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Home » Daily Briefing » Daily briefing - 31 January 2019

Daily briefing - 31 January 2019

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Stripe chief executive Patrick Collison

The trade war between the US and China is headed for the endgame, and it's not looking pretty. Readers of Lafferty News will have noted the recent dominance of the surveillance capitalism model — think of Facebook or Tencent — which thrives on drinking in user data and selling it back to advertisers. Since around 2013, media have laid bare the alarming extent of surveillance enabled by the collaboration of intelligence agencies and communications and digital infrastructure businesses. Did Huawei refuse to install backdoors on its equipment for Western agencies, in advance of bidding for US and European contracts? And more pertinently, how will Europe react, now that Huawei looks likely to be shut out of US (and UK, Aotearoan and Australian) infrastructure building, despite Huawei's technological advantage in deploying 5G? Is Huawei opposed to the surveillance capitalism model? Its bosses are claiming to clarify this in a positive manner. Even Facebook is now falling about itself trying to square this circle, promising end-to-end encryption for all of its messaging services, with barely an objection by the US government.

The official mandate is to increase liquidity at China's banks, but looked at from certain angles, it appears very like a bank bailout. China appears to be mastering the complex economic terminology favoured by those with things to hide. Recent news suggests that China's economy is not powering ahead at the same rate as recent years, and officials are keeping an anxious eye on the shadow banking system. But they're also seriously worried about the official banking system. At a recent press session, a PBOC official said: "Banks need to have adequate capital to guarantee sustainable financial support for the real economy, and an important way of replenishing their Tier 1 capital is to issue perpetual bonds. The Central Bank Bills Swap (CBS) allows financial institutions holding banks' perpetual bonds to have more collateral of high quality, improves market liquidity of such bonds, and increases market desire to buy them, thereby encouraging banks to replenish capital via perpetual bond issuance and creating favourable conditions for stepping up financial support for the real economy." Or, as Frances Coppola notes, "They are over-leveraged, under-capitalized, and so stuffed with non-performing loans that they are struggling to lend. Now, the People's Bank of China (PBC) has decided to sort them out. Welcome to the Great Chinese Bank Bailout."

Stripe keeps taking the money, and Tiger Global has put another $100 million into the pot, with the latest raise increasing the valuation of the private processor to $22 billion, as Stripe moves into POS software, business infrastructure and card issuing. This latest funding will be used to expand the business internationally. "The new funding is very much late-stage, with Stripe set to celebrate its ninth birthday this year," notes Silicon Crunch. "Although it's not unusual for late-stage companies to raise money, the new funding will once again raise questions as to whether Stripe will eventually go public. Stripe has long dismissed any notion of taking the company public. Stripe Chief Financial Officer Will Gaybrick is on record in 2016 as saying that the company has 'no plans' to go public in the foreseeable future, while Chief Executive Officer Patrick Collison reiterated that in April 2017. Incidentally, chief executive Patrick Collison is worth a follow on Twitter @patrickc if only for his reading lists and reflective musings.

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