Aurelia Butler

Russia’s prime minister Mikhail Mishustin is to head a high-profile delegation to a business forum in China next week as Moscow’s economic dependency on Beijing grows, more than a year into its full-scale invasion of Ukraine.Mishustin and Russia’s top energy official Alexander Novak, who are under western sanctions over the invasion, will be the most prominent Russian figures at the Russia-China Business Forum in Shanghai on May 23rd, according to people familiar with the matter. A spokesperson for Mishustin did not respond to a request for comment.Top state company officials including Sberbank’s Herman Gref and Rostelecom’s Mikhail Oseevsky, who are also sanctioned, plan to attend, they added, as does a group of businessmen from Russian industrial companies. A list of people applying for visas to attend the forum includes figures such as agricultural billionaires Andrei Guryev Jnr and Vadim Moshkovich, who are sanctioned, as well as Russia’s richest woman, the ecommerce billionaire Tatiana Bakalchuk, who is not. They did not immediately respond to requests for comment. The event is expected to underscore China’s growing support for president Vladimir Putin after western nations passed sweeping sanctions in response to the invasion that cut Russia off from global markets and crucial supply chains.A draft programme for the forum, seen by the Financial Times, outlines Russian and Chinese plans to increase economic co-operation in areas from agriculture and transport to energy, industry, and tech. Russia’s bilateral trade with China hit $190bn in 2022, a new record, and grew 39 per cent year on year to $54bn in the first quarter of this year. The renminbi has also taken on an increasing role in Russia’s payments after western sanctions left it largely unable to use the dollar.

China’s leader, Xi Jinping, made a state visit to Moscow in March just days after the International Criminal Court issued an arrest warrant for Putin on war crimes charges — a strong sign that Russia continues to enjoy Beijing’s backing.China has helped keep Russia’s economy afloat by ramping up purchases of its oil, while Chinese companies have stepped in to replace western suppliers or procure sanctioned western-made components for Russian companies on the black market.But Xi’s visit also highlighted the extent to which Russia’s economic reliance on China has made it the junior partner in the relationship. Xi’s two-day summit with Putin yielded no major agreements and conspicuously failed to make visible progress on finalising the Power of Siberia-2 pipeline, which Russia hopes will help reroute some of the gas exports it no longer sends to Europe.Some of its difficulties were on display in instructions to attendees on booking flights to Shanghai. State airline Aeroflot is offering flights on a Boeing 777, one of the western-made planes Russian airlines are struggling to service under sanctions. The visit will be the first trip to China for Mishustin, who became Russia’s prime minister shortly before the Covid-19 pandemic began in 2020. During his visit to Moscow in March, Xi told Mishustin to “visit China as soon as possible” in order to “establish close ties” with Li Qiang, China’s new prime minister.Xi indicated that Russia and China would revise a practice, held before China limited most international contact during the pandemic, whereby the countries’ presidents and prime ministers would exchange visits in alternating years. He also said that China expected Putin to attend the third summit of Xi’s Belt and Road Initiative this year.Bloomberg News first reported on Mishustin’s planned trip. More

Today’s top storiesTurkish leader Recep Tayyip Erdoğan appeared on course to extend his rule into a third decade, as he entered an election run-off, having comfortably beaten his main opponent in the first round. The result prompted some soul-searching among Turkey’s opposition.EU regulators cleared Microsoft’s $75bn acquisition of Activision Blizzard, breaking from the UK and US which are holding up the gaming industry’s biggest ever deal.UK Prime Minister Rishi Sunak promised to send hundreds of attack drones and other military hardware to Ukraine after face-to-face talks with President Volodymyr Zelenskyy.For up-to-the-minute news updates, visit our live blogGood evening.Brussels today raised its inflation and growth forecasts, arguing that the EU economy had weathered disruption from the war in Ukraine and the energy crisis and avoided what was once seen as an “inevitable” winter recession.EU-wide consumer price inflation would now hit 6.7 per cent this year and 3.1 per cent next year, the European Commission said, compared with its previous forecasts of 6.4 per cent and 2.8 per cent. The forecast for GDP growth for this year was revised up from 0.8 per cent to 1.0 per cent and for 2024 up from 1.6 per cent to 1.7 per cent.Eurozone inflation has fallen from an all-time high of 10.6 per cent in October to 7 per cent last month, mainly due to a sharp drop in energy prices. The improvement is a much-needed shot in the arm for business: separate data this morning showed eurozone industrial production fell by a more-than-expected 4.1 per cent in March, led by drops in factory activity in Ireland and car production in Germany. However, consumers may need some convincing that inflation is on the way down. According to the ECB’s latest survey, people are becoming more pessimistic about rising prices. The trend is likely to spook policymakers: if people expect price pressures to stay high for longer they are more likely to push for higher wages and accept higher prices, fuelling more inflation. High price growth will also leave a lasting drag on household finances, analysts warn, with consumers continuing to feel much poorer than before the pandemic.Meanwhile the debate continues about how quickly the ECB’s tightening of monetary policy will bring eurozone inflation down. The central bank said today that its efforts were only just starting to have an impact and would peak in 2024. The programme will also cut economic growth by an average of 2 percentage points over the next three years, it said.Need to know: UK and Europe economyFormer Bank of England policymaker Michael Saunders echoed recent findings from current Monetary Policy Committee members that “greedflation” — where businesses drive up inflation by increasing prices beyond what they need to — did not “reflect the reality for the UK”.New data from the Office for National Statistics highlighted the deterioration in Britons’ mental wellbeing, especially among the young, thanks to the twin blows of the pandemic and the cost of living crisis.

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The G7 and EU will ban the restart of Russian gas imports, the first time trade has been blocked by western powers since the invasion of Ukraine. The move will prevent exports to countries such as Poland and Germany, where Russia cut off supplies last year.A new FT visual presentation shows how covert voyages allegedly took South African arms to Russia.Need to know: Global economyOptimism that US headline inflation is heading in the right direction is being tempered with lingering concern over the stubbornly high “core” measure, which strips out volatile food and energy prices.A deal to end the stand-off over the US debt ceiling is appearing to take shape after talks at the weekend. Signals that Chinese president Xi Jinping has ambitions on Taiwan would wreck the progress Beijing has made over the past 40 years, writes chief foreign affairs columnist Gideon Rachman.Thailand’s opposition party leader Pita Limjaroenrat said he was ready to be prime minister and was in coalition talks after beating the country’s military rulers in yesterday’s election.Argentina is bringing in new emergency measures to deal with its worst economic crisis in two decades, including raising interest rates to 97 per cent.Ghana has long been thought of as a model for African development, but its reputation now lies in ruins after defaulting on its debts. Our Big Read looks at the lessons for neighbouring countries which also overspent when debt was cheap.Global demand for platinum — a key metal in car catalytic converters as well as in glass-fibre for wind turbines, electronics and petrochemical plants — is expected to surge 28 per cent this year as supply falters in top producer South Africa. China holds about 85 per cent of the world’s stocks.Need to know: businessOnce-feted Vice Media filed for bankruptcy protection ahead of a proposed deal to sell the business to a consortium of lenders. The company’s anarchic style was popular with millennials but has struggled to become financially successful as traditional media groups hit back, and tech giants such as Meta tighten their grip on digital advertising.Chinese tech entrepreneurs are going on the global offensive following the success of companies such as TikTok and Shein and continuing economic turmoil and fierce competition at home. China’s highly competitive electric vehicle market is set for a shakeout as prices plunge and foreign carmakers enter the fray. One projection says the number of EV companies in China will shrink from about 200 to between five and 10 in the coming years. The board of Australia’s Newcrest Mining unanimously backed a A$29bn ($19bn) takeover offer by its US rival Newmont, paving the way for the world’s largest gold miner to strengthen its grip on the sector.The World of WorkThe UK’s opposition Labour party is planning sweeping changes to the labour market should it get elected, including ending “fire and rehire” and the introduction of a “right to disconnect” from out-of-hours emails and texts, as has been introduced in countries such as France, Italy and Portugal.Demand for supply chain managers has surged following recent disruptions to global trade, propelling once-overlooked professionals to increasingly important positions in multinational companies.Lockdowns may have spelt the end for much of formal office gear but, Emma Jacobs asks, do we still need boundaries between work and weekend wardrobes?Uncertain future demand for office space has made workplaces the epicentre of anxiety about the wider UK commercial property market. The situation is echoed in Germany, where empty offices have tripled since the pandemic. Some good newsDeforestation in Brazil’s Amazon rainforest fell 68 per cent in April from the previous year, according to preliminary government data. The data are the first sign of progress for President Luiz Inácio Lula da Silva who won last year’s election with a promise to end the destruction. More

The writer is a contributing columnist, based in ChicagoThe honeymoon, it seems, is over. China and the US have detested one another for most of my lifetime, but for a brief couple of decades, around the turn of the millennium, they seemed unexpectedly determined to be friends. Luckily, those were the years — between the mid-1990s and the mid 2010s — when I adopted two Chinese infants, and moved to Shanghai to raise them. It was the best time to have a foot in both camps; I had no idea how soon that would become impossible. Now relations between my two favourite superpowers have sunk to their worst point since Richard Nixon’s diplomatic bombshell of visiting China in 1972 — and the signs are palpable, even in the insular US Midwest where I now live. It’s not all chips and TikTok either: dozens of US states and federal lawmakers are trying to stop Chinese nationals from buying land in the US. Never mind that Chinese own less than 1 per cent of foreign-held US land, according to a 2021 US Department of Agriculture report. The figure has risen substantially in recent years, and the USDA says Beijing’s overseas agricultural investments grew more than tenfold — from $300mn in 2009 to $3.3bn in 2016. That has given my homeland the jitters. No federal law currently stops foreigners from buying US land, and a proposed bill to ban US farmland purchases by China, Russia, Iran and North Korea has so far gone nowhere in Congress. Washington proposed a rule this month that would restrict foreigners from buying land near eight military bases. But some US states want to go much further.Micah Brown of the National Agricultural Law Center says battles over foreign ownership go back to colonial days, and early in the previous century, most Asians were barred from owning land in many states. Now the debate is flaring again: 34 US states want to restrict foreign investment in land, he says. Last week Florida governor Ron DeSantis signed a law to stop most Chinese citizens from buying farmland. His probable run for the US presidency may not be unrelated, since he quickly claimed that his state is “leading the nation in terms of what we’re doing to stop the influence of the Chinese Communist party”. United Chinese Americans, a lobby group, said the law would “legitimise and normalise” discrimination and racism towards Asian Americans. A few days earlier, the governor of Montana signed a law preventing governments, businesses and individuals from China, Cuba, Iran, North Korea, Russia or Venezuela from buying or leasing farmland. And Texas legislators have been debating a law to restrict certain foreigners from buying such assets after they pulled the plug on a proposed Chinese wind farm investment. South Dakota tried a different approach: angered by the failure of the federal government to act when Fufeng, a Chinese food manufacturer, proposed a big investment near a military base in North Dakota, it now wants to establish its own Cfius (committee on foreign investment). In the Fufeng case, the federal Cfius ruled it had no jurisdiction because the base in question wasn’t on its list of military facilities triggering special scrutiny; Washington is now proposing adding it to the list. “If a federal entity can’t investigate such an obvious concern, then maybe something is broken,” says Rachel Oglesby, deputy chief of staff in the South Dakota governor’s office. She peppers her talk with references to Chinese “invasions” and “enemy” countries, and concludes that “China has grown a lot stronger in the last 10 to 15 years and people are rightfully scared about that”. The proposal for a state-level Cfius didn’t make it through South Dakota’s legislative session, she says, because of fears that “friendly” countries might get caught up in the red tape, but she insists the issue is gathering momentum.Antonia Tzinova, an expert on foreign agricultural investment at the law firm Holland & Knight, puts my fears about all this into words. “The chatter is getting stronger and stronger and at some point someone will make a stupid mistake and we will all live to regret” the impact on the bilateral relationship, she says. Food and land and patriotism: it’s a toxic cocktail. More

WASHINGTON (Reuters) – President Joe Biden’s administration and Republicans in the U.S. Congress are in talks to end their standoff over raising the $31.4 trillion debt ceiling, haggling over vastly different proposals that both claim to cut deficits by trillions of dollars.Democrat Biden’s full $6.8 trillion fiscal 2024 budget request doubles down on his economic agenda to shrink inequality, with pre-K, childcare and more healthcare. It is paid for by with tax increases on wealthy Americans and corporations.U.S. House of Representatives Speaker Kevin McCarthy and his fellow Republicans’ “Limit Save and Grow Act” is a spending reduction bill that would cut 2024 federal discretionary spending to fiscal 2022 levels and rescind signature Biden programs already approved by Congress.Apples-to-apples comparisons are difficult, but here’s where they can be lined up:TOP-LINE DISCRETIONARY SPENDINGDiscretionary spending in the federal budget refers to funds for everything except mandatory programs such as Social Security and Medicare. It is at the heart of the partisan dispute.Republicans: The House bill would cut 2024 U.S. discretionary spending back to the 2022 level of $1.664 trillion and limit subsequent annual increases to 1% for a decade. The cumulative 10-year savings would be $3.2 trillion, according to the Congressional Budget Office (CBO).But the bill does not specify how this 4.1% cut from the 2023 level of $1.736 trillion would be allocated among programs. Republicans have objected to the Biden administration’s accusations that across-the-board cuts would reduce veterans’ benefits, saying they never intended that.Biden: The White House’s 2024 budget request proposes $1.9 trillion in discretionary spending – a 9.4% increase followed by annual increases averaging 1% over a decade. The discretionary spending proposals would add $2.23 trillion to deficits over 10 years, offset by tax increases.DEFICIT REDUCTIONRepublicans: Full enactment of the Limit, Save and Grow Act would result in total 10-year deficit reduction of $4.804 trillion from the CBO’s February baseline.Biden: Full enactment of the fiscal 2024 budget request would reduce deficits by $2.857 trillion, according to the White House.TAXESRepublicans: Repeal clean energy tax credits and spending passed in the Inflation Reduction Act, for a 10-year savings of $540 billion, according to CBO. The plan contains no changes to current tax rates.Biden: Eliminate various fossil fuel, digital currency and other tax breaks to save $325 billion.Expand Child Tax Credit through 2025 and convert it to monthly payments, expand the Earned Income Tax Credit for low-wage earners and expand other tax cuts and credits, for an estimated cost of $615 billion.Raise the corporate income tax rate to 28% from 21%, reform international tax rules, increase taxes on corporate stock buybacks and enact other business tax increases to raise $3.0 trillion over 10 years.Enact a “billionaires tax” of 25% on unrealized asset gains for the wealthiest 0.01% of Americans, increase the top individual tax rate to 39.6% from 37% and increase capital gains and estate taxes, to raise $985 billion.Apply net investment income tax to “pass-through” business income for individuals and increase Medicare tax rates for taxpayers making over $400,000, to raise $680 billion.EDUCATION AND SOCIAL PROGRAMSRepublicans: Repeal Biden’s student debt cancellation and expansion of income-driven student loan repayment plans, reversing $460 billion in costs recognized in fiscal 2022. The Supreme Court is expected to rule in June on a legal challenge to Biden’s debt cancellation, which may make this a moot point.Expand work requirements for Medicaid, food stamps and other welfare programs, for 10-year savings of $120 billion, according to CBO.Biden: Free pre-K education, child care, community college, national paid family and medical leave and other higher education spending, for increased spending of $1.1 trillion over a decade.Expand Affordable Care Act health care subsidies and coverage, Indian Health Service funding and other long-term care spending, for increased spending of $880 billion.INTERNAL REVENUE SERVICEHow the IRS, the U.S.’s tax collection agency, is treated is a major divide. Republicans: Repeal $80 billion in IRS funding passed by Democrats in Biden’s signature climate bill to boosting enforcement, operations and customer service. This adds $120 billion over 10 years to the deficit because of lower tax collections, according to CBO.Biden: Extend the $80 billion in 10-year IRS investments for two more years, investing about $29 billion, and increase the IRS’s annual operations budget by $1.8 billion. The increase raises an additional $134.1 billion over a decade, the White House estimates.OTHER PROVISIONS:Republicans: Rescind unused COVID-19 relief funds for a savings of $30 billion, with nearly half of that realized next year. Modify regulations, permitting and leases for energy projects, for a $3 billion in deficit reduction. Requires congressional approval of rules with an annual economic effect of at least $100 million, for an unknown budget impact.Biden: Reduce future growth of defense discretionary spending, expand user fees and spectrum auctions, extend budget sequestration for Medicare and reduce fraud and abuse, for savings of $350 billion.Note: Estimates for the Republican plan are from the Congressional Budget Office, based on February baseline deficits that were revised upwards on Friday. Estimates for Biden’s budget request are from the White House, as CBO has not yet issued a score. More

WASHINGTON (Reuters) – President Joe Biden and congressional Republicans enter a critical week for debt-ceiling talks hoping they can find common ground on spending levels and energy regulations to avert a devastating default. Though the two sides did not appear close to an agreement, the White House has not ruled out the annual spending caps that Republicans say must accompany any increase in the nation’s $31.4 trillion debt limit. Republicans who control the House of Representatives, for their part, are not insisting on other conditions that the White House has deemed off limits, such as a repeal of the green-energy incentives in Biden’s Inflation Reduction Act of 2022.The two sides could also potentially find common ground on energy regulations.Biden told reporters on Sunday that he thought both sides wanted to reach a deal. “I think we’ll be able to do it,” he said.Staff from the two camps met through the weekend for talks that White House officials described as constructive.Biden is due to meet with congressional leaders on Tuesday for face-to-face talks, one day before he leaves for a meeting of the Group of Seven rich nations in Japan. That trip will leave little time for the two sides to reach a deal before the United States runs out of money to pay its bills, which Treasury officials say could come as soon as June 1.A first-ever U.S. default would plunge the country into recession and inject chaos into global financial markets, economists say, and the standoff has started to worry investors and consumers.Republicans say there is plenty of time.”Ninety percent of the work on these deals always happens in the last two weeks anyway. And so I still see a path forward to success,” Representative Dusty Johnson, who helped craft the Republican proposal, told Reuters on Friday.Biden has insisted that Congress must increase the country’s borrowing capacity without conditions, but the White House says it is also willing to discuss budget matters with Republicans who control the House of Representatives.”Our expectation is that Congress will do what is necessary even as we continue to have parallel discussions on the budget,” Lael Brainard, head of the White House’s National Economic Council, said on CBS on Sunday.Republicans face pressure from former President Donald Trump, who said they should allow the country to default unless all their demands are met. “Better now than later,” he wrote on social media. House Republicans passed legislation in April that pairs a $1.5 trillion debt-ceiling hike with $4.8 trillion in spending cuts, largely achieved by cutting annual discretionary spending by 8% next year and capping growth in the years to come.SPENDING CAP INCREASES?Democrats say they will not agree to other elements of that legislation, such as a repeal of Biden’s student-loan forgiveness effort and an increase in work requirements for some benefit programs. But they have not ruled out spending caps. Republican Representative Don Bacon, a leading centrist, told reporters on Friday that an agreement could potentially call for 2% annual increases, rather than the 1% specified by the Republican bill.”We may be able to negotiate something a little higher than what we have, but maybe not as high as what the president would want,” he said.The White House and Republicans may agree to ease permitting requirements for pipelines and other energy infrastructure – though that would require time to draft into legislation, said Brian Riedl, a fellow at the conservative Manhattan Institute.The longer the two sides take to reach a deal, the smaller it is likely to be, he said. “The field of play is going to shrink because you’re running out of time on broader policies,” he told Reuters. More

“The thing that made it a close call for me is this big question mark about what is going to be the impact of this on credit conditions,” Goolsbee told CNBC, adding that things did not appear to have become notably worse since the prior Fed meeting. Asked about market expectations for rate cuts later in the year, even though Fed policymaker forecasts do not call for any, Goolsbee appeared to have a warning, noting that failed Silicon Valley Bank took off its own hedges against higher interest rates because it believed markets and not the Fed’s projections. More

Soaring UK inflation is not the result of higher company profit margins, even for food prices, a former Bank of England interest rate setter has said, echoing similar findings by current members of the Monetary Policy Committee. Michael Saunders, senior economic adviser at consultancy Oxford Economics, said on Monday that “greedflation”, where businesses drive up inflation by increasing prices beyond the extent that their own price pressures would demand, did not “reflect the reality for the UK”.Instead, the “overwhelming majority of the rise in inflation reflects cost pressures from energy and other commodities”, noted Saunders, who served on the MPC between 2016 and 2022. A number of central banks have warned that “greedflation” risks entrenching price pressures. Profit margins of US companies hit their highest level since the aftermath of the second world war in 2022, according to a study by the University of Massachusetts Amherst. Eurozone businesses have also enjoyed a sharp expansion in their profitability over the past two years, research by French bank Natixis found.Saunders’ comments echo remarks by Ben Broadbent, BoE deputy governor, who last week said there had been “no increase in the profit share of national income” in the UK, following concerns over supermarket “profiteering”.Speaking in the same session, which came after the central bank raised interest rates by a quarter of a percentage point to 4.5 per cent, BoE governor Andrew Bailey said that in terms of aggregate corporate profits, the figures for the eurozone and the UK did not “tell the same story”.Saunders noted that while energy companies’ profit margins had risen significantly, the aggregate profits of non-financial groups, excluding oil and gas, had fallen in the year to the third quarter of 2022 and were close to the lows of the past 25 years as a share of gross domestic product. “Clearly, the exceptional price rises of a few companies do not reflect the general pattern, with profits of both manufacturing and service sector firms falling as a share of turnover and aggregate GDP,” he wrote.Data from the Office for National Statistics in February showed that the profitability of UK businesses, excluding oil and gas producers, fell in the year to Q3 2022, hitting one of its lowest-ever levels.Saunders said food inflation — which reached a 45-year high of 19.2 per cent in March — was largely the result of input prices rising by nearly 30 per cent for UK food manufacturers and the costs of importing food increasing by more than 40 per cent.

He added that the current fall in agricultural commodity prices had yet to show up in consumer food inflation because of “the usual lags rather than profiteering”.Saunders said high inflation denting corporate profits had implications for monetary policy, because it reduced the need for rate increases.If high inflation is generating a squeeze on profits and wages, the “weakness in activity is likely to be greater and more prolonged than in a case of buoyant profits, thereby creating disinflationary pressures that will help bring inflation substantially lower”. More