Good morning from the Financial Times.
Today is Thursday, December 18th, and this is your FT&E's briefing.
BP is replacing its CEO and India's central bank governor is cheering his country's Goldilocks moment.
Plus, companies doing business in China are looking to private equity for a helping hand.
I'm Mark Filippino, and here's the news you need to start your day.
BP's chief executive Murray Auchinclough said late last night he's stepping down immediately.
The head of Woodside Energy, Meg O'Neill, will join as CEO in April.
BP's head of trading, Carol Howe, will take over in the interim.
O'Neill started as Woodside's CEO in 2021.
Before that, she was an executive at ExxonMobil.
This is yet another big change at BP this year.
In April, activist investor Elliott Management upped its stake in the oil major to 5%.
The American hedge fund pressured the company to cut costs.
BP also continued to pivot away from its ambitious energy transition and back to oil and gas.
Auchincloss is stepping down from his CEO post less than two years into the role.
He said he'll stay on in an advisory capacity until the end of next year.
A balanced economy is the dream of every central bank governor.
The head of the Reserve Bank of India says during his first year, he's achieved it.
Sanjay Malhotra spoke to the FT's Mumbai bureau chief, Chris Kay, recently.
It was his first interview with an international news organization since he was appointed to the job a year ago.
Chris joins me now to talk about the conversation.
Hey, Chris.
Hello.
So Governor Malhotra has called this a Goldilocks economy, Chris.
Why is he saying that?
Yeah, so essentially he's been on the job for the past year.
And in that time, inflation has fallen quite sharply and is basically close to zero.
While at the same time, economic growth remains strong.
It came in at 8.2% year on year in the September quarter.
And that's given the RBI space to support the economy without worrying about it overheating.
And as you've said, Malhotra has called it a Goldilocks situation.
I guess importantly, the RBI expects inflation to rise back towards its 2 lower targets next year, but still remain well behaved by Indian inflationary standards.
So the message really is that policy is kind of anchored around sustaining growth rather than fighting price pressures, which is really a kind of shift from where India was a year ago, just before Malhotra was appointed and inflation had breached the RBI's upper 6 target and economic expansion was slowing as well.
I think it's important to back up a little bit because, as someone who loves to geek out about monetary policy, I was a little confused about how the inflation trajectory happened, considering Malhotra came in and really loosened monetary policy from my understanding, which you would think would fuel inflation.
Yeah, it was a bit of a charged environment last year when he came in.
And just a month beforehand, India's finance minister had been openly frustrated that the RBI had kept borrowing costs high, even as growth had slowed and inflation was at the upper end of the RBI 6 target.
Then Malhotra came in and by February this year, he started cutting rates.
He's been quite aggressive.
He's cut 1.25 percentage points this year.
And that was the first time india had eased in five years, and yeah, i mean counter-intuitively.
In some ways he's been rewarded for those actions, or at least lucky, and how it's turned out, you know obviously, inflation's uh bottomed out and uh, the economy is roaring ahead.
The other part of this that i think is important to touch on is president trump's tariff policy.
It's been in the spotlight all year.
How is that factored into the central bank's job of keeping the economy on track in india?
Yeah, the RBI has been quite vocal about the challenges.
But so far, India's economy seems to have been fairly resilient in the face of that.
And the government itself has been responding by implementing or seemingly responding by implementing a number of reforms on tax and labor to try and ease pressure on businesses.
When we spoke to Malhotra, he himself said that's a U.S. trade deal.
If reached in the coming months, for instance, it could add a half percentage point to GDP growth, which is obviously sizable for an economy that's already expanding at 82 annually in the last quarter.
The world's fastest growing economy.
It is the world's fastest growing major economy, yes.
And what's striking really is that these deals aren't baked into the RBI's current forecasts yet.
And those are showing a bit of moderation over the next few quarters.
But even then I don't think anyone's going to be too disappointed with a close to 7 GDP reading that they're expecting.
No, probably not.
So Chris, what are economists saying about Malhotra's seemingly impressive start to his tenure as governor?
I think everyone's given him a relatively good scorecard right now.
I think there are sort of wider questions on how how much responsibility he has been, or the RBI has been, for the kind of blistering economic growth that we've seen, particularly in the last quarter, which took many economists by surprise, including those at the RBI.
And Malhotra himself told us that the RBI's forecasting needs improvement.
But he has argued that the revisions and margins of error around those are normal.
So the criticism kind of centers on technical issues like deflators and large growth in India's kind of what's called the opaque discrepancy category.
Obviously, I think, economists are worried that the headline growth numbers may disguise many of the issues still facing the country, like stagnant wages, a dearth of jobs for India's vast labor force, relatively tepid corporate investment and lukewarm net FDI foreign direct investment, for instance.
That's the FT's Mumbai bureau chief, Chris Kay.
Thanks, Chris.
Thank you.
There are a couple of noteworthy central bank happenings today.
The European Central Bank is expected to keep interest rates on hold and the Bank of England might cut rates.
BOE Governor Andrew Bailey has already signaled his support for a quarter point decrease, and yesterday's UK inflation report shows that things on that front are moving in the right direction.
The country's consumer price index fell to 3.2% in November.
That's a third of a percentage point lower than estimates and the lowest figure since March.
The Office for National Statistics said weaker food, drink and clothing prices brought down the November reading.
Global companies are rushing to rethink their China businesses.
They're dealing with an increasingly competitive local market and some of them want to bring in private equity to address that.
I'm joined by the FT's Ryan McMurrow in Beijing to explain.
Hi, Ryan.
Hi there.
Thank you for having me on.
So, Ryan, what global companies are we talking about, and what exactly are they considering?
Well, it's definitely a lot of them at this point.
Most recently, we had Starbucks and Burger King, which have already announced they're selling a good piece of their China business to private equity partners.
And then we have others like sports retailer Decathlon, Haagen-Dazs, the ice cream brand.
Pete's and Costa Coffee, Lhasa and GE Healthcare that are all kind of looking at doing the same thing, looking at selling a piece or all of their China business to private equity partners that they hope can help turn things around or make if things are going all right already make things even better for their China businesses.
And what did these companies tell you about their plans?
Anything?
Well, so the ones that haven't been formally announced yet, most of them declined to comment.
Or a couple of them said that they were committed to China and they wouldn't comment on market rumors.
I mean, these are, I guess, active discussions going on.
So it's unusual for the companies to be so vocal on how they are looking at it.
Why are global companies thinking about pursuing this path?
Why private equity?
I think it's kind of a combination of several different things at the moment.
Probably the most important one for all these companies is just how competitive their local Chinese rivals have become.
You have companies like Luckin Coffee, which has set up in China.
They're really all over the place at this point in China.
It's just made it really hard for like Pete's, Costa and Starbucks to compete, especially when Luckin is selling coffee at like one third of the price that they are.
So they're really looking for a partner to come in and help them localize to an even greater degree the business and kind of help set incentives for the local management team and then also track the execution and really empower the local management team to run and operate like the people who own Luckin, who are here on the ground in China and making these same decisions every day and really moving pretty fast about it.
Ryan, what does this trend tell you about the future of doing business in China?
Why not just leave the market entirely?
Well, I think especially for these, a lot of these are consumer-facing brands.
It's just such a competitive market at the moment with so many local companies offering probably similar quality at lower price points.
So it's kind of universal that foreign-owned companies are pretty downbeat about their prospects at the moment.
Maybe two or three years ago, when things were really bad with US-China relations and the economy was doing very poorly, a lot of companies looked at what if we just leave entirely?
And at least from what we've heard from people briefed on those processes, it's a hard market to just leave entirely, especially because, even say Starbucks, they're now going to be facing luck in globally.
So if they leave China entirely, they won't see and be aware of what Luckin is doing to innovate in China so that we can compete with Chinese companies globally.
Ryan McMurrow is the FT's Deputy Beijing Bureau Chief.
Thanks so much, Ryan.
Sure.
Thanks for having me on.
Before we go.
There have been many, many twists and turns in this increasingly acrimonious battle between Netflix and Paramount to buy Warner Brothers Discovery.
The latest is that Warner Brothers board told investors yesterday to reject Paramount's hostile takeover bid.
Warner Brothers called the $108 billion offer inferior to a deal it already agreed with Netflix.
If you're a bit dizzy from the back and forth of the past couple of weeks, who could blame you?
Do not sweat it.
Our colleagues who have been following this story have you covered, and our show notes is a link to 10 things you need to know about what's at stake for the future of the century-old Hollywood brand.
This has been your daily FT News briefing.
Check back tomorrow for the latest business news.
Thank you.
The latest episode of The Next Five podcast is all about the human factor in tech.
I speak to Natalie Douglas at Liberty Bloom.
It is a rapidly changing environment.
If you are standing still, you are moving backwards.
Professor Ashley Boganza.
At what point do we have 12 members of the board and one AI agent?
And Kevin Frechette at Fairmarket.
That problem of when and how do humans get in the loop, that hasn't been solved.
You can listen to the full episode of The Next Five wherever you get your podcasts.
Enjoy.
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