AstraZeneca could spin off China business

This is an audio transcript of the FT News Briefing podcast episode: ‘AstraZeneca could spin off China business’

Marc Filippino
Good morning from the Financial Times. Today is Monday, June 19th, and this is your FT News Briefing.

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AstraZeneca is protecting itself from US-China tensions. And France is pushing back on a plan by Germany on Europe’s air defences. Plus, corporate America has poured a lot of money into diversity plans over the past three years, but now it’s pulling back. I’m Marc Filippino and here’s the news you need to start your day.

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US secretary of state Antony Blinken is wrapping up a trip to China. The hope is to smooth over a relationship that’s been on the rocks lately. Companies are watching this trip closely because the geopolitical tensions are causing businesses to make some tough choices. For example, the FT recently learned that the Anglo-Swedish drugmaker, AstraZeneca, has put together a plan to spin off its China business. I’m joined now by the FT’s global pharmaceutical correspondent, Hannah Kuchler. Hi, Hannah.

Hannah Kuchler
Hi.

Marc Filippino
OK. So what do we know about AstraZeneca’s plans so far?

Hannah Kuchler
Cautionary note, this is not going to necessarily happen, but I think that the company thinks it’s quite wise, according to, you know, people that we’ve spoken to about the talks, somewhat as a just-in-case measure as tensions rise between the US and China. There’s a lot of potential conflict there. The US is the world’s largest pharmaceutical market, it’s really important to every pharmaceutical company. AstraZeneca is the largest foreign drugmaker in China. It sees a lot of potential there. The country has an ageing population and the government is trying to encourage the sales of more innovative drugs and maybe it just wants to make sure it kind of keeps the Chinese government on side.

Marc Filippino
What exactly would an AstraZeneca breakout look like? Do we know yet?

Hannah Kuchler
We don’t know for sure, but what we understand they’re in talks about is a listing of a separate entity of the Chinese business, probably in Hong Kong, possibly in Shanghai, but most likely in Hong Kong. There could also perhaps be advantages there if people wanted to buy in just to the potential growth in China, for example, or if investors thought, actually, I don’t want any China risk, I’ll just buy the main company.

Marc Filippino
So what does this mean for other pharmaceutical companies operating in China?

Hannah Kuchler
Pharmaceutical companies are not gonna stop being interested in China. Not only is the population ageing, they also have lots of chronic diseases caused by things like smoking and pollution. And so there’s lots of potential to sell drugs there. There’s a rising middle class, there’s people prepared more to pay for these drugs. But it is tricky, right? And perhaps there’s a sense that as the tech industry, things like semiconductors, have been really under examination, their dependence on China, that maybe pharmaceutical industry is also very strategic, very innovative and could be scrutinised next.

Marc Filippino
Yeah, we’ll keep a lookout. Hannah Kuchler is the FT’s global pharmaceutical correspondent in London. Thanks, Hannah.

Hannah Kuchler
Thank you.

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Marc Filippino
France is pushing back on a German-led air defence plan that will be hashed out at a conference this week. German chancellor Olaf Scholz unveiled the Sky Shield Initiative last October. The idea is to create a European air and missile defence system against Russia in particular. So far, 17 countries have signed up, but France felt blindsided by the plan. France and Germany have avoided any public disagreements on the subject. But French president Emmanuel Macron has implicitly criticised the Sky Shield plan. He says it relies too much on weapons manufactured outside Europe.

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Today is an American holiday called Juneteenth. It commemorates the end of slavery here in the US. Juneteenth also became a large corporate holiday after a Minneapolis police officer murdered George Floyd, a black citizen, in 2020. In addition to recognising the holiday, corporate America has started investing in diversity and inclusion efforts. But now, companies have been cutting back. Here to talk more about this is the FT’s labour and equality correspondent, Taylor Nicole Rogers. Hi, Taylor.

Taylor Nicole Rogers
Good to be back. Hey, Marc.

Marc Filippino
Good to have you. So it’s been three years since there was this big investment in corporate diversity and inclusion. Have those efforts overall been successful?

Taylor Nicole Rogers
So I’ve asked a lot of different people this exact question over the past couple of months, and everyone seems to be saying either definitely not or maybe a little bit.

Marc Filippino
Maybe a little bit, so not even a lot. A little bit. Why is that?

Taylor Nicole Rogers
Well, I think progress in diversity and inclusion is something that’s really difficult to measure. You think about representation of people of colour and women in offices, those numbers have changed a little bit, especially if you looked at boards. But when you ask black professionals if their experiences and their companies are getting better, people usually say maybe a little bit, people seem to be more aware of what’s going on. But it’s unclear if that is directly related to all of the big campaigns and investments that came out of 2020.

Marc Filippino
But there are cutbacks now. How big are they and why are they happening?

Taylor Nicole Rogers
They seem to be pretty significant. You know, it’s important to say that all parts of companies are facing cutbacks this year for various reasons. But a lot of people are alarmed that several large companies, Meta and Twitter among them, have laid off nearly all of their diversity and inclusion teams. As well as there have been a lot of reports that say that workers of colour have been disproportionately affected by the lay-offs that we’ve seen from last year, on into the early spring.

Marc Filippino
What does this mean for people of colour working in these companies or potential recruits for these companies?

Taylor Nicole Rogers
Well, it means everything from companies are not going to be able to travel to historically black colleges to recruit new workers in the same numbers they were a couple of years ago when cash was fleshed, to there just might not be as much funding for the Juneteenth party, and everything in between.

Marc Filippino
The way it’s being treated right now and the way our discussion makes me think that companies view this as a want and not a need. How does that perception change?

Taylor Nicole Rogers
I think a lot of companies do see diversity as a need, but I don’t think they see the amount of investments that we’ve seen over the past three years as imperative. I think a lot of companies think they can get away with, you know, 25-30 per cent of what we did in 2020 and, you know, maintain the levels of representation that they have within the company. They can maintain interest from black consumers if they’re doing just a little bit. And to change that perception, I think we would have to see more conversations in corporate America about race on the, quote unquote, “off years” where race is not the number one headline. And we’ll see if they can do that.

Marc Filippino
Taylor Nicole Rogers is the FT’s labour and equality correspondent. Thanks, Taylor.

Taylor Nicole Rogers
Thanks, Marc.

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Marc Filippino
Before we go, the UK thinks artificial intelligence could help lift its economy. AI and government productivity are expected to be a big focus of the Autumn Statement. Chancellor Jeremy Hunt has told ministers to figure out how to use AI to save money and boost the country’s sluggish growth rate. For example, health secretary Steve Barclay said the tech could make the NHS more efficient without putting more burden on staff.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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