Aurelia Butler

If you think the Asia-Pacific is the crucible in which the future of integrated world trade is being concocted, you’re well behind the times. Everyone is into the Indo-Pacific these days. This sounds like a tiresomely pedantic distinction, perhaps a needless change that the manufacturers of Risk would make to the gameboard to justify putting out a new edition. In fact it’s a pretty big deal, and underlines why the US and increasingly its allies are sublimating trade liberalisation to security in the region.The (imperfectly defined) areas may be fairly similar, though Indo-Pacific generally covers more of the globe to the west, taking in the whole Indian Ocean. The real distinction is that Indo-Pacific is an international relations term, not an economics one. The zero-sum mercantilist Donald Trump started using the term a lot during his presidency as part of his confrontation with China. It continues to fit a world where, particularly given Russia’s assault on Ukraine, the US and frequently its allies — the EU, UK, Australia, Japan — prioritise constructing counterweight alliances to Beijing and Moscow above liberalising trade.Once, the US constructed a Trans-Pacific Partnership, including relatively liberal free-trading nations of the eastern Pacific such as Chile, Mexico and Canada. Now the prized members of its new Indo-Pacific Economic Framework are India and Indonesia, both of which were invited to this week’s G7 leaders’ meeting in Germany. The EU last year launched its own Indo-Pacific strategy, and has picked up trade talks with India after a hiatus of almost a decade. India’s military might and increasing estrangement from China make the US keen to work with New Delhi on every possible front. The strategic Quad partnership of (more or less) democracies in the region — the US, Australia, India and Japan — has expanded its role to include Covid vaccines, climate change and critical technologies. Unfortunately, the phobia about trade deals that has gripped Washington means it cannot offer market access as an incentive for economic integration. The TPP was designed to mould a trading area in the US’s image. The Biden administration’s IPEF has correctly been widely dismissed for containing few binding measures at all.The EU has the opposite problem: it can sign trade deals but it doesn’t have a navy. Even in trade, Brussels’s modus operandi in Asia has generally involved picking off countries one by one with a standard bilateral model agreement rather than attempting to weld them into a bloc. There wasn’t a lot more respect among trade folk for the EU’s Indo-Pacific strategy, which involved a lot of hand-waving about digital partnerships, than for the US version.The desire to keep India onside has caused US allies to shy away from aggressive liberalisation and forthright trade diplomacy. India under Narendra Modi may declare itself a mercantile nation, and is back in the preferential trade agreement game, but it’s still leery of competition from other Asian economies, notably China. Modi abandoned plans to join the Asia-Pacific’s Regional Comprehensive Economic Partnership, let alone the updated TPP. New Delhi is also as obstreperous as ever on the multilateral circuit, dominating a recent World Trade Organization ministerial meeting by threatening to tear up a moratorium of 24 years’ standing on taxing digital trade, insisting on watering down a deal on fishing subsidies and blocking a deal on agriculture.Yet although the advanced economies were intensely frustrated, much of their public criticism of India was muted. Don Farrell, the Australian trade minister, told the FT in an interview during the WTO ministerial meeting: “We don’t want to make things more difficult for India. We want to have a good relationship with them. We share democratic values. We have a very important strategic partnership.” Australia and the UK are signing weak PTAs with India, full of loopholes and exceptions, because of the political imperative.Now, it might be (it probably is, in my view) that meaningful trade deals are neither necessary nor sufficient to cement strategic alliances. India wants, and is getting, military co-operation from Washington much more than it cares about access to the US market. But to the extent that trade does have a geopolitical impact, the US’s aversion to any substantive agreement has allowed China to expand its influence in the region, joining RCEP and trying to accede to TPP.None of the advanced economies really has a coherent policy combining trade with geopolitics in the Indo-Pacific. If their rivalry with China continues to intensify, it’s an omission that may come to weigh increasingly heavily on the minds of the governments [email protected] More

Nearly 46% of Chinese households think the employment situation remains “grim” in the second quarter, urban depositors surveyed by the People’s Bank of China (PBOC) said. Another indicator of future expectation of employment also dropped to the worst level since 2009. With the survey-based jobless rate in 31 big cities rising to a record of 6.9% in May, Premier Li Keqiang said China would strive to return the economy to a normal track and cut the jobless rate as soon as possible, state media said on Tuesday.A cohort of graduates larger than the entire population of Portugal is about to enter one of China’s worst job markets in decades, at a time when youth unemployment stands at a record of 18.4%.Faced with economic uncertainties, more than 58.3% of the households are inclined to save rather than spend or invest in the second quarter, up from 42.4% in the first quarter, the PBOC survey showed. Despite signs of economic recovery in May from the previous month’s slump, with the commercial hub of Shanghai under full lockdown, consumption stayed weak, underlining the challenge of attaining positive GDP growth.A separate survey of bankers published by the bank showed weaker loan demand in the current quarter.An index of loan demand dropped to 56.6%, the lowest since the third quarter of 2016, with declines in the manufacturing, infrastructure, retail sales and property sectors.As COVID-19 lockdowns shut businesses, an index of entrepreneurs’ confidence in the economy dropped by 9.2 percentage points for the second quarter from the previous quarter, and was down 15.5 percentage points on the year. More

TOKYO (Reuters) -Japan braced on Wednesday for its hottest day yet of a record-breaking heatwave, as Prime Minister Fumio Kishida called for a ramp-up of nuclear power use amid fears of a shortage of electricity to keep air conditioners whirring. As some manufacturers announced plans to scale back production to save power, temperatures of around 40 C were predicted in areas surrounding Tokyo on the fifth day of the capital’s worst June heatwave since records began in 1875.The Japan Meteorological Agency forecast that temperatures there won’t drop back to 30 C until July 5.”The electricity demand and supply situation is expected to be the toughest in the last three days (of this week),” an industry ministry official told reporters. All additional measures to boost supply had been incorporated, according to national grid monitor OCCTO, whose mid-morning estimate showed the reserve ratio of power generation capacity for the Tokyo area likely to fall as low as 2.6% between 4.30 p.m. and 5 p.m. on Wednesday – under the minimum 3% threshold deemed necessary to ensure stable supply.The government signalled a power shortage warning for the fourth consecutive day on Thursday for Tokyo and surrounding areas although the supply-demand balance would likely be less tight with additional capacity coming on stream. Prime Minister Kishida said he would do his utmost to secure enough supply, telling a news conference he would make the greatest possible use of nuclear power as long as safety was assured.Most of Japan’s nuclear plants have been halted since the March 2011 tsunami that set off the Fukushima nuclear accident. Meanwhile, power companies are rushing to restart thermal power plants that have been shut down and calls are rising for additional use of alternate energy sources, including restarting reactors.As officials again called on households to save electricity where possible – without stinting on air conditioning where it would endanger the health of the vulnerable – auto parts maker Yorozu Corp said it would close its manufacturing plants for at least two days a month from July through September. Seven & i Holdings said it was asking 7-Eleven stores in and around Tokyo to take further power-saving measures such as dimming signboards and turning off ventilation fans when deep-frying equipment was not in use during the 3-8 p.m. crunch time. More

Fed research shows that it’s more costly for policy makers to be wrong about inflation expectations being well anchored when they are not, as opposed to erroneously assuming they are rising when they’re actually well anchored, Mester said Wednesday in remarks prepared for delivery to the European Central Bank’s annual policy forum in Sintra, Portugal.“These simulation results, coupled with research suggesting that persistent elevated inflation poses an increasing risk that inflation expectations could become unanchored, strongly argue against policy makers being complacent about a rise in longer-term expectations,” Mester said.In an interview earlier with CNBC, Mester said the Fed is “just at the beginning of raising rates” and that she wants to see the benchmark lending rate reach 3% to 3.5% this year and “a little bit above 4% next year” to rein in price pressures even if that tips the economy into a recession. She also said if the economic conditions remain the same as now she would back another 75 basis points hike when officials next gather in July. The Fed earlier this month raised interest rates by 75 basis points, the largest increase since 1994, as it battles the highest prices in 40 years. Policy makers had been telegraphing a 50-basis-point move before the meeting, but quickly changed course when, days before the June 14-15 gathering, a preliminary survey showed rising inflation expectations.A final reading of the University of Michigan’s longer-term US consumer inflation expectations, published Friday, settled at 3.1% for June, down from the initial report of 3.3%, which would have been a 14-year high. Fed officials keep a close eye on barometers of consumer price sentiment, and have expressed concern about expectations becoming unanchored and leading to runaway inflation.Mester said long-term inflation expectations are rising and may continue to do so as gasoline and food prices remain elevated.“The current inflation situation is a very challenging one,” Mester said Wednesday. “Central banks will need to be resolute and intentional in taking actions to bring inflation down.”Mester said the current inflation climate, which is partly being driven by supply-side shocks, belies the view that central banks should err on the side of being too accommodative, popular in the pre-pandemic era where low inflation was the main challenge for policy makers. “It also calls into question the conventional view that monetary policy should always look through supply shocks,” Mester said. “In some circumstances, such shocks could threaten the stability of inflation expectations and would require policy action.”©2022 Bloomberg L.P. More

The People’s Bank of China (PBOC), in a statement after the conclusion of a quarterly meeting of its monetary policy committee, promised to use aggregate and structural policy tools to boost confidence in the economy. “At present, global economic growth is slowing, inflation is running at a high level, geopolitical conflicts continue, and the external environment is becoming more complex and severe,” the PBOC said. “Economic development is facing triple pressures of shrinking demand, supply shock and weakening expectations.”China’s favourable conditions of stable and increased grain output and a stable energy market will help keep domestic inflation basically stable, the central bank said.China’s economy has recovered to some extent, but its foundation is not solid, state media on Tuesday quoted Premier Li Keqiang as saying.Central bank governor Yi Gang said earlier this week that China’s monetary policy would continue to be accommodative to support the recovery.The PBOC will improve the market-oriented interest rate regime, promote the reduction of comprehensive financing costs for enterprises, and support banks to replenish capital, it said in the statement.The central bank also reaffirmed its stance of making the yuan exchange rate more flexible and keep the yuan basically stable. More

JOHANNESBURG (Reuters) – With two days to go until opening to the public, workers rush to put the finishing touches on the Kwena Square shopping complex, a shiny $13 million sign that South Africans are defying the global “retail apocalypse”.Not even COVID-19 could separate them from their beloved malls. “I love going to the mall with my daughter and my grandkids,” said 54-year-old Kowie Erasmus, who’s eagerly awaiting Friday’s grand opening of Johannesburg’s Kwena Square, which broke ground at the height of the pandemic. “Malls are a social place.” The South African market has evolved differently from many other places in the world; high crime rates and a scarcity of safe public spaces have long driven both retailers and shoppers into commercial complexes. Armed guards and parking with restricted access ensured carefree consumer consumption. The attachment to malls has confounded the expectations of many industry players and experts who saw lockdowns in South Africa – initially among the world’s strictest – as an opportunity for e-commerce to finally take hold and take significant bites into traditional sales.Some leading players are now actually doubling down on brick-and-mortar expansion plans in Africa’s most developed economy, a 1 trillion rand ($62 billion) retail market. “Investments in physical stores will still be significantly greater than investment in online,” said David North, chief transformation officer at grocery and clothing group Pick n Pay, one of several retailers that said they would invest more in physical operations than online in this financial year.Commercial property developers are following the money.More than 300,000 square metres of new leasable retail space are set to be completed across the country this year, compared with about 367,000 square metres over the previous two years combined, according to data from property consultants Rode & Associates.The new spaces include a string of malls that are due to open in 2022, including Oceans Mall in the coastal city of Durban, kwaBhaca Mall in the Eastern Cape and Mamelodi Square in Pretoria”The experience economy – being in a physical space and enjoying that space – is what South Africans crave and value the most,” said Ulana van Biljon of Emira Property Fund, a real estate investment trust. AMERICA’S MALL DECLINEThe pandemic gave e-commerce a huge global boost. In seven leading economies accounting for roughly half of the world’s economic output, online retail sales increased from $2 trillion in 2019 to around $2.9 trillion last year, according to U.N. trade agency UNCTAD.Traditional retail players in those markets have taken a pounding with over 17,500 chain store outlets vanishing across Britain alone in the first year of the pandemic. In the United States, the number of malls – already in a years-long decline – could drop to around 600 from just over 1,000 in 2020.While e-commerce’s share of South Africa’s total retail sales more than tripled to around 5% from 2019 to 2021, according to Euromonitor International, it lags far behind many nations. South Africa has almost half as many people as Mexico, for instance, yet its $2.9 billion e-commerce market is a sliver of Mexico’s $19 billion. E-commerce accounts for 28% of retail sales in Britain, 25% in China and 14% in the United States, according to UNCTAD estimates.In South Africa, even with growing internet access through increasing mobile phone penetration, high data costs still prevent many lower-income people from shopping online. Furthermore, home deliveries are complicated by the fact some consumers lack recognizable street addresses, such as in townships which can lack proper signage. ‘NOT JUST ABOUT SHOPPING’The resilience of South African malls isn’t simply down to e-commerce’s difficult path, though. The security they offer is still a big attraction at a time when the country’s historically high crime rates show little sign of abating.National police reported a 15% increase in so-called contact crimes – including assault, murder, robbery and sexual offences – in the quarter ended March 2022, when they rose to their highest level in the past five years over that period. Carjackings rose 19.7%.Gomotsegang Motswatswe, a public relations account manager, said she spent a lot of time with her family at the mall. “It’s important for malls to provide security and a safe place,” said the 35-year-old, adding that it gave her peace of mind to know her car was parked in a secure place. “It’s not just about shopping,” she explained. “We still want to be out there as people and socialise.” Motswatswe is among the many South Africans who are returning in force to malls following the easing of COVID-19 restrictions. Foot traffic has not yet recovered – still 18% below pre-pandemic levels at the end of the most recent quarter – yet shoppers are spending more per visit, according to data compiled by MSCI Research.Business at South Africa’s shopping centres is now beating pre-pandemic levels on average, in terms of trading density, which measures turnover per square metre, according to the data.In the first quarter of 2022, the MSCI quarterly trading density index recorded 21.1% year-on-year growth in annualised trading density. THREE HOURS TO THE MALLRetail executives are betting on both traditional and online operations.Pick n Pay is opening 200 discount Boxer stores and revamping Pick n Pay stores, though it is also targeting an eight-fold increase in online sales. The bulk of its 3.5 billion rand capital investment in the current financial year is earmarked for new stores and revamps.Value fashion and homeware retailer Mr Price says 66.5% of its capital expenditure for the current financial year will be allocated to stores, with a plan to open 180-200.Massmart, which is majority-owned by Walmart (NYSE:WMT), says 57% of its capex will go towards new stores and remodels this year, while 15% is allocated for e-commerce expansion. Over the next five years, it wants to expand its e-commerce business to 15% of total sales, from 2.2% now.Upmarket fashion and homeware retailer TFG is spending 75% of its capex on new stores and e-commerce.There may be room to grow, in terms of brick-and-mortar stores, by meeting the needs of South Africans living in rural and downmarket communities who have long been underserved by retail parks and complexes. Much of the country’s new retail property development is now happening outside of major cities, Niel Harmse, vice president of MSCI Inc told Reuters.South Africans like Phindile Nkosi, who lives in Pongola, a small town in rural eastern South Africa and drives three hours with her children to spend the day at a mall on the coast, demonstrate there’s still unmet demand. “I do wish that Pongola would have a mall. Because, as much as it’s a small town, it’s developing.” ($1 = 15.9966 rand) More

There aren’t many things Britain is truly “great” at these days. Yet there’s one part of the fast-moving fintech economy where the UK is the undisputed world leader. Unfortunately, it is fraud. Criminals scammed UK banking customers out of a record £1.3bn in 2021, according to figures released this week by UK Finance. The UK is experiencing an “epidemic of fraud”, the trade body says, warning that “collaborative action” between financial firms, internet giants and telecoms companies is the only way authorities stand a chance of regaining control.You may not be surprised by these figures. Over 40mn UK adults have been targeted by scammers so far this year — that’s around three-quarters of the population. Spotting dodgy messages before you click on them could be our national sport.And fraud is proving to be a particular blind spot for the current government. After being swindled out of billions via fraudulent loan applications at the height of the pandemic, the prime minister was recently accused of airbrushing fraud from the crime figures. Fraud accounted for 39 per cent of all crime in 2020-21, according to the Office for National Statistics. And it gets worse. Globally, the UK has the worst overall problem with online fraud relative to its size. Why? An English-speaking population, wide adoption of online banking and our faster payments system are the “holy trinity” for organised criminal gangs, who can rapidly route stolen cash across international borders. This makes it harder and more resource intensive for the UK’s myriad crime-fighting agencies to catch up with them. As the pandemic pushed even more of our day-to-day lives online, it has become much easier for these tech-savvy criminals to target the weakest link in the chain — human beings. According to UK Finance, banking customers were tricked into authorising some £583mn worth of payments in 2021 — a whopping 39 per cent increase on the previous year. Yet I fear the 2022 figures could turn out to be even worse when you add the cost of living crisis into the mix. Emotional manipulation is the scammers’ chief money extraction tool; fear and greed are top of their playbook. As millions of Brits struggle to stay on top of their finances, or seek better returns on cash savings, the opportunities to exploit the desperate are sadly increasing. In 2021, investment fraud was one of the biggest drivers of the spike in “authorised” payments, accounting for nearly one-third of total losses, with the promise of high returns enticing potential victims. UK Finance says the scammers are well aware of how pension freedoms have given the over-55s access to huge sums of money. Add to this an estimated “advice gap” of 13mn people unable or unwilling to pay for financial advice, and you have a sitting target. The average loss per victim of investment fraud last year was more than £14,000. These scams typically originate from cold calls, but also involve fake online ads promising high returns on fictitious investments, cloned websites, approaches on social media and even old-fashioned letters through the post. In all cases, the “opportunity” is time limited, and victims will be put under pressure to act fast or lose out. Sometimes victims are persuaded to put more money in after seeing a “return” on their initial investment. The other huge rise was impersonation scams. Ironically, these often rely on our fears of falling victim to online fraudsters.In 2021, some £137mn was lost to scams where criminals posing as bank staff or police convinced customers to transfer money to so-called “safe accounts” — up 51 per cent in a year. A further £77mn was lost to scammers posing as employees from utility companies, HM Revenue & Customs, the NHS or other official bodies using the threat of fictitious fines or outstanding debts to extract payments.You might think you’d be too smart to fall for this, but UK Finance warns that criminals research their targets, using information gathered from social media profiles, data breaches and previous scams. That’s right — those fake text messages urging us to register for energy help schemes, get money off our shopping or pay for missed parcel deliveries give criminals enough data to gain our trust — then clean us out. To give banks and card companies some credit, the combination of algorithms and ingenuity (such as the Banking Protocol initiative between police and frontline banking staff) meant they managed to detect and prevent some £1.4bn of fraud last year. UK Finance believes the economic crime bill announced in the Queen’s Speech could help, too, by giving banks the ability to “slow down some faster payments” if fraud is suspected.But how the banks treat victims of crime leaves a lot to be desired. Most signed up to a “no fault” code in 2019 pledging to refund the “innocent victims” of fraud — a judgment call some seem incapable of making. Of the £583mn lost to authorised fraud last year, some £271mn — 46 per cent — has been reimbursed to victims under the code. If your bank knocks you back, consumers can escalate complaints to the Financial Ombudsman Service, which this week reported a 20 per cent annual increase in such cases. Currently, the ombudsman is over-ruling banks’ decisions not to refund in around 75 per cent of cases — an unacceptably high number — but the huge backlog of fraud causes means it takes nine months for it to get to complaints. The Financial Conduct Authority’s “consumer duty” and beefing up of payments legislation could help in the future. But why should banks be the only ones on the hook for fraud losses?

“Major online platforms — search engines, social media and shopping sites — are the gateway to almost all online activity and they must provide a barrier to fraud and not a conduit,” says Katy Worobec, managing director of economic crime at UK Finance. The upcoming online safety bill will impose a legal duty on the biggest platforms to police fake ads, but until social media sites are forced to share the huge cost of compensating victims, I doubt this will have much impact. Other campaign groups, including the Social Market Foundation, make a powerful case for reforming how fraud is tackled and increasing police resources. Yet Mark Shelford, the lead police commissioner for economic and cyber crime, recently told the FT the most cost-effective way of fighting fraud was through education. He has a point. I’m not talking about the increasingly arse-covering messages that banking apps display when you transfer cash, but a proper public awareness campaign like the FCA’s brilliant PPI reclaim advertisements featuring Arnold Schwarzenegger. If Arnie can’t terminate the scammers, then I don’t know who can. And the social media platforms and search engines should be forced to run the ads for free.Claer Barrett is the FT’s consumer editor: [email protected]; Twitter @Claerb; Instagram @Claerb More