Aurelia Butler

There are few things more heartening than the comeuppance of a brute, especially when that comeuppance liberates thousands of people from the brute’s ability to terrorise them. But Ukraine’s exhilarating advance on the battlefield in the past week or so carries lessons beyond the satisfaction of good’s victory over evil.I remember well conversations in the first days after President Vladimir Putin’s attack about whether to arm Ukraine’s government. A common view was that because the country was bound to be overrun by Russia’s army in a matter of days, sending arms would only make things worse by encouraging a permanent but permanently doomed guerrilla effort: “a new Afghanistan on our doorsteps” as some put it. In these conversations I insisted that even those who expected Ukraine to lose at least owed them a chance at defending their country. Fortunately, the Ukrainians’ bravery and fighting prowess stopped the assault on Kyiv fast and spectacularly enough to rally more western support. That support made this month’s counter-offensive possible.Expectations about what will happen play a deep role in what actually does happen. Ukraine’s stout defence in the battle for Kyiv, by confounding expectations of a quick defeat, made the political winds shift in the west. This month’s counter-offensive, by confounding western expectations of a dragged-out positional war, has shifted them again. Already, as my colleague Henry Foy reports, the view is taking hold that better and faster weapons delivery could hasten rather than delay an end to the war, and a better end at that. Western countries are now said to be discussing providing Kyiv with fighter aircraft, a move that was previously rejected as too likely to provoke Putin.If these expectations had shifted earlier, or shifted more, it was likely that Ukraine would have been given more military aid sooner. Its defence and counter-attacks would then have been even more impressive, thus validating those very expectations. Conversely, if those who argued Ukraine didn’t stand a chance had won the rhetorical battle, the effects of such a victory may well have proved them right in the real war too. Politicians know this function of expectations very well. Putin, always the spy, has presided over information warfare against the west for as long as he has been in power. His success (on which he has spent significant amounts of money) can be measured in the shocking number of otherwise thoughtful people around the world who seem content to lay the ultimate blame for torture and rapes in Bucha and elsewhere at the door of western democracies. From the start of the war Volodymyr Zelenskyy, Putin’s opposite in so many ways, grasped the importance of shaping a domestic and international narrative, and his excellence in communication has added to the bravery and organisational skill of Ukrainians on the ground. Economists have an analogous, if less refined, understanding of expectations. Game theory, which analyses interactive economic situations, shows how people’s behaviour can be shaped by their expectations of the behaviour of others in such a way that expectations become self-fulfilling. Under certain conditions, if everyone expects the bad outcome to occur, it does; and if everyone expects things to work out better, they do — all because of the actions people choose given what they expect others to do. Financial price fluctuations can exhibit this pattern. So can demand-led economic cycles driven, as Keynes put it, by “animal spirits”.Lift the gaze up from narrow models, and self-fulfilling expectations help make sense of large-scale phenomena. Five years ago, I wrote about economics Nobel laureate Robert Shiller’s work on “narrative epidemics” and how when shared stories take hold of enough people’s minds, they change reality itself. One example back then was how the election of Donald Trump — a master of storytelling if nothing else — prompted a boost to economic sentiment among his supporters, which probably kept the economy humming along nicely.So here is one similarity between war and the economy. Because expectations matter, both are profoundly unpredictable. And neither is fully determined by “hard” factors but influenced by mass psychology. Take today’s energy prices. These are, in part, based not just on current physical constraints but on the expectations of those trading in the financial hedging markets for prices in the future. Nobody has any idea whether next year’s physical energy markets will match what financial traders expect today. But those expectations influence the prices companies and consumers pay for physical energy today. And if those expectations change — for example, from signs of government intervention, or as the fact of Europe’s rapidly filling gas reservoirs sinks in — so could the nature of the energy price crisis, even with little immediate change in the physical constraints.As my colleague Gillian Tett recently pointed out, Shiller’s insights also apply to central banking. The debate on inflation boils down to whether people will start expecting current inflation to persist — and, therefore, cause it to persist by driving up wages and prices further. The few of us who think central banks are wrong to kill our current strong jobs growth point to how longer-term inflation expectations remain quiescent. The majority that supports tightening thinks that because the economy is overheating, only tightening can prevent expectations from shifting up (even when they agree that no tightening would be necessary if inflation only reflects one-off supply shocks). But, in one way, central bankers face a trade-off that Ukraine’s army doesn’t. Ukraine can change expectations for the better by changing the situation on the ground for the better. Central bankers’ chosen strategy for changing inflation expectations for the better, however, causes harm to the economy by killing job and income growth. If instead they can convince people that inflation will go away by itself as supply shocks fade away, they will not have to cause harm to the economy in the process. My own view is that because that is indeed what people seem to expect, it is a gross policy error to make borrowing costlier.Consider, then, how Ukraine’s military success may shape expectations in Russia. One of the books I read as a student that I remember best is Étienne de La Boétie’s Discourse on Voluntary Servitude, which points out that a dictator can only have power over others insofar as they choose to obey him or her. In pure physical terms, an individual could never dominate a nation, but dictatorship is possible through a network of self-reinforcing fears that those who rebel will be punished. That is why revolutions, when they happen, happen so fast, or why once taboos are broken, they are hard to restore. When enough people stop expecting enough others to comply, reasons evaporate for anyone to comply at all. Call it the Wizard of Oz theory of power: once the expectation of enforcement falls away, so does any ability to enforce.The most intriguing impact of Ukraine’s recent victories, therefore, is in Moscow. Explicit dissent against the war seems to have broken out (as has the open use of the taboo word “war”), from critical talk show guests to municipal officials calling for Putin’s impeachment. This may matter, or it may not. But we won’t know how many Russians would oppose the war if they did not expect to be punished for it until enough Russians no longer expect to be punished for it. The widespread belief that it is possible to oppose a dictator has a way of making just that happen. If Ukrainians keep succeeding as they have, things could change much faster in Russia than we think.Other readablesIn another effect of changed expectations, I write in my column this week that Vladimir Putin has forced the EU into the energy union it should have built long ago.As you will know from last week’s Free Lunch (and several more before), I take a deep interest in wealth taxes. So I was intrigued to learn from new research on more than a hundred years of German wealth inequality that the country imposed a large one-off tax on wealth in 1948. “Owing to this wealth tax, Germany became one of the most equal countries before her postwar economic miracle took off,” the researchers say.Expect more stories like this one: durable goods manufacturers — in this case, Electrolux — facing a double whammy from retrenching consumers and overstocked inventories from back when nobody could get enough of industrial goods.Numbers newsThe UK economy is flatlining. But maybe inflation is, too.Overall US inflation was only 0.1 per cent month on month in August, thanks to falling energy prices. Outside of energy, however, core inflation rose 0.6 per cent, or more than 6 per cent on an annualised basis. The Guardian offers an explainer of the UK royal family’s finances. More

South Korea said it was reviewing “contingency plans” to tackle foreign exchange volatility, with the Korean won hovering at a 13-year low against the US dollar as currencies across Asia come under pressure from an increasingly hawkish Federal Reserve.Finance minister Choo Kyung-ho stepped up verbal intervention on Thursday to try to stem an acute sell-off in the South Korean currency, saying authorities would take necessary measures if there was excessive volatility.“The exchange rate is rising too fast and people are concerned about this. So we are closely monitoring the market situation,” he told a session of parliament. “We are staying on alert and reviewing various contingency plans through inter-ministry discussions.”The won extended losses on Thursday, falling to Won1,393.7 against the dollar, its lowest level since March 2009. The currency of the export-driven economy has weakened 17 per cent against the dollar this year. The Bank of Korea warned this month that the won’s recent fall had been too fast relative to the country’s economic fundamentals. The central bank raised its policy rate in August by a quarter point to 2.5 per cent and signalled more tightening to counter the won’s weakness.Analysts expected the currency to continue its descent until the end of this year, dragged down by the Fed’s aggressive monetary tightening and Seoul’s ballooning trade deficits.“Asian currencies, including the won, will remain under pressure for the time being as the Fed continues its outsized rate hikes while Japan maintains its loose stance, China is cutting rates and South Korea is not raising rates as much as the US,” said Hwang Se-woon, a researcher at Korea Capital Market Institute. “But the won is likely to fall further, although its pace is unlikely to be as rapid as the yen’s or yuan’s.”

The weaker won has heightened inflationary pressure by increasing import costs, as Asia’s fourth-largest economy relies heavily on energy imports. South Korea’s inflation rate slowed to 5.7 per cent in August, from 6.3 per cent in July, a 24-year high.But the finance minister has forecast South Korean inflation to peak in October. The country reported a record trade deficit of $9.47bn in August as export growth slowed while higher prices of oil and other commodities inflated the country’s import bill.“We do not expect the trade account to turn supportive of the won in the near term,” Standard Chartered said in a recent research note. “Slowing global growth and external demand will likely keep the trade account under pressure, outweighing any benefits from a pullback in commodity prices.” More

Some of China’s biggest state-run banks have cut deposit rates for the first time since 2015, as Beijing searches for ways to boost flagging growth in the world’s second-largest economy without risking runaway depreciation of the renminbi.State lenders including Industrial and Commercial Bank of China, Bank of China, Bank of Communications and Agricultural Bank of China cut interest rates for three-year deposits by 0.15 percentage points on Thursday to 2.6 per cent, according to the banks. The lenders also reduced rates for three-year certificates of deposit by 0.1 percentage points to 1.45 per cent.The measures mark the latest attempt to revive economic growth in China, where policymakers are struggling to contain the fallout from disruptive Covid-19 lockdowns and a liquidity crisis cascading through the property sector. The cut to deposit rates comes after China trimmed its benchmark lending rate in August, with the one-year loan prime rate lowered 0.05 percentage points to 3.65 per cent and the five-year LPR, a reference rate for mortgages, slashed by 0.15 percentage points to 4.3 per cent, as regulators sought to support small businesses and homebuyers.Economists and analysts said the co-ordinated move by state lenders on Thursday suggested they had received instructions from the People’s Bank of China. Rising rates in the US have spurred capital outflows from China, as investors have traded renminbi for dollars, putting the Chinese currency on a course for its largest annual fall against the dollar on record.“The PBoC is in a bit of a bind at the moment,” said Julian Evans-Pritchard, senior China economist at Capital Economics. “It wants to provide more monetary support to the economy, but at the same time they don’t want to let the exchange rate go too far beyond Rmb7 against the dollar.”

Evans-Pritchard added that lower deposit rates would allow Chinese banks to cut lending rates further without requiring an official cut to the benchmark loan prime rate that could undermine China’s currency. “It’s a sort of stealth approach to pushing down lending rates,” he said. Analysts at Nomura warned that cuts to China’s deposit rates would have a “negligible impact on the economy”, adding that the “keys to an economic recovery” were China’s Covid-19 policies and whether Beijing took decisive action to boost housing demand.Chinese banks have faced shrinking net interest margins on loans this year due to LPR cuts. Nicholas Zhu, senior credit officer at Moody’s Investors Service, said the reductions to deposit rates would offset pressure on net interest margins and “help stabilise profitability and support capitalisation, a credit positive for banks”.

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There’s a cynical old saying in Brussels: EU trade policy is set by Germany, whose trade policy is set by German export manufacturers, whose trade policy is set by the German car industry, whose trade policy is set by Volkswagen. A bit of a caricature, of course, but not the worst basis for analysis.The country’s manufacturing export model is now under threat. Voices in government are arguing that having already suffered from a reckless reliance on Russian gas, Germany’s economic dependence on another belligerent autocracy in the form of China has left it dangerously exposed.The German and international media report that the economy ministry, run by the Greens, is looking at reducing support such as state investment and export guarantees for German companies operating in China. It’s intended to be about diversification rather than reducing exports or investment overall. But since a reduction in operations in an economy the size of China’s is unlikely to be made up by foreign markets elsewhere, it might well form part of a long-term reorientation away from manufacturing mercantilism. If so, that would be a good outcome. The dangers to the German and wider EU economies from Berlin’s export-orientated model have long been clear. From the early 2000s, by suppressing domestic wages and demand and prioritising current account surpluses, Germany ultimately shifted production home and unemployment to the rest of the eurozone, and increasingly irritated the US.This model is also more and more at odds with the EU’s stated approach to trade policy. Traditionally, the German export lobby (and its supply chain satellites in central and eastern Europe) has been important in pushing for free trade agreements — even if these days it is often more interested in investing in consumer markets like China than exporting there. Former chancellor Angela Merkel regularly undertook trips to China with a gaggle of German corporate executives in tow. The Greens, who have intriguingly emerged as Germany’s chief Russia and China foreign policy hawks, have pointed out the difficulties and contradictions of this position. A draft EU deal with the South American Mercosur trading bloc signed in 2019, for example, is widely known as “cars for beef”. It gives European automakers access to Brazil’s vast consumer market, overriding the protests of French and Irish cattle farmers against Brazilian imports. In the dying days of its six-month EU presidency in 2020, Germany also drove through the bilateral Comprehensive Agreement on Investment (CAI) with China, largely designed to protect German operations there.For a trading bloc which claims to uphold the multilateral order and protect the environment and labour rights, the model is increasingly trapping the EU in a contradiction. The Mercosur deal is now stalled because of concerns about the destruction of the Amazon. CAI was deservedly blocked by opposition in the European Parliament, which rejected Commission president Ursula von der Leyen’s laughable claim that the deal would materially promote human rights in China.You can believe that the EU should not be fiddling about with tangential issues such as the environment and human rights in trade deals, but you cannot seriously argue that agreements like CAI do much to advance them. Much of the German industrial elite doesn’t appear to lie awake worrying about trade with morally dubious partners. Herbert Diess, the now-sacked chief executive of Volkswagen, in 2019 famously denied knowledge of Uyghur re-education camps in China’s Xinjiang province, where VW has a plant, and this year called for an end to the war in Ukraine and for rapprochement with Russia.Germany has passed a law making companies responsible for human rights abuses in their supply chains, ahead of a similar initiative by the EU. Brussels has also enacted a ban on products made with forced labour. But German industry leaned against such moves. Germany’s domestic legislation does not create a new civil liability for companies, and their obligations to find and eliminate abuses are considerably weaker in lower tiers of their supply chains. In another triumph of German corporate communications, Roland Busch, chief executive of Siemens, said last December that import bans were a bad idea and the forced labour issue couldn’t be fixed by confrontation with China.For the moment, Germany is having enough trouble with its rushed attempt to do without Russian gas. Fundamental structural change in business and the country’s political economy will take a lot longer. Still, if the EU is serious about reorientating its trade policy and Germany about rebalancing its economy towards domestic demand, ending the export bias is an important step. In the meantime, reducing artificial incentives for companies to become dependent on China is a good development in [email protected] More

Tianjin Saixiang’s “nanoknife” may be a form of precision surgery, but it is indicative of a broad trend that is reshaping China’s economic relationship with the rest of the world.Made by a little-known Chinese company, it is designed to target prostate cancer without invasive surgery. Tianjin Saixiang was given the official imprimatur of “little giant” in 2020, meaning it qualifies for preferential treatment in return for helping China to climb the technology ladder.According to an executive at the company, who declined to be named, this Chinese version of a cutting-edge treatment is part of a drive to reduce the need for imported medical technologies. The government “requires local hospitals to, where possible, replace foreign medical equipment with domestic ones,” says the executive. “That is a boon for us.”This month, Xi Jinping gave a speech about the urgent need for breakthroughs in domestic technology in order to outcompete the west and bolster national security. The experience of Tianjin Saixiang is one small example of the scale of the Chinese leader’s ambition. Under Xi — who appears all but certain to secure another term in power next month — China is seeking to become a state-led and self-sufficient techno-superpower that will no longer rely so much on the west.The underlying objective, say analysts, is to build a “fortress China” — re-engineering the world’s second-largest economy so it can run on internal energies and, if the need arises, withstand a military conflict. While many in the US want to “decouple” their economy from China, Beijing wants to become less dependent on the west — and especially on its technology.The strategy has several constituent parts and — if successful — will take several years to realise, the analysts say. In technology, the aim is to spur domestic innovation and localise strategic aspects of the supply chain. In energy, the objective is to boost the deployment of renewables and reduce reliance on seaborne oil and gas. In food, the path to greater self-reliance includes revitalising the local seed industry. In finance, the imperative is to counter the potential weaponisation of the US dollar.Such changes represent a clear challenge for many multinational companies, some of which derive the lion’s share of their global growth from China’s market.China’s self-sufficiency drive has been building for a number of years but has been accelerated since Russia’s invasion of Ukraine and the subsequent western sanctions on Moscow. Chen Zhiwu, a professor of finance at the University of Hong Kong, says Chinese leaders understand military conflicts may be “hard to avoid” if Beijing wants to unify Taiwan with the mainland. “The comprehensive economic sanctions against Russia after its invasion of Ukraine have only added urgency to [China] achieving self-sufficiency in technology, finance, food and energy,” Chen adds. “Self-sufficiency as a phrase has regained currency in the party’s publications.”Steve Tsang, a professor at Soas, University of London, warns the construction of “fortress China” does not mean Beijing is about to seal itself off from the outside world. As the global economy’s top trading power and one of the biggest recipients of foreign direct investment, such a course would amount to economic self-harm.“Instead, [Xi] is building a series of moving fortresses or forward bases to advance China’s place in the world,” says Tsang. “They are above all about making China an innovative power with technologies that others will look to China for sharing, making them dependent on China.”

Heavy gamble on techMany of the changes being signalled as China prepares to host the 20th National Congress of the Chinese Communist party in mid-October have been foreshadowed or in train for some time. But the party congress appears likely to reaffirm and accelerate the pace of several such developments.Xi’s remarks as he presided this month over a meeting of the Central Commission for Comprehensively Deepening Reform, one of the party bodies he uses to rule China, set out a clear vision for technology.The development of “core technologies” was not something that could be left up to the free market but had to be led by China’s government. “It is necessary to strengthen the centralised and unified leadership of the [. . .] Central Committee and establish an authoritative decision-making command system [for technology],” the CCTV broadcast quoted Xi as saying.In an indication of the importance that Xi attaches to this agenda, he appears set to pack the new Central Committee, which comprises about 200 of the most senior officials in China, with technocrats, rather than career bureaucrats, according to an analysis by Damien Ma, managing director of Macro Polo, a US-based think-tank.These tech-savvy officials will then be responsible for overseeing what amounts to a huge gamble. China is pouring unprecedented resources into fostering technological self-reliance, especially in strategic industries such as semiconductors, in the hope that such funding will lead to innovation and import substitution.In total, well over $150bn has been pledged to spur progress in semiconductors. A report last year by Semiconductor Industry Association, a grouping of US chipmakers, found that $39bn has already been invested by China’s National Integrated Circuits Fund largely in new manufacturing projects.In addition, more than 15 local governments have announced funds worth a total of $25bn dedicated to the support of Chinese semiconductor companies. A further $50bn has been earmarked in the form of “government grants, equity investments and low-interest loans”, the SIA report said.By comparison, the US plan to dispense $50bn to support its own domestic semiconductor industry looks much more modest. Semiconductors are generally considered the Achilles heel of China’s industry. In 2020, it imported a whopping $378bn of semiconductors, a supply chain vulnerability perpetuated by the fact that 95 per cent of installed indigenous Chinese capacity is dedicated to making trailing-edge technology, the SIA report said.Nevertheless, some notable breakthroughs have occurred. It emerged this summer that SMIC, one of China’s leading chipmakers, has successfully made a 7 nanometre chip, putting it just one or two “generations” behind industry leaders such as TSMC in Taiwan and Samsung in South Korea.Several analysts, however, say that notwithstanding such progress and the huge funds that China has dedicated to the development of its chip industry, goals of full semiconductor self-reliance are delusional. The industry is so complex and interconnected that no country can stand alone.“Self-sufficiency is a fantasy for any country, even ones as large as the US or China, when it comes to chips,” says Dan Wang, technology analyst for Gavekal Dragonomics based in Shanghai. A second strand to China’s efforts to attain technology self-sufficiency comes in two interrelated areas — the state’s selection of potential champions such as Tianjin Saixiang and government backing for a strenuous push into venture capital.China’s president Xi Jinping addresses workers on an oil platform off eastern China, where he said: ‘Our energy rice bowl must be held in our own hands’ © Xie Huanchi/Xinhua/Alamy At a national meeting held this month in the eastern province of Jiangsu, China named 8,997 enterprises as “little giants”, putting them in line for tax breaks so they can help China compete with the US and other western powers. Xi, in a letter to the meeting, said he hoped that such enterprises will “play a more important role in stabilising supply chains” — indicating his ambition that the “little giants” will help to indigenise China’s technology industry. Support for such efforts can be found in Beijing’s assertion of increasing control over the country’s venture capital industry. In the past few years, China has overseen the establishment of more than 1,800 so-called government guidance funds, which have raised more than Rmb6tn ($900bn) to invest largely in tech sectors that Beijing deems “strategic”. The funds’ salient feature is that they are mostly run by provincial and local governments or by state-owned enterprises. But here too analysts are sceptical over the long-term efficacy of Beijing’s attempts to “pick winners”. An adviser to China’s government, who declined to be identified, says that several aspects of the “little giants” plan were flawed.Companies had to be vetted by local governments in the first instance, opening up the potential for favouritism and corruption. At the same time, government officials can be poor assessors of a company’s prospects, especially when it involves technology that is hard to understand.“The best way to identify . . . champions is to follow the rule of the survival of the fittest,” says the government adviser. “Any high-tech firm that grows big through competition should be viewed as a [candidate ‘little giant’]. It can’t be pre-determined by the government.”Such concerns do not mean the “little giants” programme will fail in its objectives to foster greater self-reliance, but just that considerable waste and inefficiency may be built into the system.

Focus on renewablesAt the intersection of geopolitics and technology lies another big vulnerability for China — the supply of energy. On a visit to an oilfield in northern China late last year, Xi made a clarion call that has echoed through the official media ever since.“Our energy rice bowl must be held in our own hands,” he said.With the country’s current energy self-sufficiency rate at about 80 per cent, that leaves some 20 per cent of supply — mostly in the form of imported oil and gas — relatively vulnerable to external shocks. China is particularly concerned about shipping routes through “chokepoints” such as the Strait of Malacca, where US naval power remains supreme.Michal Meidan, a director at the Oxford Institute for Energy Studies, says Beijing is adopting an increased focus on renewables such as solar and wind as part of the solution.“China looks at the global geopolitical situation and assesses the vulnerabilities around supply chains,” says Meidan. “Enhancing and entrenching its dominant position in renewable manufacturing and supply chains as well as its deployment domestically makes a lot of sense.”This creates a reliable impetus behind renewable future deployment that is already at world-leading levels. Analysts say China is on track to achieve early a national plan to source about 33 per cent of its power from renewables by 2025. But it will be many years before its vulnerabilities over seaborne oil and gas imports are shored up, they added.

Key food battlefront A more intractable dependency on the outside world comes in agriculture. China’s food security has plummeted over the past three decades as its population has grown and agricultural land usage has shifted from grains to more lucrative crops. In 2021, only 33 per cent of the country’s total demand for the three main food oils — soyabean oil, peanut oil and rapeseed oil — was satisfied by domestic production, down from more than 100 per cent in the early 1990s.Although successive Chinese leaders have stressed the vital importance of food security for years, analysts believe the language and tone has hardened under Xi.That has been especially the case since the trade war rhetoric unleashed by the US under Donald Trump and the 2019 publication of the food security white paper by China’s State Council. Food security and national security have since been clearly conflated by senior leaders and the goal of staple food self-sufficiency increasingly described in similar terms to other “fortress China” ambitions.Key policies on grain output focus on the need for ever greater yields, as well as greater protection of arable land, more efficient water use and other big water-saving projects. China aims to maintain its self-sufficiency in major grains, which reached over 95 per cent in 2019.But the most important policy, according to analyst Trina Chen at Goldman Sachs, is the seed industry revitalisation plan, which Xi first promoted in 2021 and which urges greater efforts to achieve self-reliance.The really key inflection point that will show food production coming under the “fortress China” bracket will be the introduction of the first generation of GM seeds in China — a shift that has been strongly resisted but which analysts now see as inevitable. (China only uses GM cotton at this point.) The attitude has shifted since the Chinese acquisition of Syngenta, the Swiss agritech group whose large business portfolio includes seeds and the development of domestic GM producers.

The dollar as a weapon “Fortress China” calculations can also be seen in China’s attitude toward the dominance of the dollar. For Beijing, one of the most alarming features of the western sanctions on Russia was the exclusion of some of its financial institutions from Swift, a global messaging system that is central to international settlement. Chinese officials have long warned of such a scenario. “When Americans . . . frequently use sanctions and over-emphasise the interests of the US while ignoring its international responsibilities, more and more nations hope to reduce their reliance on the dollar,” wrote Zhou Chengjun, director of the People’s Bank of China’s Institute of Finance, in May last year.Vulnerability to this type of sanction arises because about three-quarters of China’s trade is invoiced in dollars — which means it relies on access to Swift. Beijing’s solution can only be in the long term. Its efforts to “internationalise” the renminbi, its currency, have met with limited success so far. Similarly, efforts to promote a “digital renminbi” — which dispenses with the need to use platforms such as Swift’s — have been slow.“Over the short run, Beijing has been at pains not to fall foul of western sanctions imposed on Russia over its invasion of Ukraine, but also its focus on decoupling from the dollar has sharpened,” says Diana Choyleva, chief economist at Enodo Economics in London. Solar panels cover hills in Shanxi province. Analysts say China is on track to achieve early a national plan to source about 33% of its power from renewables by 2025 © Sam McNeil/APChina’s emphasis on self-reliance has been a long time coming. From about 2015 onwards, Xi’s administration placed increasing emphasis on self-reliance in industrial supply chains. That intensified with last year’s launch of China’s 14th “Five Year Plan” and the introduction of a policy called “dual circulation” — which stressed China’s need to rely on internal dynamism.Since then, a rising tide of US sanctions on Chinese companies, geopolitical divisions flowing from China’s support for Russia in the war in Ukraine and a surge in tensions over Taiwan have reinforced the trends underpinning “fortress China”.Such a heavy emphasis on domestic technology poses a significant risk to those multinational companies focused on supplying the Chinese market. According to one senior Asia banker, there is currently a massive disconnect in the boardrooms of western companies between their enthusiasm for the growth potential of their businesses in China and their silence on the geopolitical debate that is shaping the environment they have to operate in.“A lot of the western companies blame themselves for not speaking up and making it clear what they think the business relationship between China and the west should look like,” says the banker. “But at the same time they feel pretty unable to do anything about that, because with things the way they are, what is the upside of being the company that speaks up?”However, some analysts believe that for all the political slogans, there are still important limitations on the scope of the “fortress China” plans. Yu Jie, a senior research fellow at Chatham House, a UK think-tank, argues that China cannot afford to completely isolate itself from the world due to its export-oriented structure. As a result, Beijing is likely to adopt a hybrid approach depending on the industry.“Sectors with strategic importance and everyday necessities for the population will be treated as matters of national security,” says Yu, “whereas sectors that require foreign capital and manpower will remain open and interconnected to the world.”

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The new UK health secretary has riled healthcare workers by telling them to “be positive” and avoid using policy wonk “jargon” as they grapple with job cuts and the deepening cost of living crisis.Thérèse Coffey, who was appointed by Prime Minister Liz Truss this month, issued the guidance to hundreds of health staff in an email last Thursday. Staff were also told to avoid using “Oxford commas” — referring to the contested punctuation mark that precedes the last item on a written list. Insiders said that the instructions — entitled “New secretary of state ways of working preferences” — had been published on the Department of Health and Social Care’s intranet. An email, seen by the Financial Times, shows Coffey’s guidance was also forwarded to UK Health Security Agency staff. The rubric has angered health workers, many of whom were on the front lines during the Covid pandemic and who now face real-terms pay cuts and added pressures as infection rates are expected to rise over the winter. Coffey’s office asked employees to “be precise” and “be positive — if we have done something good, let us say so and avoid double negatives”.The email was “super patronising . . . It does make you consider if you’re in the right place when a new minister comes in with this”, said one person with knowledge of the mood at the UKHSA.“The idea that we have to frame issues positively indicates a person who doesn’t want to deal with problems, so that’s not encouraging,” they added.Another senior public health official said they understood that staff would see the reference to Oxford commas, in particular, as “extremely patronising”. However, they added, the agency had a way of communicating that was “incredibly abstruse and I can imagine that house style winding Thérèse Coffey up through the ceiling”.Health officials said it was not unusual for ministerial teams to set out ways of working for staff when new ministers were appointed. “Although there is usually some guidance, it’s not so prescriptive,” said a person with knowledge of the mood among employees. The email has caused particular frustration among some staff at the UKHSA, which was born out of Public Health England last year and has been the main agency in charge of dealing with outbreaks, including Covid-19, monkeypox and polio.UKHSA workers said they were “demoralised” after the government earlier this year made substantial job cuts to fixed-term staff who were involved in outbreak control during the pandemic.According to people with knowledge of the matter, UKHSA has been warned internally that job cuts — of up to 70 per cent in some departments — could seriously hinder its response to outbreaks.Staff at UKHSA have this year been offered a one-off £350 payment in “recognition of the extraordinary efforts . . . over the past couple of years”, according to documents seen by the FT.Some permanent staff at the health protection agency have been offered a 2.5 per cent pay increase to help manage the rising cost of living, according to insiders. “We are actually getting a salary cut,” said one employee with knowledge of the plans. UK inflation is expected to hover around the low double digits this autumn.“After everything we have done to respond to the Covid-19 pandemic, including extensive overtime working, including during bank holidays, we are getting pay increases that are way below current inflation rates,” the person added. The UKHSA said: “We value enormously all of our hard-working colleagues who work tirelessly to make our nation’s health secure.” More

TOKYO (Reuters) -Japan ran its biggest single-month trade deficit on record in August as imports surged on high energy costs and a slump in the yen, exposing the economy’s vulnerability to external price pressures.The growing trade deficit highlights the fragile nature of Japan’s economic recovery which has so far largely remained intact despite a high price tag firms are paying for imports that is aggravated by the yen’s slide to a 24-year low and rising prospects of a global slowdown.Imports jumped 49.9% in the year to August, driven by costs of crude oil, coal and liquefied natural gas (LNG), and causing the trade deficit to swell to 2.8173 trillion yen ($19.71 billion), the biggest shortfall on record.The gain in imports was bigger than a median market forecast for a 46.7% rise in a Reuters poll and outstripped a 22.1% year-on-year increase in exports in the same month, the Ministry of Finance data showed.”Imports are on the rise as high raw material prices continued and supply disruptions eased, while exports are sluggish,” said Takeshi Minami, chief economist at Norinchukin Research Institute.”Costs will rise if imports go up without any change to the size of the global economy. It will lead to the importing of inflation.”August’s trade gap marked https://tmsnrt.rs/3BjNQd6 the 13th consecutive month of year-on-year shortfalls and was bigger than the 2.3982 trillion yen deficit expected in a Reuters poll.The yen’s fall by nearly 20% over the past six months added to higher import costs, aggravating already high costs of energy and raw materials.Oil imports from the United Arab Emirates and coal and LNG from Australia strongly drove up overall imports.By region, exports bound for China, Japan’s biggest trading partner, grew 13.5% year-on-year in value terms on stronger shipments of motor vehicles such as hybrid cars to the country. Shipments to the world’s biggest economy the United States expanded 33.8% in August largely due to stronger motor vehicle and parts exports.Exports, however, declined 1.2% in volume terms, the data showed.”Exports aren’t growing on a volume basis even though the yen has weakened so much. That will be hard for corporate profitability unless the global economy starts expanding and exports increase,” said Minami.Japan’s economy grew for a third straight quarter in April-June, data last week showed, as the lifting of local COVID-19 restrictions boosted consumer and business spending.Analysts say, however, that the country’s recovery remains fragile as consumer and business activity face risks such as from a global growth slowdown and a tightening of monetary policy by many central banks around the world.($1 = 142.9700 yen) More

DETROIT (Reuters) -U.S. passenger railroad Amtrak said it will temporarily cancel all of its long-distance trains starting on Thursday – along with some state-supported trains – because of a potential freight rail work stoppage that could start the following day.Amtrak workers are not involved in the labor dispute, but the railroad operates almost all of its 21,000 route miles (33,800 km) outside the U.S. Northeast Corridor on track owned, maintained and dispatched by freight railroads. Railroads including Union Pacific (NYSE:UNP), Berkshire Hathaway (NYSE:BRKa)’s BNSF and Norfolk Southern (NYSE:NSC) have until a minute after midnight on Friday to reach tentative deals with three holdout unions representing about 60,000 workers before a work stoppage affecting freight and Amtrak could begin.Amtrak made its announcement on Wednesday after earlier in the week deciding to cancel 10 long-distance trains throughout the United States ahead of the Friday deadline. Trains to be canceled starting on Thursday are: the Auto Train (Washington to Sanford, Florida), Capitol Limited (Washington to Pittsburgh), Cardinal (Washington to Chicago) and the Palmetto (south of Washington to Savannah, Georgia). Before COVID, Amtrak had about 4.4 million passengers annually on long-distance trains. Late Thursday, Amtrak said it would also cancel some state-supported train services starting late in the day, including the Capitol Corridor, Amtrak Cascades, Heartland Flyer, Illinois, Michigan and Virginia services, as well as San Joaquins and part of the Pacific Surfliner and Springfield services.Some commuter train systems such as Chicago’s Metra have also said they will be forced to begin cutting service on Thursday. Minnesota’s Northstar Commuter Rail, operated under contract by Berkshire Hathaway’s BNSF, that serves the Minneapolis area, said its service could be suspended as early as Friday.Moody’s (NYSE:MCO) said Amtrak’s decision to suspend long-distance trains is “credit negative, as it will impact customer retention and revenue, resulting in higher operating losses. However, as the company relies on federal funding and operating losses were anticipated, the suspension will have a limited credit impact on Amtrak unless it persists.” More