John Lewis looms large in Clayton County.
The civil rights activist and longtime congressman, who died in July at the age of 80, first came on to the national stage at the March on Washington in 1963, speaking alongside Martin Luther King, Jr. He went on to represent Clayton, a heavily African-American county just south of Atlanta, Georgia, in Congress for more than three decades.
Lewis spent the final years of his life locking horns with US president Donald Trump, who claimed his congressional district was “in horrible shape and falling apart”.
So there was a certain poetic justice for voters there when the county’s declaration tipped Joe Biden ahead of Mr Trump in Georgia as ballots were still being counted earlier this month. With some 5m votes cast, Mr Biden ended up winning the state by a margin of just under 13,000, becoming the first Democratic presidential candidate to win there since Bill Clinton in 1992.
Two weeks later, in the car park of Divine Faith Ministries International, a church in Jonesboro, the county seat, hundreds of Democrats were still celebrating. Many had face masks emblazoned with Lewis’s catchphrase “good trouble”, a reference to his commitment to non-violent protest. Others wore blue T-shirts reading: “Clayton County saved America.”
Raphael Warnock, senior pastor of Ebenezer Baptist Church in Atlanta, addressed the crowd as the sun began to set. “Clayton County, do you know how powerful you are?” he asked, with the cadence of a practised preacher. “You were the county that pushed us over the finish line and flipped Georgia blue.”
Not only was Georgia the narrowest of swing states in the presidential election, but in January it will also determine which party controls the US Senate — and with it, the nature of the Biden presidency.
Jon Ossoff, 33
Ran a close second in the first round of voting
Native Georgian who works as an investigative journalist and narrowly lost a high-profile congressional race in 2017
David Perdue, 70
Led in the first-round of voting but did not win by enough to prevent a run-off
Businessman and former chief executive who has been the senator for Georgia since 2015
“You have power, and it would be a shame if come January 5 you did not exercise that power,” Rev Warnock added. “Are you ready to stand up one more time?”
Thanks to a rare set of circumstances, both of Georgia’s US Senate seats have run-off elections on January 5. Rev Warnock, who is pastor of the Atlanta church once led by Dr King, faces Kelly Loeffler, a 50-year-old former Wall Street executive. In the other race, incumbent Republican senator David Perdue, a 70-year-old former chief executive of Dollar General, the discount variety store chain, is running against Democrat Jon Ossoff, a 33-year-old documentary film producer.
Democrats had hoped to not only win the White House, but also reclaim control of the Senate on November 3. But after fending off several well-funded Democratic challengers, the Republicans will have at least 50 seats in the 100-member upper chamber of Congress, while Democrats currently have 48. If Democrats are able to pick up the two remaining Senate seats in Georgia, that will leave the chamber split, with Kamala Harris, the vice-president-elect, able to cast a tiebreaking vote.
Raphael Warnock, 51
Won 32.8 per cent to lead in the first round
Senior pastor of Ebenezer Baptist Church in Atlanta
Kelly Loeffler, 50
Won 25.9 per cent to beat fellow Republican Doug Collins and advance to the run-off
Former Wall Street executive appointed as senator for Georgia in 2019
With even the slimmest Democratic Senate majority, a Biden administration would be able to press ahead with its legislative agenda on everything from Covid-19-related economic stimulus to healthcare reform. Without it, Mitch McConnell, the Senate’s most-senior Republican, would likely stand in the way of Mr Biden’s best-laid plans, forcing Washington into gridlock.
Georgia has become one of the most politically competitive states in the country, mirroring the dynamics of the wider US electorate. An aggressive effort to register and mobilise black voters has benefited Democrats, while the state’s rural population, which is overwhelmingly white, remains loyal to Mr Trump, even in defeat.
At the same time, the fast-growing Atlanta suburbs have become both more diverse and more disillusioned with Mr Trump and Republicans — a sentiment that some party officials worry will spill over into the January run-off, particularly if the president continues to refuse to concede to Mr Biden.
For Democrats, the message is clear: voters can only fully reject Mr Trump if they return to the polls on January 5 to elect Mr Warnock and Mr Ossoff.
“There are hundreds of thousands of lives hanging in the balance, y’all,” said Mr Ossoff as he campaigned alongside Mr Warnock in Jonesboro. “I am here to ask for your vote . . . not for my sake, but for the sake of our community, for the sake of our state and for the sake of our nation.”
As recently as four years ago, few would have believed that a Democratic presidential candidate could win in Georgia, a conservative southern state with high levels of church attendance and a history of racial division.
But the electoral landscape has changed, due in part to the organising efforts of people such as Stacey Abrams, the former lawmaker who narrowly lost the state’s governor race in 2018. Ms Abrams is widely credited as the architect behind grassroots efforts to engage African-Americans, who make up nearly a third of the state’s population and are overwhelmingly more likely to vote for Democrats.
In 2014, she set up a group called the New Georgia Project to register and mobilise black voters. Two years ago, after she came up short in the governor’s race, she launched another organisation, Fair Fight Action, to tackle voter suppression tactics. Since then, some 800,000 new voters have been registered in the state, many of them African-American.
After election day, countless Democrats praised Ms Abrams for her efforts. At the event in Jonesboro, many Democrats wore paraphernalia bearing her name. One woman had altered her “Stacey Abrams Governor” T-shirt from 2018 so the slogan read “Stacey Abrams Goddess”.
LeWanna Heard-Tucker, the Democratic party chair in Fulton county, which includes most of Atlanta, says the 2018 governor’s race galvanised black voters for 2020. “We worked really hard to get Stacey elected, and we know that election was stolen from her. We know what voter suppression looks like, and people were fed up, particularly black voters,” she says.
But it was not only black voters in urban areas that propelled Mr Biden to victory in Georgia. The former vice-president also benefited in Georgia from a sea change in the Atlanta suburbs, including one-time Republican strongholds such as Cobb and Gwinnett counties.
Cobb County, just north of Atlanta, has long been associated with the GOP. Newt Gingrich, the former Republican Speaker of the House, represented the area in Congress for two decades.
But the suburban sprawl has transformed in recent years, in part due to an influx of younger, college-educated people, many from more liberal areas in the north-east or Midwest, drawn to a booming jobs market in greater Atlanta. They have made the suburbs more racially and ethnically diverse, and once wide open spaces are now dotted with construction sites for apartment buildings.
Mrs Clinton edged out Mr Trump in both Cobb and neighbouring Gwinnett County in 2016. Mr Biden defeated Mr Trump by a 14-point margin in Cobb, and 18 points in Gwinnett. Turnout in Cobb was up by a fifth compared with 2016; in Gwinnett, turnout surged by a quarter.
“We used to build statewide Republican victories on massive Republican margins in Cobb and Gwinnett counties,” says Whit Ayres, a Republican pollster. “When I saw that Hillary Clinton had won both Cobb and Gwinnett in 2016, I thought, oh the times, they are a changin’.”
Jacquelyn Bettadapur, chair of the Cobb County Democratic party, first got involved in local politics in the run-up to the 2016 election. She was invited to join a secret Facebook group for hundreds of moms who supported Democratic candidates, and recalls being “floored” by the group’s existence, saying: “I had spent so many years thinking I was the only progressive within 15 square miles.”
“I think there were a lot of disaffected Republicans,” she adds. “The ranks of these women’s groups are full of former Republicans.”
Jason Shepherd, who chairs the Cobb County Republicans, acknowledges the demographic changes in the area have favoured Democrats, but adds that in most cases, the Trump campaign acted independently of local candidates, many of whom are more popular in the area than the president.
“I have never met Donald Trump . . . I have never shaken his hand or been in a picture with him or anything,” he says. “Rallies are still fun, even with masks, but rallies do not engage the concern of a voter who is still trying to decide, well, I like Donald Trump’s policies, but I really do not care for him as a person.”
Brendan Buck, a Georgia native who was a top aide to former Republican House speakers Paul Ryan and John Boehner, says the Atlanta suburbs were the “purest example in the country of where educated voters, particularly women, have just had enough of this president”.
“There is only so long you can put up with pure incompetence if you are a smart educated person following the news. It is only so long you can have someone talk down to and alienate women before they decide to come out in huge numbers,” he says.
But Mr Buck added that just because the voters had turned on Mr Trump did not mean they were forever aligned with the Democratic party. “Those suburbs just wanted to send a message to Trump,” says Mr Buck. “The question for the run-off now is: do those voters feel like they sent their message? Or do they feel like they have more work to do?”
‘Last line of defence’
On January 5, turnout will be key. Run-offs, like midterms and special elections, have attracted fewer voters than presidential contests. In Georgia, that has often translated into Republican candidates triumphing over Democratic challengers. But this time around, Republican leaders acknowledge Democrats are fired up, and the two run-offs are likely to be tight. The few polls that have been conducted in recent weeks suggest both races are tight.
“We are running as if we are behind,” says David Shafer, a former state legislator who now chairs the state Republican party.
While Democrats are looking to African-American communities in places such as Clayton County, and suburban supporters outside Atlanta, Republicans are hoping to run up their numbers in more rural parts of the state.
US vice-president Mike Pence earlier this month joined Ms Loeffler and Mr Perdue for two “Defend the Majority” rallies in Cherokee and Hall counties, exurbs of Atlanta where Mr Trump received more than twice as many votes as Mr Biden on November 3.
In Cherokee County, at the foothills of the Blue Ridge Mountains, they addressed an outdoor crowd of several hundred people, many wearing red “Make America Great Again” baseball caps.
They argued that Democrat-controlled White House and Congress would push through “socialist” policies, like Bernie Sanders’s Medicare for All proposals, which would effectively eliminate private health insurance, or the Green New Deal, a climate package associated with the progressive New York congresswoman Alexandria Ocasio-Cortez.
“Today, we are the last line of defence against this country making a change to the left that we won’t get to undo for maybe two, three, four, five generations. We can’t let that happen,” said Mr Perdue, who, like Ms Loeffler, is among the wealthiest members of Congress and has come under scrutiny in recent weeks for stock trades at the start of the Covid-19 pandemic. “Let’s make darn sure that the road to socialism never runs through the state of Georgia.”
What all three failed to say, however, was something on the minds of virtually everyone in the crowd: Mr Trump has not conceded in Georgia, or nationwide, to Mr Biden, continuing to argue, without evidence, that the November 3 election was “rigged” amid widespread fraud.
Given the close nature of the race, every ballot in Georgia was manually reviewed in an unprecedented statewide audit ordered by Brad Raffensperger, Georgia’s Republican secretary of state who has come under attack from several members of his own party, including the president. On Thursday, Mr Trump called his fellow Republican an “enemy of the people”.
Mr Trump’s supporters are not backing down, and at the Cherokee County rally, voters across the board were repeating his unsubstantiated claims.
Susan Maguire, 62, said she was “positive” that votes were cast illegally in Democratic areas. “I believe for sure that there are things that were done illegally in the voting systems in many of these Democratic cities. I am positive of it,” she says. “Why can anybody think they wouldn’t try to rig the election?”
Local estate agent Dawn Faletti, 55, agreed, saying: “This will be overturned and all of the fraud will be revealed and exposed, and [Mr Trump and Mr Pence] will win. We are standing here and we are standing with them ‘til the end.”
Such sentiments underscore the divisions within a Republican party that is grappling with how to handle Mr Trump’s refusal to acknowledge his defeat.
Like many of their colleagues on Capitol Hill, Mr Perdue and Ms Loeffler are wary of going against Mr Trump, given his purported desire to run for president again in 2024. In Georgia, the senators need Mr Trump’s most ardent supporters to turn out again for them in January — but they also risk alienating more moderate Republicans if they lurch too far to the right. The president is to hold a rally in the state next Saturday.
“This is not the type of environment that either of the Republicans want to be running in. It is a strategy that they are left with because of the president,” says Mr Buck, the former Republican congressional aide, of Mr Perdue and Ms Loeffler’s dilemma.
“They know that if he were to turn on them, he could absolutely tank Republican turnout,” he adds. “I think they also know that he doesn’t give a damn about the Senate majority, he doesn’t give a damn about those two senators, and if he feels slighted, it would be no skin off his back to tweet out that they are not fighting hard enough, that they are surrendering and that they don’t deserve anybody’s support.”
Mr Buck pointed out that Mr Trump’s antics risked not only suppressing moderate turnout, but could also have the unintended consequence of discouraging the conservative base. “How long can you tell people that the election is rigged before they decide not to participate any more?”
US presidential election 2020: You tell us
How do you feel now the election is over? Are you happy with the winner? Do you feel the election process was fair? How do you see the outlook for America? Do you feel positive about the incoming president or uncertain? Share your thoughts with us.
Investors rethink China strategy after regulatory shocks
After four days of heavy selling in Chinese stocks, regulators in Beijing decided it was time to offer some reassurance to Wall Street. But some investors have still been left figuring out whether to double down or flee.
In a hastily arranged call on Wednesday evening, Chinese regulators told a dozen or so executives from global investors, heavy-hitting banks and Chinese financial groups not to fret about the shock overhaul of the country’s $100bn private tutoring industry. Investors should not worry about intervention to curtail profitmaking in other companies, they said. Rather, China remained committed to allowing companies to access capital markets.
The message did not stick. Tech stocks in the country have wrapped up their worst month since the financial crisis of 2008. “Clearly there will be more [regulatory intervention] to come,” said one person briefed on the call. “That much was obvious to everyone.”
Now, foreign investors in China have been left nursing huge losses, and anxious over where, after education, regulators might turn their attention next. They must decide whether the drop in stocks is an opportunity to double down on a fast-growing economy or a sign that unpredictable political risk outweighs potentially lucrative returns.
“The political risk factors of investing in China have grown exponentially in the past 18 months,” said Dominic Armstrong, chief executive of Horatius Capital, which runs a geopolitical investment fund. “People learned the hard way in Russia and they’re learning the hard way in China.”
Following a leaked memo just over a week ago suggesting Beijing was planning to clamp down on education companies, the market sell-off was sharp.
It was led by a drop in education stocks that, according to one Gavekal analyst, made for “some of the most traumatic viewing since the charts of Lehman’s bonds”. TAL Education, Gaotu Techedu and New Oriental Education, which are listed in New York, all fell close to 60 per cent in the first hour of trading on July 23.
Further jitters came on Tuesday when Tencent, one of China’s biggest tech groups, announced its flagship WeChat social network had suspended user registrations as it upgraded security technology “to align with all relevant laws and regulations”.
Nerves have pummelled Chinese tech groups listed in New York, taking the Nasdaq Golden Dragon China index down more than 20 per cent in July — the worst month since the global financial crisis.
In Hong Kong, the Hang Seng Tech index fell almost 15 per cent, dragging the broader Hang Seng benchmark almost 9 per cent lower as Chinese internet giants Tencent and Alibaba fell 18 and 14 per cent, respectively.
Big institutional investors have driven the selling, according to strategists at JPMorgan Chase. Meanwhile Ark Invest star manager Cathie Wood has also been slashing her China holdings. The $22.4bn Ark Innovation exchange-traded fund, which held an 8 per cent allocation to China shares in February, has now almost completely exited Chinese stocks, according to the company’s website.
But some have stepped in for a potential bargain. “We have been net buyers,” said a fund manager at a $15bn Asia-based asset manager. “It is unheard of to see these types of moves . . . You’ve got to buy them, unless you think the entire world is going to crash and burn.”
The crackdown on education marks part of the Chinese Communist party’s attempts to address falling birth rates by removing some of the perceived financial obstacles to having children. The rules will ban companies that teach school curriculum subjects from making profits, raising capital or listing on stock exchanges worldwide, and from accepting foreign investment.
This sector is dominated by three large US-listed groups — TAL Education, New Oriental Education and Gaotu Techedu — which have enjoyed soaring valuations in recent years and drawn billions of dollars of backing from some of the world’s top investment firms such as BlackRock and Baillie Gifford.
Private rivals like Yuanfudao and Zuoyebang, which have held multibillion-dollar funding rounds in recent years, are backed by groups including Tencent, Sequoia, SoftBank’s Vision Fund and Jack Ma’s Yunfeng Capital.
The government intervention came shortly after anti-monopoly and data security measures against some of China’s largest tech companies. Last November the $37bn blockbuster initial public offering of Chinese payments group Ant was torpedoed by Beijing regulators, and its controlling shareholder — Alibaba founder Ma — disappeared from public view for several months.
In the past few months Beijing has also been expanding its influence in to the domestic online sector. In April it fined ecommerce group Alibaba $2.8bn for abusing its market dominance, and opened an antitrust investigation into Meituan, the takeaway delivery and lifestyle services platform.
And earlier in July, Chinese regulators announced an investigation into possible data security breaches at Didi Chuxing, less than a month after the ride-hailing app raised more than $4bn in a New York listing. Its shares have dropped two-fifths since then.
Baillie Gifford, the Edinburgh-based fund manager with £352bn in assets under management, is the second-largest shareholder in US-listed TAL and has made big bets on China’s tech sector.
“It’s not saying we like the geopolitics or the national politics or anything like that,” Baillie Gifford fund manager James Anderson told the Financial Times in June, referring to its decision to add exposure to China in recent years.
But potential gains are too compelling to ignore, he added, pointing to “the excitement we see around businesses, the ambition levels among Chinese entrepreneurs, and the relationships we can build with the individual companies”.
Baillie Gifford declined to comment this week on the latest developments in China.
The new restrictions for private tutoring companies prohibit them from accepting foreign capital through “variable interest entity” structures — the model that many big Chinese tech firms have used to list abroad for two decades. The VIE structure, which allows global investors to get around controls on foreign ownership in some Chinese industries, has never been legally recognised in China, despite underpinning about $2tn of investments in companies like Alibaba and Pinduoduo on US markets.
In response to Beijing’s restrictions on China-based companies raising capital offshore, on Friday the US Securities and Exchange Commission announced that China-based companies will have to disclose more about their structure and contacts with the Chinese government before listing in the US.
“I worry that average investors may not realise that they hold stock in a shell company rather than a China-based operating company,” SEC chair Gary Gensler said in a statement.
The education crackdown sparked fears the VIE ban could be extended to other sectors.
Revoking the rights of Chinese companies to use VIEs is seen as China’s nuclear option. On Wednesday, Beijing regulators sought to reassure investors that it would not target VIEs more widely. But one Wall Street executive briefed on this week’s call with regulators said “it was more about what they didn’t say, there were questions about the VIE structure they didn’t address”.
The consequences of restricting VIEs in sectors outside of education would be so severe that some are confident Beijing would not eradicate them completely.
“The government will allow the VIE structure to survive, but one thing is clear: if a company wants to use the VIE structure to circumvent certain regulations then that is not going to work,” said Min Chen, head of China at $8bn emerging markets specialist Somerset Capital Management.
Rather than selling out of China altogether, some investors say they are focusing on trying to select stocks that are in line with the government’s strategic priorities.
“Companies such as taxi-hailing groups or community group buying businesses, where their model is to use their competitive pricing advantage to squeeze out smaller players are likely to find themselves vulnerable to more regulation,” said Chen. “There is also the potential for winners in this environment, such as domestic leaders in the tech space and semiconductor producers . . . as well as companies that are exposed to mass consumption.”
Alice Wang, a London-based fund manager at €2.7bn Quaero Capital, agreed that investors will need to switch to betting on sectors that are “important to China’s long-term economic future . . . areas like renewables and industrial automation companies that drive the ‘Made in China’ narrative.”
David Older, head of equities at €41bn asset manager Carmignac, echoed these sentiments and said he likes sectors such as semiconductors, software, renewable energy, healthcare and electric vehicles. He is overweight China and has been adding to his positions this week: “It’s a great buying signal when you see strategists saying that China is uninvestable.”
Trying to align yourself with the government’s strategic objectives “is the only way you can sleep at night”, said Horatius Capital’s Armstrong.
Chinese government intervention is about addressing its “demographic time bomb,” he said. “This is a Chinese problem and there will be a Chinese solution. You can come along and be a passenger if you want, but the ride is not going to be smooth.”
International asset managers rush to tap ‘huge’ China wealth opportunity
Some of the world’s biggest investors are pushing into China with wealth management joint ventures to create investment products for the country’s vast and growing pools of savers. A report from Boston Consulting Group and China Everbright Bank showed that China’s wider wealth market was worth Rmb121.6tn ($18.9tn) in 2020, up 10 per cent from a year earlier.
While China’s wealth management sector is still dominated by banks, early overseas movers include Europe’s Amundi and Schroders, and BlackRock, JPMorgan Asset Management and Goldman Sachs Asset Management from the US, lured by the country’s liberalisation of its financial markets.
“There’s a fast-growing middle class in China that has huge [asset management] needs for savings and retirement,” said Valérie Baudson, chief executive of €1.8tn group Amundi, which recently launched a wealth management subsidiary with the Bank of China. This year the joint venture has launched over 50 funds to sell to the Chinese bank’s network of clients, and raised €3.4bn in assets.
Executives downplayed the political risk of these initiatives, pointing to the importance of partnering with domestic Chinese institutions. “It’s not a risk that keeps me up at night. For us it’s about a long-term investment,” said Peter Harrison, chief executive of £700bn asset manager Schroders, which gained approval in February for a wealth management subsidiary with China’s Bank of Communications. Bringing Schroders’ long-term investment approach to China, “is very much for the benefit of long-term Chinese savers,” he added.
The value of Amundi has been updated since first publication.
Additional reporting by Eric Platt in New York
Can plant-based milk beat conventional dairy?
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Plant-based milk brands are churning up the global dairy business, with a surge in sales, investment, and new products coming to market. The plant derived dairy trade is now worth an estimated $17bn worldwide.
Growing consumer demand has boosted investment. According to data firm Dealroom, venture capital funding across the plant-based dairy and egg sector has skyrocketed, from $64m in 2015 to $1.6bn in 2020.
The world’s biggest food company, Nestle, recently launched its first international plant-based dairy brand, a cow’s milk substitute made from yellow peas. Wonder will come in a variety of flavours, competing with established brands like Oatly oat-based milk. Founded in Sweden in the 1990s, that company is now valued at around $15bn. Demand for alternatives to soya, which once dominated the dairy free market, continues to escalate.
In the west, sales for other plant-based milks, including oat, cashew, coconut, hemp, and other seeds overtook soya back in 2014. Since then, they’ve raced ahead to be worth almost three times as much as soya products, with a combined projected value of more than $5bn in sales by 2022.
Advocates argue that plant-based production emits less greenhouse gas than cattle, making it the way forward to help feed the world and curb global warming. But dairy groups are fighting back with their own sustainability campaigns. And cow’s milk is hard to beat when it comes to naturally occurring nutrients, like protein, vitamins and minerals.
The average 100 millilitre glass of cow’s milk contains three grammes of protein, compared to 2.2 grammes in pea milk and just one gramme in oat-based substitutes.
Dairy producers have also won a legal bid, preventing vegan competitors in the EU from calling their products milk and yoghurt. Despite their growing popularity, plant-based brands are a long way from displacing conventional milk products. Their current $17bn turnover is still a drop in the pail, compared with the traditional cattle-based dairy trade, which is worth an estimated $650bn worldwide.
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