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Virus outbreak forces Chinese to stay at home and order more delivery

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A worker inspects an order at a JD.com delivery station in Yizhuang, Beijing, amid the coronavirus outbreak.

Hilary Pan | CNBC

BEIJING — More people are stuck at home in China as they wait out the coronavirus outbreak, giving some delivery and e-commerce companies an opportunity, even as they try to manage the risks of the disease.

Previously, on a typical day, a courier for JD.com in Beijing would deliver about 140 to 150 packages per apartment complex, said Lansong Sun, head of the company’s delivery station in Yizhuang, on the outskirts of Beijing.

Now, that’s climbed to more than 200 orders a day, Sun said Tuesday, according to a CNBC translation of his Mandarin-language remarks.

More than half of China is shut down as authorities try to limit the spread of a pneumonia-causing virus that emerged in late December. It has killed more than 500 people, primarily in the city of Wuhan, but has infected more than 20,000 people throughout the country.

In an effort to prevent the virus from spreading, at least 24 provinces, municipalities and other regions have told businesses not to resume work before Monday. Beijing city authorities have strongly encouraged companies to let employees work remotely until Monday as well. Schools across the country are also generally shut until mid-February or later.

Pick up in grocery delivery

As people stay at home and avoid public areas, they’ve turned to ordering groceries online from companies that boast of one or two-hour delivery during normal operating times. As expected, orders for face masks and disinfectants have also surged.

For example, JD’s affiliate Dada, which delivers for Walmart and local grocery chains, said sales more than quadrupled from a year ago during the 10 days of the Lunar New Year holiday that ended this past Sunday. In the same period, JD said its own sales of fresh products increased more than three times compared with last year. The company said it sold 15,000 tons of fresh products during the holiday period.

Figures from rival Alibaba‘s Hema grocery store and fresh produce delivery platform were not available.

Anecdotally in Beijing, while workers make their way back to the city, the customer demand is so high that orders can take hours longer than scheduled to arrive. And rather than stretching into the evening, available delivery slots are often cut short.

Demand also remains relatively high in meal delivery. On Wednesday, a Beijing city official disclosed that about 20,000 delivery people were manning an average of more than 400,000 orders a day from takeout platforms Meituan and Elema, according to state media. The article added that delivery people are requested to wear face masks and conduct temperature tests.

Challenges from the virus

The virus has created some other logistical challenges for delivery, especially food.

Meituan, Hema and Dada have announced an in-app feature for contactless delivery, allowing the courier to leave an order in a convenient spot for the customer to pick up, without having to interact.

Kentucky Fried Chicken and Pizza Hut brands also launched a similar option for delivery. Parent company Yum China said in a statement to CNBC that the brands are testing out a feature in China for ordering online, and picking up in-store without contact. Meituan said it is trying something similar.

In many areas, couriers can no longer send packages straight to the door. Instead, they must call customers to pick up parcels from the front gate of the apartment complex, which can sometimes be a several minute walk away from the customer’s unit.

“It certainly lowers efficiency,” Ruichuang Chen, a JD.com courier, said, according to a CNBC translation of his Mandarin-language remarks. One of JD’s selling points is same-day or next day delivery.

While most people are at home and will fetch packages quickly, Chen noted that other customers may be asleep or not understand the policy and are unwilling to pick up deliveries. In order to make sure customers get their packages, Chen said he starts his day around 7 a.m. and keeps going until all the parcels are delivered.

Overall, industry representatives and analysts said logistics companies were operating fairly normally outside of areas such as Hubei, the province that has been hit hardest by the virus. Many businesses have also participated in accelerating delivery of medical supplies and other necessities to Hubei and the city of Wuhan through special channels.

But for most of the country it may take a few days or even weeks longer for orders to arrive, given the postponed re-opening of many businesses and quarantined cities. Earlier this week, some cities such as Hangzhou — where Alibaba’s headquarters is located — also stepped up inter-city highway closures and said households should only send one person out to buy goods every two days.

Alibaba’s logistics affiliate Cainiao said it “will deploy workers according to the specifics of government policy on returning to work.” That’s according to a CNBC translation of the Chinese-language text.

Virus-related disruptions, especially for China’s manufacturing hubs, will hit the entire logistics industry, Charles Guowen Wang, director at think tank China Development Institute, said, according to a CNBC translation of his Mandarin-language remarks.

Delays in returning to work will slow down the ability of manufacturers and related logistics services to get back up to normal operating speed, Wang said, adding that the efficiency of logistics relating to daily needs will also have a clear drop, likely affecting profits.

One-time boost?

It’s still unclear what the ultimate economic impact this year will be. The shutdown is essentially an extension of the Lunar New Year holiday, which began on Jan. 24 this year.

The holiday is typically an off-peak season for e-commerce since most people are traveling overseas, said Charlie Chen, director and head of the consumer team at China Renaissance. If people are at home, they will typically spend more time on their phones, and play games or shop, he said.

However, he expects these to be one-time purchases, and that after the threat of the virus dies down, many consumers will return to their habit of going to fresh produce markets.

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EU launches plan to regulate A.I. aimed at Silicon Valley giants

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BRUSSELS, BELGIUM – FEBRUARY 19: Executive Vice President of the European Commission for a Europe Fit for the Digital Age Margrethe Vestager (L) and the EU Commissioner for Internal Market Thierry Breton (R) are talking to media in the Berlaymont, the EU Commission headquarter on February 19, 2020 in Brussels, Belgium.

Thierry Monasse

BRUSSELS – The European Union is looking at ways to regulate artificial intelligence (AI) as it ramps up its oversight of large technology firms.

The European Commission, the EU’s executive branch, opened a 12-week period of discussion on Wednesday aimed at better understanding how to protect EU citizens from what it describes as the negative impacts of A.I. More concrete legislation is then expected in the second half of this year, in what could become its next big point of contention with companies such as Facebook and Alphabet.

“We recognize that we missed the first wave, or the first battle, which was the battle of personal data,” Thierry Breton, the EU’s commissioner for the internal market, told reporters in Brussels Wednesday. He said, however, that the “good news” is that the EU now understands that the next tussle will be over industrial data.

The EU is seen as a leader in corporate regulation, but European companies still struggle with competition from American and Chinese firms. The region’s data privacy rules, called General Data Protection Regulation (GDPR) and were announced in 2018, serve as a benchmark for tougher regulation in other parts of the world, including in the United States.

Overall, the EU’s aim when it comes to A.I. is to assess what sort of technologies are a risk to fundamental human rights, including in areas such as health care and transport. These will be subject to tougher requirements.

One area that the Commission is particularly concerned about is facial recognition. At the moment, the processing of biometric data in order to identify people is illegal in most cases, under data privacy laws. However, the EU is now looking at whether there should be certain exceptions.

Speaking to journalists in Brussels, Margrethe Vestager, the EU’s head of competition policy, said: “Artificial intelligence is not good or bad in itself, it all depends on why and how it is used.”

In an exclusive interview with CNBC Tuesday, Vestager said that the EU is taking a “double-sided” approach where it will enable this technology, while also ensuring it’s not harmful to EU citizens.

Meanwhile, U.S. lawmakers are watching and waiting to see what the EU decides on. “We encourage the EU to follow America’s lead and pursue an innovation friendly, values-based approach to A.I. regulation, one which avoids over-burdensome, one-size-fits-all policies,” Michael Kratsios, the U.S. chief technology officer told CNBC in emailed remarks.

He added that “the best way to counter authoritarian uses of A.I. is to ensure the U.S. and its allies remain leaders in innovation, advancing technology underpinned by our common values.”

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Virus hits small business, Iran says 2 test positive

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This is a live blog. Please check back for updates.

All times below are in Eastern time.

  • Total confirmed cases: More than 75,200
  • Total deaths: At least 2,000

10:04  am: IMF chief calls outbreak the ‘most pressing uncertainty’ for global economy

International Monetary Fund head Kristalina Georgieva said the COVID-19 outbreak is the “most pressing uncertainty” for the global economy. The new coronavirus is going to slow China’s economic growth for the year — just how much depends on how well world leaders can contain the fast-spreading outbreak, she said in a blog post. “There are a number of scenarios, depending on how quickly the spread of the virus is contained,” she said. If it’s contained quickly, she said, China’s overall 2020 GDP growth will be hurt, but just slightly and cross-border spillover would remain minimal. “However, a long-lasting and more severe outbreak would result in a sharper and more protracted growth slowdown in China. Its global impact would be amplified through more substantial supply chain disruptions and a more persistent drop in investor confidence, especially if the epidemic spreads beyond China.” — Feuer

9:15 am: Plugable Technologies warns the worst of its supply disruption won’t hit for months

The CEO and founder of Plugable Technologies, which sells USB, Bluetooth and power devices and partners with 15 factories in China, told CNBC’s “Squawk Box” he is expecting the virus to disrupt his supply chain during March and April the most because securing any extra inventory will take at least two months to move through the supply chain. CEO Bernie Thompson said he has also had trouble with factories outside China since it only takes one part built in the country to disrupt the entire supply chain, especially in the electronics industry. —Higgins-Dunn

9:01 am: Virus hits small business owners who import products from China

As coronavirus spreads around the world, small business owners who import from China are on edge. CNBC spoke with Kyle Kirshner, who has been doing business in China for several years. He knew to stock up on supplies ahead of the Lunar New Year, but prolonged factory shutdowns threatened his business and that of others who import products from China. Kirshner owns Kyndley, which sells outdoor products via Amazon and imports 90% of its goods from China. He expects his supply will be impacted within a month if things don’t turn around. And if he doesn’t have product to list on Amazon, his rankings may drop and hurt sales. — Rogers

8 am: China expels three WSJ journalists

China has revoked the press credentials of three journalists from The Wall Street Journal after the newspaper declined to apologize for a column that called China the “real sick man of Asia,” China’s foreign ministry said. Spokesman Geng Shuang told a daily briefing that Beijing made several representations to the paper over the column, which China criticized as racist and denigrating its efforts to combat the coronavirus epidemic, but that the paper had failed to apologize or investigate those responsible. Deputy Bureau Chief Josh Chin and reporter Chao Deng, both U.S. nationals, as well as reporter Philip Wen, an Australian national, have been ordered to leave the country within five days, the WSJ reported. — Feuer

7:30 am: Adidas reports 85% drop in China business activity

German sportswear maker Adidas said business in China dropped by about 85% year on year as the coronavirus outbreak has resulted in store closures and fewer customers visiting the remaining outlets. Adidas said it had seen lower traffic, mainly in Japan and South Korea, but added that it had not yet registered any major business impact beyond Greater China. “As the situation keeps evolving on a daily basis, the magnitude of the overall impact on our business for the full-year 2020 cannot be quantified reliably at this point in time,” it said. — Reuters

A masked man guards at the entrance to a village as a measure to contain the COVID-19 spread in Zhangye in northwest China’s Gansu province Tuesday, Feb. 18, 2020.

Barcroft Media | Getty Images

6:30 am: Iran says two people have tested positive for coronavirus

Iranian authorities reported two suspected cases of the coronavirus, according to the country’s semi-official ISNA news agency. A health ministry spokesperson said both cases were in the city of Qom and the patients had been put into isolation. “The next stages of testing are underway and the final results of these tests will be released to the public once they have been determined,” Kiyanoush Jahanpour, a spokesperson at Iran’s health ministry, said in a statement, ISNA reported. Iran has not previously confirmed any cases of the coronavirus. — Meredith

5:40 am: Japan says 79 more people have tested positive for coronavirus on Diamond Princess cruise ship

Japan confirmed 79 new cases aboard the Diamond Princess cruise liner, taking the total number of on-board infections to 621. Japan’s public broadcaster, NHK, citing the health ministry, said 68 of the 79 people with COVID-19 didn’t have any symptoms. Earlier, passengers and crew members on board the quarantined cruise ship, who were not taking government repatriation flights, started the process of disembarking. There may be more positive test results as people need certificates indicating they tested negative for the virus before they can leave. — Meredith

Read CNBC’s coverage from CNBC’s Asia-Pacific and Europe teams overnight here: Iran says two test positive for virus, death toll tops 2,000.

— Reuters and CNBC’s Noah Higgins-Dunn, Kate Rogers, Sam Meredith contributed to this report.

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Hardliners to dominate, low turnout expected

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Iranians walk past electoral posters and fliers during the last day of election campaign in Tehran on February 19, 2020. – Iran’s electoral watchdog defended its decision to disqualify thousands of candidates for a crucial parliamentary election in two days, as a lacklustre campaign neared its end.

ATTA KENARE | AFP via Getty Images

Iran is holding its parliamentary elections Friday, and one thing seems all but certain: It will be a major victory for the country’s conservative hardliners.

This week will see 7,148 candidates vetted by Iran’s unelected religious and legal authorities compete for 290 seats across 31 provinces. But much of the country’s youth, particularly in the capital Tehran, plan to stay at home, foreshadowing what’s expected to be the lowest voter turnout in years.

“I’m not going to vote, and none of my friends are going to vote too,” Mehdi, a business owner in his 20s living in Tehran, told CNBC. “Nothing is going to change with or without us voting … They decided everything for the country, without considering the Parliament,” he said, referring to the ruling regime.

“So it’s a joke to even have a Parliament. We’re protesting against them by not participating in the elections.”

‘Least competitive’ election in years

Iranian activists and country experts point to the sheer lack of competition manufactured by the regime’s ruling lawmakers: 7,296 of 15,000 people who applied to run for Parliament were disqualified by the Guardian Council, a 12-person board of experts in constitutional and Islamic law largely appointed by the supreme leader Ayatollah Ali Khamenei that wields significant power in Iranian politics.

“These will be the least competitive parliamentary elections in Iran since 2004 when reformists and incumbents were also disqualified en masse,” Barbara Slavin, the director of the Future of Iran Initiative at the Atlantic Council, told CNBC. “If history repeats itself, a conservative will also be elected president in 2021.”

Iranian Supreme Leader Ayatollah Ali Khamenei gives his first Friday sermon after eight years in the Imam Khomeini Musalla, in Tehran, Iran on January 17, 2020.

Iranian Supreme Leader Press Office | Handout | Anadolu Agency | Getty Images)

The Guardian Council oversees the elections, decides who can run, and has veto power over the Parliament’s legislation, making it more influential than the popularly-elected body, and its highly conservative nature has led it to frequently ban reformist candidates from running for public office.

Calls for an election boycott

This year, the Council also banned 80 sitting reformist lawmakers from running again.

“With the exception of the first post-revolutionary parliamentary elections in 1980, the Islamic Republic’s parliament has only ever allowed a narrow range of politicians to run for office,” said Arash Azizi, an Iranian historian and analyst, in a report last week. “But this time the Guardian Council has gone much further, effectively expelling the reformist faction of the regime from the political realm.”

Iranians within and outside the country, including the imprisoned activist Narges Mohammadi and former minister Mostafa Tajzadeh, have openly called for a boycott of the elections. The hashtags #BoycottIranShamElections and #MyVoteRegimeChange are being widely tweeted by activists.

Meanwhile, Khamenei and Iranian President Hassan Rouhani are urging voters to go to the polls. “Participation in the election is a stamp of support for the ways of the regime and will thus lead to security,” the supreme leader recently announced. “I beg you not to be passive,” Rouhani said last week.

Many Iranians are questioning the purpose of voting, “particularly when voting doesn’t really result in policy changes that help ordinary Iranians,” said Sanam Vakil, deputy head of Chatham House’s MENA Program. “It’s really just about legitimizing the Islamic Republic as part of a public relations stunt rather than having a policy impact.”

“And maybe by not voting, they are making as much of a point as if they were voting,” she said. “It’s a protest in itself.”

Severe economic pain

Much has changed since Iran’s last parliamentary elections in 2016, which were considered a substantial victory for Iran’s reformists and came amid a swell of popular optimism for a more open country and economy.

The 2015 Iranian nuclear deal, or JCPOA (Join Comprehensive Plan of Action) had just been signed by multiple countries including the U.S. and European Union states, and Iran’s economic growth for the year was projected to be as high as 6%. Many of Iran’s voters looked to reformist candidates’ promises of a more open Iran and better economic prospects stemming from the nuclear deal, which lifted international sanctions.

Those elections saw a reported 62% turnout, just above the prior historical average for parliamentary elections of 60.5%. Turnout on Friday is expected to be significantly lower than in several past elections, suggesting a loss of faith in the Islamic Republic’s electoral system and severe pessimism under a buckling economy.

The Donald Trump administration’s withdrawal from the nuclear deal in 2018, sweeping re-imposition of sanctions and continued corruption and mismanagement within the country have wrought severe economic pain on the Islamic Republic, particularly impacting ordinary Iranians, regional experts say.

An Iranian man holds-up a placard as he attends in front of a University to mark the memory of the victims of the Ukraine Boeing 737 passenger plane in Tehrans business district on January 11, 2020.

Morteza Nikoubazl | NurPhoto | Getty Images)

The IMF estimated a staggering 9.5% contraction for Iran’s economy in 2019, and unemployment and inflation are soaring. A poll conducted by Tehran University reportedly predicted a mere 25% turnout in the capital city, while others are expecting around 50% nationwide of the country’s roughly 60 million eligible voters.

The Iranians who spoke to CNBC also expressed their anger over the hundreds of civilians killed by security forces during protests in November and January. The November protests were triggered by a 300% hike in fuel prices, and the latter after Iranian forces admitted to unintentionally shooting down a passenger jet with 176 people on board — the majority Iranian citizens. The downing came amid a retaliatory attack on US troops in Iraq after the killing of top Iranian commander Qasem Soleimani on January 3.

Is Trump’s ‘maximum pressure’ policy to blame?

Regional analysts have long warned that a more hardline government was a major risk of the Trump administration’s “maximum pressure” policy on Iran.

“In response to max pressure, Tehran is looking to consolidate elites, with uber hardliners filling every major institution,” Behnam Ben Taleblu, senior fellow at the Foundation for Defense of Democracies, told CNBC. This is especially critical as Khamenei is now in his early 80s.

But he argued that Trump is not primarily to blame, noting that Iran’s clerical establishment was restricting reformist politics and cracking down on dissent long before the current U.S. administration. “It’s the Islamic Republic that’s been narrowing its political spectrum ever since the 1979 Islamic Revolution.”

Vakil sees the current political forecast as a clear consequence of maximum pressure. “It’s ironic,” she said, “because the Trump administration sought to alter the behavior of the Islamic Republic and instead it’s empowering that behavior.”

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