Aurelia Butler

Central bankers who manage trillions in foreign exchange reserves are loading up on gold as geopolitical tensions including the war in Ukraine force them to rethink their investment strategies. An annual poll of 83 central banks, which manage a combined $7tn in foreign exchange assets, found that more than two-thirds of respondents thought their peers would increase their gold holdings in 2023. Bullion tends to become more attractive in times of instability, and demand has soared over the past year. The amount of gold bought by central banks rose by 152 per cent year on year in 2022 to 1,136 tonnes, according to the World Gold Council, a trade body.Most reserve managers surveyed rated geopolitical risk as one of their most important concerns — second only to high inflation — according to the HSBC Reserve Management Trends Survey published by Central Banking Publications. More than 40 per cent of respondents listed it as one of their top risk factors, compared with 23 per cent in last year’s poll. Around a third of those polled had changed, or were planning to change, the assets they purchase owing to tensions such as Russia’s invasion of Ukraine and worsening US-China relations. Víctor Méndez-Barreira, author of the survey, said Russia’s full-scale invasion of Ukraine had created a “factor that reserve managers now need to reckon with”. The invasion led the western alliance of the US, UK and EU to deploy extensive financial sanctions on Moscow, including measures to freeze around $300bn-worth of Russian central bank assets. The central bank’s gold reserves did not fall under the direct ambit of the sanctions as they were stockpiled in Russia. World Gold Council figures show many purchases made over the past year have been by central banks in countries that are not aligned with the west. The People’s Bank of China bought 62 tonnes of gold in November and December 2022, lifting its total bullion reserves above 2,000 tonnes for the first time. Turkey’s official gold reserves rose by 148 tonnes to 542 tonnes over 2022. States in the Middle East and Central Asia were also listed by the council as “active buyers” of gold last year. John Reade, chief market strategist at the World Gold Council, said the sanctions against Russia’s central bank had “caused many non-aligned central banks to reconsider where they should hold their international reserves”. He added: “Countries have recognised that the gold that Russia holds, because it’s outside of anybody else’s control, is useful in situations where you might not be able to access any other reserves.”While Russia’s gold was stored at home, many central banks keep their reserves abroad, including at the Bank of England and the New York Federal Reserve, reflecting London and New York’s status as the biggest gold dealing markets. Gold was also seen as an effective hedge against high inflation — the number one concern of more than 70 per cent of those polled. The price of bullion is now close to an all-time nominal high, following the surge in inflation over the course of 2022. The majority of those polled said the renminbi would become a larger share of international reserves over the rest of this decade. European Central Bank president Christine Lagarde warned in a speech last week that rifts between the US and China threatened the leading positions of the dollar and euro in global reserve management. According to IMF data, the dollar accounted for 58 per cent of all central bank reserves during the fourth quarter of last year. The euro accounted for a little over 20 per cent, and the renminbi just 2.7 per cent.The survey took place between February and mid-March 2023.Additional reporting by Harry Dempsey More

Companies are expanding production outside of China to reduce the risk from rising geopolitical tensions, but the country’s dominance in world trade makes cutting it out of global supply chains impossible, one of the world’s largest container shipping groups has said.“The scale [and] the weight of China means it is easy to overexaggerate the impact of ‘China plus one’,” said Michael Fitzgerald, deputy finance chief of Orient Overseas Container Line, a Hong Kong-headquartered group belonging to Chinese state-owned Cosco. “It’s happening. It’s real,” he told the Financial Times this month, referring to the strategy of companies shifting or expanding production outside of China amid tensions between Beijing and Washington. “But don’t forget the absolute scale of China is so huge that even if Vietnam is growing by a bigger number [and] if China’s growing by a smaller number, that’s still a huge proportion of the supply chain.”Apple, Samsung, Sony and Adidas are among the multinational companies that have shifted manufacturing to south-east Asia from China over the past few years, while Siemens has also been scouting for investments in the region to reduce supply chain risks.While Fitzgerald acknowledged that companies have made “adjustments” and shifted some production out of China due to lower labour costs and risk management, “it will be that kind of bit-by-bit, incremental shift. It’s not [that] everybody packs up and goes”.“It’s just not possible,” he said. “How would you want to shift that much production?”An OOCL container ship in Felixstowe, UK. The company says it has been diversifying growth in its freight routes to south-east Asia © Chris Ratcliffe/BloombergOOCL has, together with its parent company, about 11 per cent share of the global container shipping market, according to data from Alphaliner. Fitzgerald’s comments come after the share of US container import volumes coming from China dropped 10 percentage points compared with a year ago to about 32 per cent, according to logistics technology group Descartes, while the share of imports from India and Thailand rose slightly to 5 and 4 per cent, respectively, over the same period.OOCL said it was diversifying growth in its freight routes and expanding in south-east Asian countries including Vietnam. Its newest vessel — one of the world’s largest container ships — docked in Vietnam last month during its first Asia-Europe voyage, reflecting an adaptation to “where the trade flow is”, Fitzgerald said.“We have been growing a lot in emerging markets — to Africa, to Latin America — in recent years. South-east Asia, obviously. So, yes, of course, we have that diversification approach,” he said. “But look, [US-China] is still a huge market . . . whether you are talking about all sorts of different products.”The company said it had a record year in 2022, with revenue rising 18 per cent from the previous year to $19.8bn, even as soaring freight rates under the pandemic’s global supply chain disruptions began to normalise.

Fitzgerald forecast a “mixed” outlook for this year as shipping giants such as Maersk have warned of an “abrupt end” to the container shipping boom. OOCL reported a 58 per cent drop in first-quarter revenue this year compared with last year to $2.2bn.Earnings this year “will not be anything like it was in the last couple of years”, he said, but the company has reduced debt and is in a stronger net cash position. OOCL’s direct parent company, the $14bn investment holding group Orient Overseas (International), was acquired by Cosco in 2018. Combined with Cosco, one of China’s biggest shipping conglomerates, the group is the world’s fourth-largest player, according to Alphaliner.Additional reporting by Oliver Telling in London More

The agreement for around 2.5 million workers in the sector follows arbitration.Under the deal, each worker will receive a total of 3,000 euros in tax-free payments in instalments through to Feb. 2024 to help offset inflation, said the ministry in a statement. From March 2024, wages will rise by 200 euros per month and in a second step, there will be a 5.5% increase, it said.The deal will run for two years.Verdi, which had wanted 10.5% more money, said it would start a survey of its members with the wage commission making a final decision on May 15.”We have reached our pain threshold with our decision to make this compromise,” said Verdi chief Frank Werneke.A surge in the cost of living this year has led to some of Germany’s most disruptive strikes in decades. Consumer prices soared by 9.6% in Germany in 2022 but price pressures have abated in recent months after a winter energy crunch did not materialise and supply chain problems eased.”This agreement brings noticeable relief to employees. The tax-free payments will show up quickly in wallets,” said Interior Minister Nancy Faeser.Last month, strike action from unions Verdi and dbb brought railways and airports to a near-halt in Germany’s biggest walkout in more than three decades, according to Verdi. More

OTTAWA (Reuters) – A union representing some 155,000 striking Canadian public workers called on Saturday for Prime Minister Justin Trudeau to speed up negotiations over a deal for higher wages and work-from-home guarantees.A wide range of public services from tax returns to passport renewals have been affected since Wednesday, when about 120,000 workers under the Treasury Board and over 35,000 revenue agency workers, represented by Public Service Alliance of Canada (PSAC) union, went on strike.PSAC President Chris Aylward told reporters the strike would continue until a “fair deal” has been agreed. He said the union has been waiting for the federal government’s response to its proposal made on Thursday and that the union’s bargaining teams were “fed up” of waiting.”I need to see the prime minister getting involved in these negotiations and helping and assisting to move these negotiations along,” Aylward said.Talks resumed shortly after Aylward spoke. The Treasury Board of Canada, which oversees federal administration and has been handling negotiations for the government, said it had “been at the bargaining table every day since mediation started.””There is no time, nor tolerance for stalling and misinformation,” the office of Treasury Board President Mona Fortier said in a statement. “Now that the PSAC has returned to the table after their press conference, talks have resumed.”Earlier, the federal government said it offered a “fair, competitive offer,” including a 9% wage increase over three years, and that it would continue negotiations to reach an agreement quickly.Tax agency workers want a pay bump of 22.5% over three years, while the Treasury Board workers are seeking a 13.5% pay rise over three years. Inflation peaked at 8.1% last year but has since come down to about half of that.Apart from wages, PSAC also wants the new agreement to recognize the right to work remotely. More