A Chinese real estate developer missed a key payment to foreign bondholders this week, heightening the persistent fears of a coming crisis in China’s real estate sector.
The developer, Fantasia Holdings Group, a company specializing in luxury properties that was founded by the niece of Zeng Qinghong, a former vice president, said on Monday night that it had failed to make a final payment of $206 million. The disclosure surprised investors already on edge following two missed payments from China Evergrande Group, the world’s most indebted developer.
Jittery investors sold shares of other developers on Tuesday, sending some stocks down by as much as 10 percent. The yields on developers’ bonds were trading at nearly a decade high, meaning the cost of borrowing for the companies had shot up.
In the disclosure made on Monday night, Fantasia said that its board would “assess the potential impact on the financial condition and the cash position of the group under the circumstances.”
Fantasia, like Evergrande, is based in the southern Chinese city of Shenzhen, but unlike its peer, Fantasia had not shown difficulties in paying its bills until now. By failing to make its final payment on Monday, Fantasia prompted a default. The company also failed this week to make a $108 million repayment on a loan from Country Garden Services Holdings, another real estate company, according to a filing on Monday.
Evergrande roiled global markets last month after it failed to make a payment to foreign bondholders. Investors began to reconsider the long-held assumption that Evergrande was too big to fail and could therefore rely on a government bailout. Now, many investors are questioning whether other developers will face similar challenges.
Chinese developers are under pressure from regulators to pay off their debts and tighten their belts after years of borrowing freely from bondholders and banks.
Beijing is now trying to limit the exposure of banks to the real estate sector, leaving companies like Evergrande and Fantasia struggling to find the cash they need to continue their operations and pay outstanding bills and bonds.
Evergrande has more than $300 billion in debts alone. Other real estate giants, such as Vanke and Country Garden, are facing debt piles worth more than $200 billion, though they are not under as much strain as Evergrande.
Investors are worried that the financial troubles will scare off home buyers and make it more difficult for other developers to continue their operations.
Chinese developers will have to make more than $28 billion in U.S. dollar bond payments in 2022, according to the agency Fitch Ratings, another signal that China’s real estate market is facing headwinds even after the country’s remarkable rebound from the pandemic.
“The risk of a sharper slowdown in real estate activity can’t be ruled out,” Tommy Wu, an economist at Oxford Economics, wrote in a recent note to clients. “Especially at a time when China’s economic momentum is slowing after last year’s strong recovery.”
Global markets showed signs of stabilizing on Tuesday as European shares trended mildly positive midday, suggesting investor sentiment toward technology stocks was improving.
Futures markets that predict U.S. stock movements suggested that Wall Street would open higher.
Stocks have dropped sharply over the past month amid lingering concerns about the coronavirus and the lack of a policy consensus in Washington over a huge spending package. Technology stocks have come under particular pressure as Facebook and other online giants have faced greater political scrutiny. The S&P 500 has fallen more than 5 percent since Sept. 2.
On Monday, amid those concerns, the S&P 500 fell 1.3 percent.
Asian markets began on Tuesday by continuing the trend. Stocks in Japan were the worst performers, with the Nikkei 225 falling 2.2 percent. Stocks in South Korea and Australia followed suit.
But Asian stocks came off their lows later in the trading day, with Hong Kong and Taiwan ending higher, and that momentum has so far carried into intraday trading in Europe. The FTSE 100 in London was up 0.5 percent, while the DAX in Germany was up 0.2 percent and the CAC 40 in France up 0.5 percent.
Investors were reacting to restoration of Facebook’s services — the social network and its WhatsApp and Instagram apps were down for several hours late on Monday in the United States — and a handful of mixed economic indicators, including an improved final figure for services in Britain from a survey of purchasing managers.
A Facebook whistle-blower is taking her campaign to Washington.
Frances Haugen, a former product manager at Facebook who leaked internal documents to The Wall Street Journal that have generated numerous revelations about the company, will testify in a Senate hearing on Tuesday morning.
The hearing, which starts at 10 a.m., is part of Ms. Haugen’s tour aimed at bringing more government oversight to the social media giant. She appeared on “60 Minutes” on Sunday night and is expected to meet with European regulators this month. Ms. Haugen has warned that Facebook does not have the incentive to change its core goal of increasing engagement — even with harmful content — without intervention from regulators.
Here is what to expect at the hearing:
Ms. Haugen will focus on the company’s push to obtain younger and younger users. Some of the research she leaked to The Journal showed that Instagram harmed teenagers by feeding on anxiety and, in some cases, suicidal ideations. The research revealed that one in three teens reported feeling worse about their body image because of Instagram.
“I am here today because I believe that Facebook’s products harm children, stoke division, weaken our democracy and much more,” Ms. Haugen said in written testimony. “The company’s leadership knows ways to make Facebook and Instagram safer and won’t make the necessary changes because they have put their immense profits before people. Congressional action is needed.”
Lawmakers will embrace Ms. Haugen’s testimony. Concerns about the safety of children online have united Republicans and Democrats. They have grown increasingly angry at Facebook for failing to protect young users and for allowing misinformation to spread.
Lawmakers will drill into what knowledge Facebook’s executives had on Instagram’s toxic effect on young users. They will probably ask if Mark Zuckerberg and other leaders were aware of but ignored the research on Instagram’s effect on children and other issues like the spread of hate groups ahead of the Capitol riots.
Lawmakers will probably also ask Ms. Haugen how the company’s systems work to promote toxic content. They will also focus on how tools like beauty filters, comments and Facebook’s “like” button can hook young users to Instagram.
Senator Richard Blumenthal, a Democrat of Connecticut and the chair of the panel on consumer protection, product safety and data security will highlight an experiment his office ran, in which it created an account for a fake 13-year-old user who expressed interest in weight loss. The account was nudged into a rabbit hole of content promoting eating disorders and other self-harms, he said in an interview.
“I want to talk about her perceptions about what she read in those documents and the use of algorithms to increase profits but also to exacerbate the harms,” Mr. Blumenthal said.
Almost everything that German factories need to operate is in short supply, not just computer chips but also plywood, copper, aluminum, plastics and raw materials like cobalt, lithium, nickel and graphite, which are crucial ingredients of electric car batteries.
Europewide, exports would have been 7 percent higher in the first six months of the year if not for supply bottlenecks, according to the European Central Bank. Germany is particularly sensitive because of its dependence on manufacturing and trade.
Nearly half of Germany’s economic output depends on exports of cars, machine tools and other goods, compared with only 12 percent in the United States. Economists have begun to predict a “bottleneck recession.”
Already many firms are increasing their inventories of parts, ordering raw materials further in advance and finding creative — some might say desperate — ways to keep products moving out the factory gates. Traton, Volkswagen’s truck unit, said last month that it was cannibalizing hard-to-find components from trucks that had been built but not sold, and reinstalling them in trucks for which there were firm orders.
Businesses are caught in a vicious cycle. Robert Ohmayer, global head of purchasing at Voith, a company based in Heidenheim that builds and equips paper factories and hydropower plants, calls it the toilet paper effect.
Just as panicked consumers hoarded toilet paper at the beginning of the pandemic, companies fearful of running short of key materials are ordering more than they need and stashing them away in warehouses. That has created even more shortages.
Companies had little choice. “We are ordering more to protect our business,” Mr. Ohmayer said.
Longer term, companies have thought about ways to bulletproof their supply lines, for example by buying parts and raw materials closer to home rather than from subcontractors on the other side of the planet. Some political leaders have even suggested that the pandemic could have a silver lining, because it will inspire companies to bring manufacturing back to Europe and the United States, creating well-paying factory jobs.
But disentangling the networks that move products around the globe is not so easy, and maybe not even a good idea, some economists and business managers say.
The slowdown has turned the German economy into a test case of how companies can become less vulnerable to power shortages in China or ships stuck in the Suez Canal. READ THE ARTICLE →
A jury ordered Tesla to pay $137 million to Owen Diaz, a Black former employee who accused the carmaker of ignoring racial abuse he faced while working there, his lawyer, Lawrence Organ, said late on Monday.
“It’s a great thing when one of the richest corporations in America has to have a reckoning of the abhorrent conditions at its factory for Black people,” Mr. Organ, of the California Civil Rights Law Group, said in an interview.
The decision by the jury, in federal court in San Francisco, was reported earlier by Bloomberg News. Tesla’s lawyers did not immediately provide comment.
In an interview, Mr. Diaz said he was relieved by the jury’s decision.
“It took four long years to get to this point,” he said on Monday evening. “It’s like a big weight has been pulled off my shoulders.”
Mr. Diaz said he worked as an elevator operator at Tesla’s factory in Fremont, Calif., for about a year in 2015 and 2016. There, he said, a supervisor and other colleagues repeatedly referred to him using racial slurs. He also said employees had drawn swastikas and scratched a racial epithet in a bathroom stall and left drawings of derogatory caricatures of Black children around the factory. Despite repeated complaints, the company did little to address the behavior, he said.
“It’s not like they were removing the offensive behavior, they would just let people keep adding and adding,” he said.
After deliberating for about four hours, the jury agreed with Mr. Diaz’s assertion that Tesla had created a hostile work environment by failing to address the racism he faced, Mr. Organ said. The vast majority of the award — $130 million — was punitive damages for the company. The rest was for emotional distress Mr. Diaz suffered, Mr. Organ said.
Despite the abuse he himself faced, Mr. Diaz said he reached a breaking point when he witnessed similar racist epithets directed at his son, Demetric, who secured a job — his first — at the company with Mr. Diaz’s help.
“My son watched his father being broken in front of him,” Mr. Diaz said.
In an internal email to Tesla staff obtained by Mr. Organ and shared with The Times, Valerie Capers Workman, a human resources executive, downplayed the allegations in the lawsuit.
“In addition to Mr. Diaz, three other witnesses (all non-Tesla contract employees) testified at trial that they regularly heard racial slurs (including the N-word) on the Fremont factory floor,” she wrote. “While they all agreed that the use of the N-word was not appropriate in the workplace, they also agreed that most of the time they thought the language was used in a ‘friendly’ manner and usually by African-American colleagues.”
The company, she wrote in the email, was responsive to Mr. Diaz’s complaints, firing two contractors and suspending another. Tesla does not believe the facts justify the verdict, she wrote, but acknowledges that the company was “not perfect” in 2015 and 2016. “We’re still not perfect,” she added. “But we have come a long way.”
Mr. Diaz sued Tesla alongside his son and another Black former employee, but only the elder Mr. Diaz’s claims made it to trial. It was not immediately clear whether Tesla planned to appeal the decision.
[Watch the Facebook hearing live.]
With Facebook and Instagram down for much of the day on Monday, many social media users used Twitter to share their woes, thoughts and jokes.
Twitter appeared to embrace its moment in the spotlight. The company’s main account tweeted “hello literally everyone,” garnering 2.4 million “likes” in just four hours.
Other major brands seemed to recognize the social media company’s marketing coup. “hi what can I get u” the official McDonald’s account replied. “59.6 million nuggets for my friends,” the Twitter account responded.
Some companies used the opportunity to market their products. Netflix tweeted an image from its new hit show “Squid Game” showing a contestant in the series labeled as “Twitter” holding up and saving the life of a contestant labeled “Everyone.”
Even Zion National Park got in on the fun.
“Facebook & Instagram are still down, so we’ll just keep on tweeting,” the park’s account said on Twitter, with a video of bird chirping.
Some users, like Jhonen Vasquez, a cartoonist, took the jokes a bit further.
“All the Facebook networks are down for now. I can’t help but be excited to see what new happiness-degrading, life-ruining horrors manifest to take their place,” he posted.
Some, lacking their favored social media apps to use as a distraction, joked that their productivity was up on Monday.
“Instagram and Facebook should go down everyday,” said BenDeLaCreme, a performer. “I haven’t been this productive since 2006.”
For some whose work involves using Facebook, the network issues meant a day interrupted.
“Social media managers at work today,” Motorola posted on Twitter, with a popular GIF of a lost John Travolta.
The radio network iHeartRadio checked in on those who work in social media, with a Twitter post that said, “Dear fellow social media managers… y’all doing ok?”
People piled on in their criticism of Facebook. Jokes about the shutdown converged with comments from politicians like Senator Ed Markey, Democrat of Massachusetts, about Frances Haugen, a former Facebook product manager who shared with The Wall Street Journal and lawmakers thousands of documents that revealed Facebook knew of many harms its services were causing.
“Facebook is down right now,” Senator Markey said in a tweet, “so it’s a great time to listen to whistleblower Frances Haugen.”
While many shared jokes on Twitter, others acknowledged the seriousness of the matter, as Facebook’s apps are relied on for communication by many of its three billion users.
“Okay, it was all jokes and gifs when Instagram and Facebook went down, but if Gmail and Twitter go down, too, the freaking out will commence,” Aisha Sultan, a columnist at The St. Louis Post-Dispatch, said on Twitter. “I’m already starting to miss my family’s incessant WhatsApp messages. Oh God, I’m getting lonely, and it’s only been 4 hours.”
Southwest Airlines said on Monday that it would require all of its more than 54,000 employees to be fully vaccinated against the coronavirus by the first week in December to remain employed.
Gary Kelly, the company’s chief executive, said that the budget carrier needed to follow competitors, including United Airlines, Alaska Airlines and Jet Blue, in requiring shots for its employees. The company has contracts with the federal government, which now requires all employees at federal contractors be vaccinated.
The airline industry was hard hit during the pandemic as borders closed, tourism evaporated and remote working kept business travelers at home. In recent months, it has seen an uptick in business as more people get vaccinated and travel restrictions are relaxed around the globe.
Southwest employees must be fully vaccinated by Dec. 8 or “be approved for a religious, medical or disability accommodation” the company said.