Aurelia Butler

Yellen, who departs Beijing on Sunday after a four day visit, told a press conference that the United States and China have significant disagreements and they must be communicated “clearly and directly.” “No one visit will solve our challenges overnight. But I expect that this trip will help build a resilient and productive channel of communication with China’s new economic team,” Yellen said in remarks prepared for the news conference.Yellen said the objective of the visit was to establish and deepen ties to China’s new economic team, reduce the risk of misunderstanding and pave the way for cooperation in areas such as climate change and debt distress.She reiterated that Washington was not seeking to decouple from China’s economy, adding doing so would be “disastrous for both countries and destabilizing for the world.”But she said the United States wanted to see an “open, free and fair economy,” not one that forces countries to take sides.She said she used the discussions to raise “serious concerns” about what she called China’s “unfair economic practices” and recent uptick in coercive actions against U.S. firms. Yellen also discussed Russia’s war in Ukraine with her Chinese interlocutors, and said it was “essential” that Chinese firms avoid providing Russia with material support for the war, or in evading sanctions. More

South Korean exports to Russia of motor lubricants that can be used in tanks, armoured cars and other military vehicles more than doubled last year, as Korean companies took advantage of their western competitors’ retreat from the market following Vladimir Putin’s invasion of Ukraine.Motor lubricant exports from South Korea to Russia increased 116.7 per cent in 2022 to $229mn, according to Korean government statistics. The surge came after western oil majors including Total, Shell and BP voluntarily scaled back their Russian operations, including sales of lubrication oils used in vehicle transmissions and engines, following the outset of the war.Russian import data shows that SK Enmove, a subsidiary of South Korean conglomerate SK Group, and GS Caltex, a joint venture between South Korea’s GS Group and US energy giant Chevron, were the two main Korean beneficiaries of the western companies’ exits.Both companies denied that their products were being used by Russia’s military, claiming strong compliance standards among their local partners. There are no South Korean restrictions on exports of motor lubricants or engine oils to Russia. Neither company has been accused of violating sanctions.Experts said it was all but impossible to verify that motor lubricants, which can be used for civilian or combat vehicles, were not filtering through to military uses.“Any POL [petrol, oil and lubricant] product can have dual use — civilian or military,” said Patrick Donahoe, a retired US major general and former commander of the US Army’s Maneuver Center of Excellence. “Anyone selling POL to Russia is helping their aggression in Ukraine.”Russian import records examined by the Financial Times show that SK Enmove and GS Caltex shipped about $2.8mn of engine oil to Russia in January 2022, prior to the full-scale invasion of Ukraine. Their volumes have since soared, reaching a peak of about $28mn in March 2023.The data shows that SK Enmove now accounts for 6.5 per cent of Russian motor oil lubricant imports, with GS Caltex supplying just over 5 per cent.“Korean firms can enter niche markets in Russia left by bigger international companies,” said Jeong Min-hyeon, head of the Russia and Eurasia team at the Korea Institute for International Economic Policy. “But realistically, I don’t think that Korean companies can control who can be the end users of their exports to Russia.”GS Caltex, which makes the Kixx brand of engine oils, and SK Enmove acknowledged they had benefited from their competitors’ withdrawal from the Russian market but insisted they took precautions to ensure their products were not diverted for military use.GS Caltex said there was “no chance” its products could be diverted to military use in Russia, adding that its “contract with a Russian private company contains clear rules on reselling of our products”.“Due to the US and EU sanctions, they can’t sell our products to the military and our Russian subsidiary is well aware of the importance of this matter,” the company said.Chevron, which withdrew its own lubricant and chemical products from the Russian market following the invasion of Ukraine, said it “does not comment on the business matters of our non-operated joint ventures, including GS Caltex”.SK Enmove, which also acknowledged that its Russian sales had profited from its competitors’ exits, said most countries relied on local production of motor oils for military use to ensure a stable supply.“Lubricants produced by Russian refiners are so low-priced that they command a large market share,” it said. “Our engine oil products are relatively high-priced that they are sold mostly for premium car users.”

A South Korean car parts trader who has exported lubricants globally said it was “ridiculous” for the companies to suggest they could track the end users of their Russian exports.“A lubricant exporter claiming they know where their products end up is like a ramen exporter claiming they know who is going to eat their noodles,” said the trader.A trade ministry official in Seoul said the country had export controls on “items that can be diverted for military use or weapons of mass destruction, but lubricants are like a commodity”. Imposing restrictions on motor oil could “take considerable time”, the official said. More

BEIJING (Reuters) – U.S. Treasury Secretary Janet Yellen on Saturday urged closer communication between China and the United States to improve economic decision-making, and challenged China to join global initiatives to help poorer nations address climate change. Despite bilateral tensions, record high U.S.-Chinese trade last year showed there was “ample room” to engage in trade and investment, and it was critical to focus on areas of common interest and address disagreements through dialogue, Yellen told Chinese Vice Premier He Lifeng at the start of a meeting.The talks lasted for about five hours, followed by a formal dinner, according to a Treasury official. Chinese state media described the meeting as “in-depth, candid and pragmatic”. Treasury said the meeting was “candid, constructive, and comprehensive.” Yellen is due to hold a news conference in Beijing early on Sunday.State-run Xinhua news agency said the talks were “constructive”, but the Chinese side expressed concern about U.S. sanctions and restrictive measures against China.China also believes that generalising the concept of national security does no good for normal economic and trade exchanges, Xinhua reported.Treasury said Yellen also conveyed that “even when the United States and China have disagreements, it is vital that the two countries find ways to work together on issues of shared – and global – concern, including debt distress in low-income and emerging economies and climate finance.”Yellen also met with the People’s Bank of China’s Communist Party chief Pan Gongsheng on Friday, discussing global macroeconomic and financial developments, including the disproportionate impact of recent economic shocks on low-income countries, Treasury said.Yellen’s visit through Sunday is Washington’s latest attempt to repair ties between the world’s two biggest economies, battered over issues from Taiwan to technology that have drawn their allies into their rivalry, having an impact on companies and trade ties.Like U.S. Secretary of State Antony Blinken, who visited last month for the first time in Joe Biden’s presidency, Yellen is seeking a delicate balance between conciliation and continuing to push Beijing to halt practices Washington says are harmful to U.S. and Western companies. Both sides have downplayed expectations for breakthroughs, while hailing the opportunity for candid, face-to-face diplomacy.”Amid a complicated global economic outlook, there is a pressing need for the two largest economies to closely communicate and exchange views on our responses to various challenges,” Yellen told He, China’s recently appointed economy czar.Doing so could “help both sides more fully understand the global economic outlook and make better decisions to strengthen our economies”, she said.At the same time, Yellen reiterated Washington wanted to ensure healthy competition with a “fair set of rules” that would benefit both countries over time.Meeting her at the Diaoyutai state guest house where foreign dignitaries are often received, He said he stood ready to work with Yellen. Yellen told a group of female economists on Saturday that she was “in Beijing at this critical time because, for all the disagreements between our nations, President Biden and I believe it is in the best interests of our peoples to put our relationship on a better track and to maintain open and honest lines of communication”.”I strongly believe that the relationship between our two countries is rooted in the solid ties between the American and Chinese people. It is important that we keep nurturing and deepening these ties, especially as China reopens after three years of COVID lockdowns.”‘MEET CHINA HALFWAY’As the U.S. seeks to re-engage at all levels, Beijing has repeatedly told Washington to match words with action, pointing to continued U.S. moves to curb Chinese access to technologies including semiconductors. Beijing has also refused to resume bilateral military ties, while tariffs imposed on Chinese products during a trade war under Biden’s predecessor, Donald Trump, remain intact. China this week abruptly announced export controls on two metals widely used in semiconductors and electric vehicles in the name of protecting its national security and interests. Still, recently appointed Premier Li Qiang left the door open to further dialogue, urging Yellen on Friday to “meet China halfway” as both sides inject “positive energy” into bilateral ties. Despite talk of U.S.-China economic decoupling, which both countries oppose, data show a fundamentally solid trade relationship, with two-way trade hitting $690 billion last year. The United States would continue to communicate directly its concerns about specific economic practices, and would take targeted actions to protect its national security, Yellen said. She urged China not to allow any disagreements to “lead to misunderstandings, particularly those stemming from a lack of communication, which can unnecessarily worsen our bilateral economic and financial relationship.” Yellen told government officials and climate experts on Saturday that China had the capacity to help the world tackle the “existential threat” of climate change.Beijing and Washington must take the lead in helping poor nations meet their climate goals and cope with the impact of climate change, she told a roundtable.Cooperation on climate finance was a “critical” responsibility of “the world’s two largest emitters of greenhouse gases and the largest investors in renewable energy”, she said.China, classified as a developing country by the United Nations, has long said it was the responsibility of developed nations to help poor countries pay to address climate change. But Beijing says it could contribute to “loss and damage” due to climate change on a voluntary basis. More

SAN FRANCISCO (Reuters) – Venture capital firm Headline used to be in one of San Francisco’s most eye-catching skyscrapers: the pyramidal Transamerica building that has defined the skyline for decades. Employees enjoyed the views from the 43rd floor and the convenience of being downtown.Then came the pandemic.As the tech industry shifted to work-from-home or downsized, a city center that was already struggling with drugs and homelessness slipped further into urban decay. Businesses closed and visitors were scared off, creating a vicious cycle that coincided with changes already happening in the city’s real estate market.With Headline’s lease ending, the company decided to look elsewhere. The executives considered building an office on a boat or moving to a residential house. Eventually, they took their operation managing $4 billion to the bucolic – and secure – Presidio, a former military base-turned-national park next to the landmark Golden Gate Bridge.And they are not alone. Venture capital firms are increasingly joining retailers and other businesses in finding homes outside downtown San Francisco. Westfield, for example, said last month it was giving up its downtown shopping mall after 20 years, as foot traffic fell by 43% from 2019.Where venture capital firms end up could have implications for the broader tech industry, as such companies usually help form a gravity center for startup founders and communities.”Presidio really represented what we thought the future of work should be,” said Mathias Schilling, Managing Partner at Headline, on a recent sunny afternoon. Nearby, a dozen employees were sitting at a long wooden communal table in the bright kitchen, eating lunch against a backdrop of lush greenery, palm trees and panoramic views of San Francisco Bay.”It’s a very calm and quiet space, something that I think instills creativity and stimulates people,” said Schilling. “We take meetings outside and we walk around the big lawn here.”Other venture capitalists – including Felicis Ventures, which backed Shopify (NYSE:SHOP) and Fitbit (NYSE:FIT), as well as Forerunner Ventures and venture studio Atomic, have filled the directories in the Letterman Building, one of the biggest office complexes in the Presidio. Converted from a former military base, the Presidio is located at the tip of San Francisco’s peninsula, several miles west of the financial district. As a national park, it is patrolled by federal police. “It 100% feels safer than downtown. There’s no open drug use in the Presidio. There are no homeless encampments. There are very few homeless wandering around and that is because it’s the federal land and the federal police is a big part of it,” said Rex Salisbury, who runs VC firm Cambrian Venture and has been living and working from the Presidio since 2017.SHIFTS IN TECH ECOSYSTEMVenture capital firms play an integral part in the tech ecosystem in the San Francisco Bay Area, where startups captured about 35% of all U.S. venture capital funding in 2022. Since the 1990s internet boom, the VCs have physically clustered in hotspots that are close to the startup founders – including Sand Hill Road in Silicon Valley and South Park in downtown San Francisco.Now some firms say they feel less obligated to stay downtown because startup founders have become more scattered since the pandemic, while the Presidio is a convenient location for firm partners who live in the northern part of the city or Marin, the county across the Golden Gate Bridge from San Francisco.”Presidio was too far, before COVID, for any founders to want to really come. Founders are not in downtown anymore, so we don’t have to be there anymore. We felt like it wasn’t going to be a burden for our founders to come here. They’re actually really excited,” said Eurie Kim, whose venture firm Forerunner left downtown for the Presidio in early 2022.Although there are no statistics on the locations of VC firms by neighborhood, the Presidio vacancy rate is about 5%, compared to an overall commercial real estate vacancy rate in San Francisco of 35%, up from 4% pre-pandemic, according to real estate firm CBRE and the Presidio Trust, the federal agency that manages the area.That is despite commercial real estate in the Presidio being on average 20% more expensive than downtown, according to CBRE data.Lisa Petrie, a spokesperson at Presidio Trust, said there had been broad interest in moving from downtown since 2020. “They all cite the amenities and the beautiful surroundings of this urban national park as the number one reason for locating here,” she added.The Presidio has long attracted non-profit organizations and entertainment firms. Lucasfilm has had its headquarters here since 2005, and the Walt Disney (NYSE:DIS) Family Museum opened in the park in 2009.Some VCs say they are still committed to downtown, however. When General Catalyst outgrew its office in South Park in San Francisco earlier this year, they moved to another downtown building a few blocks away. “We found a convenient location that’s close to public transportation, downtown hotels, and restaurants,” said Jon Rehagen, chief technology officer at General Catalyst, adding that the firm was partnering with local restaurants and service providers. “Hopefully, that will help to revive the downtown tech corridor that is still recovering after the pandemic.” Employees in Presidio also hoped for downtown’s recovery – but said for now they were happy they no longer needed to commute there.”That part of town just hasn’t evolved in so long,” said Molly Martell, vice president of Brand at Headline. She said she hoped the attention being focused on its problems would be a catalyst for change. “It’s just tragic to see what’s happening,” she added.A spokesperson for the office of San Francisco Mayor London Breed said the government wanted to support businesses of all types in all neighborhoods in the city. “Mayor Breed continues to implement strategic initiatives to help stabilize existing businesses and recruit new ones as part of her Roadmap to Downtown San Francisco’s Future plan. We will continue to emphasize efforts to support the revitalization of Downtown, but we also welcome investments in all parts of our City,” the spokesperson said in an email. Colin Yasukochi, executive director of CBRE’s Tech Insight, compared the Presidio to Sand Hill Road, the historic address for VCs in Silicon Valley.”We do have this phenomenon that we call ‘flight to quality’ in real estate here,” he said. “The Presidio has evolved as the Sand Hill Road of San Francisco.” More

A surge in US real yields — the return that bond investors can expect once inflation is taken into account — has reawakened investors’ concerns that shifts in the Treasury market are undermining one of the crucial supports for riskier assets like stocks.The yield on 10-year inflation-protected securities, known as Tips, rose to 1.82 per cent on Friday, the highest level since 2009, as investors became increasingly convinced that the Federal Reserve would have to hold interest rates at a high level for longer to tame inflation.Real yields are closely followed as a gauge of borrowing costs across the economy and a way to judge the relative value of risky assets. For investors, higher real yields on ultra low-risk government debt make other assets relatively less attractive. This week’s surge took 10-year inflation-adjusted borrowing costs past the levels of last October, when bonds sold off sharply and the outlook for US inflation was far more uncertain.“There’s a big risk that this real yield rise starts to damage the corporate sector,” said Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International. When debt that was borrowed in an environment where interest rates were at or close to zero needed to be refinanced at much higher rates today, “that’s where the problem starts”, he said.Ahmed added that a typical high yield company that raised money at about 4 per cent during the pandemic would now have to pay more than 12 per cent. “It’s a huge shock if you are refinancing right now,” he said. Analysts say that many companies took out loans when rates were slashed to help support the economy during pandemic lockdowns, and the effect of higher borrowing costs would probably be felt more acutely in the second half of next year and into 2025. But lending is already slowing down this year. Figures from Fidelity show that US banks have issued new loans and leases at an annualised rate of $279bn so far this year, down from an average level of $481bn between 2015 and 2019.With financial conditions tightening, investors are also increasingly nervous about US equity valuations. “Theoretically equity prices should be going down because the return for beating Tips is much higher,” said Jon Day, fixed income portfolio manager at Newton Investment Management. “Five years ago a 5 to 7 per cent return on equities should be good — now it’s not, it should be a 10 or 15 per cent return on equities just to keep the same gap.” That logic is one reason why a sharp rise in real yields following Wednesday’s Fed minutes sparked a stock sell-off. Still, equities have nevertheless run up sizeable gains this year, driven largely by excitement around the possibilities of artificial intelligence prompting investors to rush in to a handful of large technology companies. Some investors say a buoyant stock market and gloomier bond investors cannot both be right.“What [stocks] are pricing in is that ultimately real rates will come off quite strongly in the next year,” said Arun Sai, a senior multi-asset strategist at Pictet. “But if real yields stay high it will be damaging to equities.” More