. The
Metric said last week that it average capitalization rate, a
had leased warehouse space to measure of yield, on European
Amazon. industrial properties was 6.4%
LondonMetric aims to in- in the fourth quarter last year,
crease its logistics property falling from 7.8% three years
holdings to 80% from about earlier, according to Real Capi-
60%, with a particular focus tal Analytics.
on properties in urban areas, “E-commerce has changed
Mr. Jones said. The company our markets globally,” said
last week raised £95.5 million Jack Cox, head of industrial
($119.9 million) through a and logistics capital markets
share placing to fund such ac- at property broker CBRE. “And
quisitions. it’s only just starting.”
HEARTLAND DENTAL
Mall landlords worried high build-out costs. Some
about rising vacancies as re- medical offices require rein-
tailers close stores are also forced walls, extra plumbing
trying to woo these newcom- and enhanced electrical utili-
ers. Vanderbilt University ties compared with the aver-
Medical Center, for instance, age retail tenant.
occupies the entire upper floor Mr. Niebrugge said when he
of the 100 Oaks Mall in Nash- is in discussions with land-
ville, Tenn., where patients lords he tells them the average
can get an ultrasound and upfront cost to fit out a Heart-
then shop at TJ Maxx on the land Dental office is around
ground level. $215 a square foot.
“If someone comes to see a “There’s silence on the
doctor, it’s likely an upscale other end,” he said. “They
consumer who can afford in- think it’s astronomically high.”
surance and that’s going to at- Landlords typically provide
tract a landlord,” said Greg an allowance averaging $45 a
Ferrante, a senior vice presi- square foot to tenants to ret-
dent at JLL, a Chicago-based rofit the space, and the tenant
real-estate services company. is on the hook for the remain-
“These consumers would have ing cost, he added. This means
more money to spend at the health-care tenants are likely
retail property.” to sign longer leases to make
An advertisement to attract it worthwhile.
tenants at White Marsh Mall Health-care real-estate
in Baltimore said the space is landlords, meanwhile, are
ideal for a medical office. The looking to add retailers to
mall, which has J.C. Penney, their premises.
Macy’s, Sears and Boscov’s as Toledo, Ohio-based health-
anchors, is currently in lease care real-estate investment
negotiations with potential trust Welltower Inc. is plan-
tenants in the medical field, ning a 15-story senior-living
said Mr. Ferrante. center in Midtown Manhattan,
While landlords are eager with 12,000 square feet of re-
to bring in health-care provid- tail space on the ground floor
ers as tenants, in some cases that is slated to open in 2019.
they would have to renegotiate Stores could include pharma-
with existing tenants because cies, financial services and
previous lease agreements food and beverage options fo-
might have clauses banning cused on wellness.
medical uses, said Melina Cor- “We’re looking at how to
dero, head of retail research at use retail to enhance the lives
CBRE, a Los Angeles-based of the people living in the
property-services firm. building and also how retail
Doctors also are seen as could draw people to this
having better credit ratings community of aging seniors,”
compared with smaller retail- said Tom DeRosa, chief execu-
ers. The flip side, however, is tive of Welltower.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
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B10 | Wednesday, March 29, 2017
Bond Buying Makes a Comeback
The undoing of the
‘Trump trade’ brings
investors back to the
safety of Treasurys
BY MIN ZENG
Government bonds are back
in fashion, as the “Trump
trade” on higher growth and
inflation begins to unravel.
The yield on the 10-year
Treasury note was at 2.381%
midday Tuesday in New York,
down from a two-year high of
2.609% on March 13 and
2.446% at the end of last year.
Yields fall as bond prices rise.
The two-week-long Trea-
sury rally has corresponded
with a modest pullback in
stocks and the unwinding of
market bets that the Trump
administration’s economic pol-
icy would boost the pace of
U.S. growth. The Dow Jones
Industrial Average fell 10
times in 11 sessions through
Monday. Midday Tuesday, it
was up 0.5%.
The bond buying reflects
concerns about the timing of a
fiscal stimulus and tax-cut
plans after the political de-
mise last week of a Republi-
can bill to replace Obamacare,
as well as the relative attrac-
tiveness of bonds featuring
higher yields.
Foreign central-bank hold-
ings of U.S. government debt
via the Federal Reserve’s cus-
tody account reached a seven-
month high last week, a note-
worthy shift because official
accounts had in recent months
been large sellers of U.S. gov-
ernment debt.
“Treasury bonds offer a
healthy yield pickup versus
other global rates markets,
even still to this day,’’ said
George Goncalves, head of
fixed-income strategy in the
Americas for Nomura Securi-
ties International. “Central
banks are long-term investors
and are all about seeking
Treasurys when they clearly
offered value.”
Email: heard@wsj.com
The Car Boom in China Is Fueled by Credit
It was only a matter of
time before the world’s larg-
est car market turned to
auto financing. But it is all a
little too fast, too soon.
China sells more than 2
million cars a month, with
growth running up 15% last
year. Much of the rush to
buy has been propped up by
a soon-to-expire government
purchasing incentive. But as
it wears off, auto financing is
stepping in to prop up the
market. Over a third of new-
car sales are now on credit,
a contrast to as recently as
three years ago when stacks
of cash were the only source
of funding. Beijing, too, is in-
creasingly encouraging con-
sumers to borrow.
At first blush, auto-financ-
ing penetration numbers
aren’t startling compared
with the developed world. In
the U.S., auto-finance pene-
tration is close to 80% and
in Japan around 50%. The
pace of growth, however, is.
China’s auto-financing mar-
ket has grown rapidly over the
SoftBank’s Fund Keeps Unicorns Happy Chinese Bidder for AC Milan Gets Assist
SoftBank is flexing its
muscles as the technology
industry’s 800-pound gorilla.
The Japanese conglomer-
ate, which controls U.S. car-
rier Sprint, has approached
Didi Chuxing, China’s ride-
hailing giant, to invest around
$6 billion, according to The
Wall Street Journal. The in-
vestment will likely come
from the soon-to-be-launched
$100 billion SoftBank Vision
Fund, which counts Saudi
Arabia, Apple and Qualcomm
among its investors.
Investing in Didi Chuxing
isn’t a tough decision for Soft-
Bank, which is already an in-
vestor in the private company,
valued at $36 billion as of Au-
gust. It is precisely access to
deals like this that attracted
the fund’s core Saudi backers.
Didi is the anointed winner in
Bullish
on Bonds
Futures-market bets on Treasury rates, weekly
20 billion
10
0 momentum again.
–10
–20
–30
–40
2016
Flows into Treasury-focused
mutual and exchange-traded
funds, monthly
$6 billion
4 2.4
2 2.9
0 2.0
–2
–4
2015 ’16
*Through Monday
Sources: TD Securities (bets); Lipper (flows); St. Louis Fed (holdings); Tradeweb (yield)
Bets on higher bond yields
have been falling. Unwinding
these so-called shorts requires
investors and traders to return
to the bond market as buyers,
driving yields lower. Hedge
funds and money managers
accumulated a net $10 billion
worth of shorts for the week
that ended March 21, via 10-
year Treasury futures, accord-
ing to TD Securities. That was
down from $41 billion at the
end of February.
A $26 billion sale of two-
year Treasury notes on Monday
attracted indirect bidding—or
bids made through intermedi-
aries—of 53.6% of total bids. A
proxy of foreign demand in-
cluding from central banks, it
HEARD ON THE STREET
Need a Lift?
Passenger-car sales in China,
monthly
2.5 million
2.0
1.5
1.0
0.5
0
2014 ’15 ’16
Source: CEIC
THE WALL STREET JOURNAL.
past year, though the exact
size is hard to pin down. Con-
sumers are funding car pur-
chases in a host of other
ways—including through
banks, credit cards, and peer-
to-peer lending platforms and
other nonbank institutions. Of-
ficial statistics are sparse and
understated when compared
with unofficially collected
numbers. Dealerships boast
Rainbows, Unicorns
Valuations of the world's biggest
private technology companies
$ Billions
Uber
Xiaomi
Didi Chuxing 34
Airbnb 29
Palantir Technologies 20
Lu.com 19
Meituan-Dianping 18
WeWork 17
Source: CB Insights
THE WALL STREET JOURNAL.
China’s ride-hailing market.
The three biggest internet gi-
ants in China—Alibaba, Ten-
cent and Baidu—as well as
Apple, are all investors.
But buying into Didi at this
stage is also not a particularly
innovative move—highlight-
ing the difficulty of managing
MARKETS
Investor sentiment in the Treasury market has turned sharply in recent weeks. Wagers on
higher yields have declined, while funds focusing on government debt have received the
largest inflows in a year. These factors, together with increased foreign official buying, have
pushed yields down.
Foreign Treasury holdings
in Federal Reserve custody
$3.0 trillion
2.8
2.7
’17
2016
was the highest since February
2016. A 10-year Treasury auc-
tion earlier this month also
drew strong indirect bidding,
with overall demand hitting the
highest since last June.
Another big factor boosting
Treasury holdings by central
banks, analysts said, is the
U.S. dollar’s break from its
multiyear bull run. On Mon-
day, the ICE dollar index, a
measure of the dollar’s value
against a number of its main
rivals, hit the lowest since No-
vember. At the start of this
year, it had jumped to the
highest since 2002.
A weakening dollar has
been pushing up the value of
many emerging-market cur-
FINANCIAL ANALYSIS & COMMENTARY
PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES
’17
New cars in northeast China’s
Liaoning province
penetration rates of 30% to
40%. That is expected to in-
crease to well over 50%, ac-
cording to Deloitte. Official
statistics track auto credit
back to 2001, when the market
was just over 43 billion yuan
(about $6.3 billion). The latest
figures put it at more than 700
billion yuan at the end of 2015.
A growing pool of auto
loans has led to a burgeoning
a $100 billion fund. Total
global venture-capital invest-
ment was merely $127.4 bil-
lion last year, according to
KPMG. That means SoftBank
68 would likely have to put a sig-
46 nificant chunk of the fund in
consensus ideas like Didi. The
$6 billion investment would
have been enough to buy all
of Didi two years ago, around
the time SoftBank made its
investment into the company.
This is good news for these
“unicorns,” which likely could
enjoy higher valuations and
delay tapping the public mar-
ket for a further while. But for
investors who are expecting
SoftBank to pull off another
master stroke like its invest-
ment in Alibaba, which has
turned $20 million into $80
billion, the deal could be dis-
appointing. —Jacky Wong
Yield on 10-year
Treasury note*
2.6%
2.2
1.8
1.6
1.4
’17 2016
rencies, including the Chinese
yuan, which eases the burden
of central banks in these coun-
tries to sell Treasurys to cur-
tail local currencies’ weakness
and capital outflows. The dol-
lar was down about 2% this
year through Monday against
the yuan traded outside main-
land China.
China’s central bank has
been at the forefront in selling
Treasurys after a large devalu-
ation of the Chinese yuan in
August 2015 raised market ex-
pectations of a weakening
yuan.
With the yuan stabilizing
over the past few months and
China’s measures to curb capi-
tal outflows, the second-larg-
securitization market. In
theory, that is good: Capital
markets are deepened, and the
burden on banks is reduced. In
tandem, there are now over
two dozen auto-finance com-
panies, including arms of Toy-
ota and Volkswagen, that is-
sued almost 900 billion yuan
of auto-loan-backed ABS in
2016, up 40% on the year.
In reality, the growth has
been too fast. While it is still
hard to draw conclusions, de-
fault rates of individual trans-
actions are edging up just as
the number of transactions
and underlying loans surge.
For investors in auto-loan-
backed securities, there is a
short track record to go by.
Consumers, for their part,
were prepaying debt at a fast
clip with rates stable. Default
rates remain low, although
recently issued transactions
show more defaults. The
trouble is all this exuberance
has come as borrowing costs
are on the rise as the central
bank squeezes financing in
short-term money markets.
A deal involving Silvio
Berlusconi, a little-known
Chinese investor and a
money-losing Italian soccer
club normally raises a few
red flags.
But American hedge fund
Elliott Management, which
has swooped in to save the
Chinese bid for AC Milan,
could end up on the winning
team. Elliott will provide the
Chinese-backed investment
vehicle with €253 million
(about $275 million): €180
million toward the €740 mil-
lion price tag, with the re-
mainder to service the club’s
existing debts.
The main reason behind
the deal is tougher restric-
tions on getting cash out of
China. Chinese acquisitions
in Europe hit a record $54
billion in 2016 but have been
THE WALL STREET JOURNAL.
Negative number means
wagers on higher yields,
lower prices
’17
2017
THE WALL STREET JOURNAL.
est foreign owner of Treasury
bonds after Japan has some
breathing room. China’s for-
eign-exchange reserves rose in
February, snapping an eight-
month decline.
Effective capital controls
and some stabilization in the
dollar suggest that China
“doesn’t have to sell as much
Treasurys to defend its cur-
rency,’’ said Alejandra Grindal,
senior international economist
at Ned Davis Research.
China’s Treasury holdings
of all maturities fell by $168
billion between last July and
this January, according to the
latest capital-flow data from
the Treasury, which is released
with a two-month lag.
With auto-finance companies
dominating over half the car-
loan market, a funding
crunch could be painful for
those financing arms.
BMW has been a market
leader in financing, and its
auto-financing penetration
levels in China have risen
from 36% in 2013 to almost
50% in 2016, according to
Bernstein analysts. Yet bor-
rowing costs aren’t standing
still. A BMW-backed ABS in
China was issued at 4.2% in
December, just months after
it issued an ABS at 3%.
Car sales are showing signs
of coming off peak levels. De-
mand is slowly shifting be-
yond China’s first- and sec-
ond-tier cities, to where
income levels are lower—and
where the ability to pay off
loans quickly is potentially
lower. Going by Beijing’s re-
cord, it could continue to push
lending to support the car
market. But it could be a lot
tougher this time, as stresses
elsewhere in the financial sys-
tem build. —Anjani Trivedi
crushed by strengthened
controls on outbound Chi-
nese foreign direct invest-
ment announced in Novem-
ber to support the yuan.
Stemming outflows into
vanity acquisitions—sus-
pected in many cases to be a
front for currency specula-
tion or money laundering—
was a major goal of the pol-
icy.
Chinese year-to-date ac-
quisitions in Europe totaled
just $5 billion as of mid-
March.
Nonetheless, Chinese hun-
ger for foreign assets re-
mains intense. If capital con-
trols remain in place, which
seems likely as long as the
U.S. Federal Reserve is rais-
ing rates, more deals like the
AC Milan one seem all but
certain.
With Focus
On India,
Price of
Sugar Falls
BY CAROLYN CUI
Sugar futures edged lower
Tuesday, even as speculation
on a change in India’s import
policy seemed to be gathering
Raw sugar for May delivery
fell 0.5% to 17.62 cents a pound
on the ICE Futures U.S. ex-
change.
Early this year, the sugar
market had seen an influx of
new participants attracted by
rising sugar prices and a bull-
ish outlook for commodities in
general. In particular, many
believed that a fall in India’s
production would eventually
force the government to lower
import tariffs and allow more
imports, boosting global sugar
prices.
But in recent weeks hopes
dimmed for Indian imports as
the India Sugar Mills Associa-
tion lowered its estimate for
consumption, leading some
traders to question whether
the government could fill the
gap by tapping into the na-
tion’s sugar reserves. Some
traders began to bet on prices
falling in recent days. Sugar
prices fell to their lowest lev-
els in 10 months last week.
“India news and gossip con-
cerning ‘will they won’t they’
seems to be rising in decibels,”
wrote Tom Kujawa, co-head of
softs department at Sucden Fi-
nancial Ltd., in a note Tuesday.
Some market participants
now expect the Indian govern-
ment to reduce import duty,
encourage imports directly, or
come up with some other
mechanism by asking the mills
to start in September and
build up domestic stocks
quickly, he added.
Analysts expect sugar prices
to become volatile again as the
financial year ends on Friday and
the May contract expires soon.
WSJ.com/Heard
OVERHEARD
YouTube has come a long
way. Good luck putting a
price on that.
When Google paid $1.6 bil-
lion for the streaming video
service a little over 10 years
ago, it seemed an incredible
outlay. Google even described
YouTube’s financial contribu-
tion as “not material.”
Ironically, that is more
than the company says about
YouTube’s finances now. A
growing number of large ad-
vertisers are pulling ads from
the service, citing their prox-
imity to objectionable con-
tent.
Instinet analyst Anthony
DiClemente had estimated
YouTube revenue of about
$10.2 billion this year, which
he now expects to be $750
million less with the hit to
advertising. Four others esti-
mate $10 billion to $17 billion.
That would make it between
9% and 11% of Google owner
Alphabet’s total business—
way, way beyond the “not
material” designation.
Chinese banks, fearing
blowback from regulators at
home, may be hesitant to get
involved. That creates a
clear opening for deep-pock-
eted Western institutions
like Elliott, which can almost
name their terms on a deal.
If the Chinese owner goes
belly up, a risk given AC Mi-
lan’s dubious record of prof-
itability under Mr. Berlus-
coni, Elliott may end up
owning the club. Assuming a
restructuring engenders a
big discount, Elliott might be
one of the very few investors
to make a profit on a vanity
deal.
With other Chinese over-
seas deals in limbo, Elliott
and its rivals could score as
the lender of last resort for
desperate buyers.
—Nathaniel Taplin