Aurelia Butler

The ECB said last week that it would stop buying bonds in the third quarter of the year and raise interest rates some time after that, ending years of monetary largesse in the face of surprisingly high inflation.De Guindos was joining a growing number of ECB policymakers, including the Bundesbank’s President Joachim Nagel, in calling for an early end to the Asset Purchase Programme.”My opinion is that the programme should end in July and for the first rate hike we will have to see our projections, the different scenarios and, only then, decide,” de Guindos told Bloomberg.”From today’s perspective, (raising rates in) July is possible, and September or later is also possible,” he added.Speaking to global policymakers in Washington on Thursday, ECB President Christine Lagarde also said future steps “will depend on the incoming data and (the ECB’s) evolving assessment of the outlook”.”In the current conditions of high uncertainty, we will maintain optionality, gradualism and flexibility in the conduct of monetary policy,” she told the International Monetary and Financial Committee.But Belgian central bank governor Pierre Wunsch, a policy hawk, was more outspoken, saying in a Bloomberg interview that raising the ECB’s policy rate, currently at minus 0.5%, to zero or slightly above by year-end would be a “no brainer”. The ECB will update its macro-economic projections in June and again in September.These estimates will be crucial because the ECB has said it would only raise rates when it is confident that inflation would stay at its 2% target over its forecast horizon.Inflation in the euro zone hit a record 7.5% last month and de Guindos hinted at it staying above the ECB’s current projections for the rest of the year. “Inflation will start to decline in the second half of the year,” he said. “But even so, it will be above 4% in the final quarter.”The ECB said in March it saw inflation at 5.6% in the second quarter, 5.2% in the third quarter and 4.0% in the final three months.Further out, it saw inflation at 2.1% in 2023 and 1.9% in 2024. More

Investing.com — The euro surges as officials put a July rate hike back on the agenda. Jerome Powell and Christine Lagarde both speak on the sidelines of the IMF meeting later. Tesla (NASDAQ:TSLA) beats earnings expectations, but raises a few eyebrows in the process. United Airlines (NASDAQ:UAL) forecasts good times ahead, but Equifax (NYSE:EFX) is downbeat about the outlook for the mortgage credit market. Russia declares ‘victory’ over a city where Ukrainian forces are still fighting, a day after it defaulted on a dollar bond payment due to the lack of cooperation from its U.S. bankers. AT&T (NYSE:T) results, jobless claims and the Philly Fed business survey are due. Here’s what you need to know in financial markets on Thursday, 21st April.1. Tesla’s earnings blow past expectations, raise eyebrowsTesla reported another stronger-than-expected quarter in the three months through March, with a net profit of $3.32 billion. That included a $679 million contribution from regulatory emissions credits, but an operating profit of $3.6 billion indicated solid underlying momentum in its core business.CEO Elon Musk said the group should be able to produce over 1.5 million cars this year, despite challenges from a three-week shutdown at Shanghai that only ended earlier this week.Some cast doubt on the group’s accounting, suggesting that Tesla either wasn’t recognizing steep input price inflation or faced a big jump in costs in coming quarters. The company reported a 15% increase in operating expenditure, but an 80% rise in revenue. The disparity may lie partially in the company using up raw material inventories that were bought before prices for inputs such as battery metals went through the roof earlier this year.Tesla stock rose over 7% in premarket trading, more than reversing Wednesday’s declines.2. ECB officials put July rate hike in playThe euro rose to its highest in over a week after Vice President Luis de Guindos joined a chorus of European Central Bank officials acknowledging the possibility of a rate increase in July. That would be the bank’s first in 12 years, and represents a significant shift after President Christine Lagarde soft-pedaled the outlook for tightening policy at her press conference last week.Lagarde and Federal Reserve Chairman Jerome Powell both speak on the sidelines of the International Monetary Fund’s spring meeting later, an event that has gathered the world’s central bankers at a time when inflation is running amok globally.By 6:15 AM ET (1015 GMT), the euro was at $1.0915, up 0.6% on the day and just off its intraday high.3. Stocks set to open higher; United soars, Equifax slumpsU.S. stock markets are set to open higher later, with Tesla’s well-received earnings helping to calm the fears stoked by Netflix’s results on Tuesday. By 6:20 AM ET, Dow Jones futures were up 208 points, or 0.6%, while S&P 500 futures were up 0.8% and Nasdaq 100 futures were up 1.1%. The Nasdaq had underperformed sharply on Wednesday, due to the heavy weighting of Netflix (NASDAQ:NFLX), which suffered its biggest one-day drop in 18 years. Netflix stock fell another 1.2% in premarket trading.Stocks likely to be in focus later include United Airlines, which reported upbeat guidance after the bell on Wednesday despite showing another big quarterly loss, and Equifax, which fell nearly 10% in after-hours trading after forecasting a sharp slowdown in mortgage credit inquiries over the rest of the year.AT&T dominates the early reporters, along with Danaher (NYSE:DHR), NextEra Energy (NYSE:NEE), Philip Morris (NYSE:PM), American Airlines (NASDAQ:AAL) and Union Pacific (NYSE:UNP), while Swiss giant Nestle (OTC:NSRGY) already reported a thumping 7.6% rise in first-quarter sales, over 5% of which was due to price increases.4. Jobless claims, Philly Fed survey dueThe number of people making initial claims for jobless benefits is expected to stay close to 60-year lows at 8:30 AM ET, a reflection of the continuing tightness of the U.S. labor market. Analysts expect initial claims to tick back down to 180,000 after last week’s increase to 185,000. Continuing claims are expected to grind lower to 1.455 million, a drop of 20,000.The numbers will be released at the same time as the Philadelphia Federal Reserve’s monthly manufacturing survey, which is expected to show a slight cooling of activity from February.Of more interest than either may be the auction of inflation-protected 5-year Treasury notes at 1 PM ET. The last auction sold at an average yield of -1.508%. That’s unlikely to be repeated given the sharp rise in real bond yields in recent weeks.5. Russia declares ‘victory’ in MariupolRussian President Vladimir Putin declared victory in the country’s battle for the Ukrainian city of Mariupol, even though elements of the defending forces continue to fight on. Putin told Defense Minister Sergey Shoigu in a choreographed video clip that Russian forces should rather conserve lives than storm the remaining Ukrainian positions in the Azovstal steel mill.Putin’s comments come a week after the loss of the Black Sea Fleet’s flagship Moskva. Moscow’s failure to account for a crew that it says was fully evacuated prior to the sinking has revived long-standing suspicions of the state’s disregard for its servicemen.Russia was declared in potential default on Wednesday by an international committee overseeing credit derivatives. However, the failure to pay occurred because the western banks acting as payment agents refused to handle Russia’s dollars, rather than because Russia had chosen not to pay. Separately, Bloomberg reported that Russia’s oil output fell to its lowest this year last week amid increasing practical problems in getting its product to willing buyers. More

Just last month, Boris Johnson had bragged that the UK has “the fastest growing economy in the G7”. The post-pandemic bounce came earlier to Britain than most. But that ebullient performance seems to have left the party-going premier with a nasty hangover: the IMF now forecasts that, in 2023, the UK will have the slowest growth rate of the seven.Output growth this year will come in at 3.7 per cent. Next year, though, it forecasts a drop to 1.2 per cent. This is around half of the IMF’s forecast for the growth rate of the average advanced economy. The IMF’s view is that “consumption is projected to be weaker than expected as inflation erodes real disposable income”. Inflation is high everywhere — a consequence of the ending of pandemic restrictions, plus the war in Ukraine. But, according to the IMF, price rises will be a major problem for longer in the UK than elsewhere. And high interest rates, raised in response to those surging prices, are “expected to cool investment”. It is not wise to read too deeply into the particulars of the current position: the emergence from a global pandemic and the start of a war on its continent are unique circumstances. But it is hard to ignore one more permanent truth: the UK has a serious long-term problem with economic growth. The country has not solved its so-called “productivity puzzle”.Since the financial crisis, the country’s economy has failed to get up a head of steam. The mean annual growth rate from 1948 to 2008 was 2.7 per cent. Since then, it has been a little under 1 per cent. Weak growth is critical to understanding the country’s politics. The UK’s long period of fiscal austerity after 2010 was a response to the UK having a smaller tax base than it was planning on. The misery was compounded and prolonged by the economy’s inability to grow strongly.Opposition politicians have, for a decade, sought to capitalise on annoyance about anaemic wage growth. It was not until 2019 that the country’s average wages had returned to the levels of 2008. Young people, in particular, face miserable pay and high housing costs. Again, this is a story about what happens when output stalls.The country’s leaders, however, have not focused on restoring growth. On the contrary, Johnson was elevated to prime minister because of his support for Brexit, a decision that has further hampered output. The Centre for European Reform, a think-tank, estimates that UK trade in goods is down by around 15 per cent due to Brexit.One concern underpinning the IMF’s forecasts is that the UK’s planned corporate tax rises may constrain the UK’s growth in 2023: corporation tax is set to rise from 19 per cent to 25 per cent. At the same time, the British government will be withdrawing the so-called “super-deduction” — a generous pandemic relief for capital spending.The Treasury is already consulting on a replacement measure to encourage businesses to keep on investing: one cause of weak UK growth is a lack of business investment. It is important that, whatever comes next, there is adequate support for business investment — a long-term weakness of the UK, even before the crash.A robust pro-investment tax measure should be a relatively easy win for the Treasury — it has the tools and there is no lobby standing in its way. But that makes it rare: many of the UK’s other growth problems, whether its distance from the European single market or the country’s restrictive planning laws, will take serious political capital to fix. So long as the UK’s politicians are indifferent to its growth problems, they will not be fixed. More

It’s rare that one can use the term “instant classic” in a book review, but Gary Gerstle’s latest economic history, The Rise and Fall of the Neoliberal Order, warrants the praise. It puts neoliberalism, defined as a “creed that prizes free trade and the free movement of capital, goods and people,” as well as deregulation and cosmopolitanism, in a 100-year historical context, which is crucial for understanding the politics of the moment, not just in the US but globally. The book also knits together a century of very complicated economic, political, and social trends, which are often siloed but are in fact quite interrelated, creating a new and important narrative about where America has been, and where it may be going. One of the most useful things Gerstle does for readers is to blow up the usual definitions of conservative and liberal, at least in terms of how US economic history is framed. Former Republican presidents Ronald Reagan and both Bushes were “conservative”, while their Democrat peers Bill Clinton and Barack Obama were “liberals”. And yet all of them could be described as neoliberals, in the sense that many of their economic policies were at core about unleashing (or at least not restraining) capitalism, with the underlying belief that markets would, indeed, know best.

While decades of unchecked markets ultimately contributed to everything from the financial crisis, to the rise of both Donald Trump and Bernie Sanders (reflecting again the way in which neoliberalism and its discontents have blurred political categories), they were in the beginning a necessary and in many ways useful reaction to what came before. You can’t really understand the Reagan revolution, with its dismantling of unions, deregulation, and tax-slashing, without understanding FDR’s “New Deal,” and how it so dramatically expanded the power of the public sector. And so, the first section of the book tackles the 1930s to the 1970s, in which the pendulum of economic power swung towards state planning, welfare, the curbing of corporate monopolies, and stability over speculation. The fact that a book on neoliberalism starts with Herbert Hoover, the president whose failure paved the way for Roosevelt’s success, rather than Friedrich Hayek, will throw some readers (like me). Other important works on the topic, such as Quinn Slobodian’s Globalists (2018), which Gerstle quite rightly name checks, begin with the European roots of neoliberalism in post-first world war Vienna, where economists such as Hayek and Ludwig von Mises struggled to find a way to knit a war-torn continent back together. What they came up with as a philosophy was neoliberalism, the idea being that if capital, goods, and people could more freely move across borders, conflict would be less likely. Their ideas informed the creation of institutions such as the International Monetary Fund and the World Bank, which have since stopped working as well as they once did, in part because the world was never quite as flat as New York Times columnist Tom Friedman would have had us believe. Capital, as always, moved faster than goods or people. Gerstle does a particularly wonderful job of connecting the political and economic dots in that post 2000s era in the US, a complicated and fascinating time in which the sort of “techno-utopianism” exemplified by Friedman’s book The World Is Flat (2005) collided with two ill-advised wars in Afghanistan and Iraq, as well as a Democratic party in thrall to both Wall Street and Silicon Valley, the election of the first black president, an economic crash, and a political narrative — we must save banks but not homeowners — that never quite added up to average voters. While it’s impossible to include every scintillating detail of the time in 300 pages (I craved even more on the existential splits between the neoliberal economic policy camp exemplified by Alan Greenspan, Bob Rubin and Larry Summers, and others like former Clinton and Obama administration advisers including Robert Reich and Joe Stiglitz, who worried about where it was all leading), Gerstle gets the broad brush strokes right. Low interest rates, financialisation, and Bush’s “ownership society” collided with increasing California wealth, identity politics, and creative accounting of stock options to brew up our very own version of 1929, which was quickly followed by the ugly race and class-dividing politics we have now. Gerstle has a real genius for capturing political irony — how 1960s hippies turned into Bay Area libertarians, how increased access to credit hurt minorities most, how Democrat Jimmy Carter was a deregulator, how individual “freedom” to pursue prosperity might morph into terrible inequality and insecurity. But one such point he seems to have missed is the way in which Reagan, whom he sees as the “ideological architect” of the past half century of neoliberalism, supported industrial policy, something Gerstle either misses or doesn’t explore, and used state power in the form of things such as voluntary export agreements and anti-dumping duties to bolster American trade interests.

Of course, protectionism and neoliberalism can marry with particularly unfortunate results such as Trump, who slashed taxes even as he started a trade war with China. As Gerstle points out towards the end of the book, the former president may have been “pushing on an open door,” in the sense that globalisation as we’ve known it since the 1980s started shifting after 2008, when both “producers and consumers” in various countries began “to question the pursuit of a borderless world”. As The Rise and Fall of the Neoliberal Order shows us, some of this reckoning is racist and xenophobic. Some of it is a necessary swinging of the economic pendulum back to a happy medium. As we wait to see where it lands, Gertle’s history of where we’ve been is essential reading for a post-neoliberal era. The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era by Gary Gerstle, OUP £21/$27.95, 272 pagesRana Foroohar is the FT’s global business columnistJoin our online book group on Facebook at FT Books Café More

The world’s finance ministers and central bank governors have decided to live with the virus: this week they are back to meeting in person for their regular April event known as the World Bank/IMF spring meetings. As usual, the IMF has published its flagship reports, which are useful reading to assess where the intellectual pinch points are in the global economic policy debate.In recent years, the IMF’s World Economic Outlook, Global Financial Stability Report and Fiscal Monitor have presented a fascinating display of rapid iconoclasm. As I have written about before, the fund sometimes seems at the forefront of a new Washington Consensus, which the current US administration has joined by overturning many of the old Washington Consensus’s dogmas. There are hints of the same this year. The Fiscal Monitor devotes a chapter (and a blog post) to cross-border co-ordination of taxation to reduce tax dodging and improve enforcement — a goal also pursued by US Treasury secretary Janet Yellen (and even her predecessor Steven Mnuchin, when Donald Trump would let him). And the WEO’s very good account of global trade in the pandemic, while arguing against concentrating production inside national borders, makes a good case for designing diversified and substitutable cross-border value chains so as to maximise resilience to shocks (you read it here first — two years ago, in fact). That sounds quite compatible with the strategy of “friend-shoring” that Yellen announced in an important speech last week.At the same time, the world has not changed so much that old challenges have gone away. Excessive private debt has long been a concern of economic technocrats, and the WEO has a good chapter (and another blog post) on the possible dangers of the rise of corporate debt in the pandemic. Among the useful advice is to make sure corporate bankruptcy regimes are fit for purpose and able to deal with insolvency problems efficiently to reallocate resources to new activities. Another debt-related problem, highlighted by a GFSR chapter (and blog post), is that government debt and national banking systems are becoming more interlinked in emerging countries, putting them at risk of the kind of sovereign-bank “death spirals” that laid several eurozone economies low in 2010. But the most innovative bit of analysis this year, in my view, is the WEO chapter on the “greening” of labour markets. I confess I had not yet thought of applying shades of green to the labour market, but it makes a lot of sense. The IMF’s research sheds light on the question on many politicians’ minds: how to decarbonise our economies without causing a jobs crisis for those employed in CO2-emitting industries. The chapter is full of useful measurements, simulations and policy advice (and again a blog post nicely summarises the findings). The classification of jobs into “green-intensive” and “pollution-intensive” is a useful, if tentative, heuristic, though probably in need of a little tyre-kicking. It finds that most jobs are neutral with respect to the carbon transition. The jobs that are particularly exposed to a fall in fossil fuel use, and those particularly in demand as decarbonisation proceeds, are concentrated among quite small groups of workers, the IMF’s methodology finds. Less surprising is the nature of the concentrated group holding the green jobs: more educated, more urban and better paid than workers in the pollution-intensive group. If the IMF’s methods for classifying jobs are robust, one hopeful conclusion emerges. The green agenda will require shifting labour from polluting to green jobs. But the required shift is of moderate scale: about 1 per cent of total employment over a decade in advanced countries, and 2.5 per cent in emerging countries. Both numbers are well below the 4 per cent of the workforce involved in the earlier shift from industry to services.The biggest political obstacle to effective decarbonisation is the fear that it will create a class of politically reactionary left-behinds. Call it yellow-vest syndrome. If the IMF research is right, that risk may be lower than it seems. But it also gives ample cause for worry: pollution-intensive jobs seem to be particularly difficult to get out of, so even a moderate rate of required structural labour market change will be hard to pull off. A bright point is that what it takes to pull it off, according to the report, dovetails with what decarbonisation in any case requires — in particular, a clear path for rising carbon prices. In addition, however, policies directly aiming to make job switches easier and safer for workers are needed, the IMF says: funding for skills training, redistribution and incentives for staying in work (though I am a bit cagey about the fund’s recommended earned income tax credits, which risk depressing wages). We are in turbulent times: much of the discussion this week revolves around how to deal with the economic fallout of Russian president Vladimir Putin’s war on Ukraine. But as these reports show, even without the shock of a war we face huge economic challenges ahead of us. Get ready for them.Other readablesI wrote six weeks ago that like in the 1940s, Ukraine and western leaders need to start planning for the peace now. This month, a group of eminent economists wrote a blueprint for Ukraine’s reconstruction. It is excellent, succinct and argues that the guiding vision should be to fit Ukraine’s infrastructure, institutions and economy for EU membership. Do read it all. But if you are short on time, take a peek at a recorded webinar with the authors — or read my column on the blueprint.There are a number of new publications worth reading about how to tighten sanctions further on Russia. An international group of experts has published a comprehensive list of the possibilities. A new CEPR Policy Insight shows how to implement sanctions on Russian oil sales. And authors from the Bruegel and Peterson Institute think-tanks show that Europe must intensify sanctions on Russian banks. A conversation with Branko Milanovic.The New York Times reports on the breathtaking progress in electric aviation.Our economies are undergoing large structural reallocation and have to undergo more still. So how can it be right for central banks to try to make investment more expensive and job growth slower?Numbers newsAlso at the spring meetings, the IMF presented downgraded forecasts for economic growth — unsurprising given the war in Ukraine. China said its economy grew 4.8 per cent in the first quarter compared with a year before. More

The “inflation mania” that has gripped debt markets this year has gone too far, according to some investors and analysts who say now is a good time to snap up bonds at a discount. A Bloomberg index of long-term US government bonds has dropped more than 18 per cent this year, leaving it on track for its biggest fall on record dating back to 1973. The retreat in bond prices has pushed the 10-year Treasury yield — a benchmark for bond markets around the world — to nearly 3 per cent as investors position for a rapid tightening of monetary policy from the Federal Reserve and other central banks tackling soaring inflation. But fund managers and investment banks are increasingly questioning how much further yields can rise as rapid inflation, along with interest rate rises designed to combat it, cause economic growth to slow, something which typically burnishes the appeal of safe assets like government bonds.“We view the current level of 10-year [US yields] as a compelling location [to buy the debt],” said rates strategists at Bank of America on Wednesday. “Inflation concern has reached a level of mania or panic,” the bank said, citing the “extreme” inflows into inflation-protected bonds as well as a spike in internet searches for “inflation”.“Our forecasts point to inflation peaking this quarter and falling steadily into 2023. We believe this will reduce the panic level around inflation and allow rates to decline,” Bank of America added.Higher payouts now provided by holding bonds are already proving tempting to some fund managers.“Gosh, they’re high enough now to buy,” said Edward Al-Hussainy, senior interest rates strategist at Columbia Threadneedle. “That’s what we’re doing.” He cautioned, however, that rates might move higher yet. “I don’t think you can be certain this is the top until you get a signal from the Fed that they have overshot, or you get a correction in risk assets,” Al-Hussainy said. Even some persistent bond bears are beginning to ponder whether the sell-off is overdone. Dickie Hodges, who manages a $3.9bn bond fund at Nomura Asset Management, said he had been “adding little bits of exposure” to long-dated bonds as yields rose. “I think it’s too early to call the top in yields right now,” Hodges said. “But central bankers know that raising interest rates materially from these levels is going to push economies into recession. And I’m convinced inflation is going to roll over later this year, so long-end yields are starting to look attractive.”Still, many investors are wary of calling time on the bond drop too soon. Barclays this week ditched a recommendation published earlier this month to buy 10-year Treasuries after yields continued their ascent. The bank said the odds of the Fed “over-tightening” and pushing the US economy into a “hard landing” had receded, with the central bank instead likely to allow higher inflation expectations to become entrenched.A greater emphasis on reducing the Fed’s holdings of Treasuries — in addition to raising short-term interest rates — could also weigh further on long-term bonds, whose yields have been pushed down by asset purchases. Fed board member Lael Brainard said earlier this month the central bank would begin a “rapid” reduction of its balance sheet that might begin as soon as its May meeting. This possibility has left some fund managers reluctant to buy Treasuries — at least for now.“If I could close my eyes and come back in six months I think I would be comfortably in the money by buying here,” said James Athey, a bond fund manager at Abrdn. “But the potential journey to get there is so uncertain that it’s hard to get the timing right. All it takes is a big upside surprise to inflation or some loose-lipped Fed speak and yields shoot up again.” More

Nestlé pushed up prices for its products by more than 5 per cent in the first three months of the year, in the latest sign of steep commodity inflation feeding through to consumer prices for branded goods.The world’s largest food company said on Thursday it had increased pricing by 5.2 per cent in the quarter, helping to produce organic sales growth of 7.6 per cent, ahead of analysts’ expectations.“We stepped up pricing in a responsible manner and saw sustained consumer demand,” said Mark Schneider, Nestlé chief executive. “Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year.”The price rises were largest in North and Latin America, where Nestlé drove up pricing by 8.5 per cent and 7.7 per cent respectively. The maker of Maggi noodles, Purina pet food and KitKats confirmed its outlook for the full year despite the cost pressures, saying it expected organic sales growth of about 5 per cent and underlying trading operating profit margin between 17 and 17.5 per cent.“As seen at other food and beverage companies, it appears that high inflation has not (yet) had an impact on consumer appetite for strong branded products,” said Jean-Philippe Bertschy, analyst at Vontobel.Nestlé’s update follows news from Procter & Gamble that it had also increased prices by 5 per cent in the three months, helping it to achieve its strongest sales growth in two decades. Heineken, the world’s second-largest brewer, on Wednesday reported price rises of 5.2 per cent.Nestlé’s figures exclude Russia, where it announced last month it would strip its business down to essentials such as infant formula and medical nutrition, suspending major brands such as KitKat and Nesquik following the country’s invasion of Ukraine.Russia had previously accounted for just under 2 per cent of the company’s revenues.Growth at the Vevey-based group was led by pet food, while confectionery and water also posted double-digit growth, boosted by households spending more time outside the home as coronavirus restrictions lifted. Reported sales reached SFr22.2bn ($23.4bn). More

This is Lauly Li in Taipei, covering the tech industry’s hardware supply chain, from semiconductors to smartphones to EVs.My fellow tech correspondent Cheng Ting-Fang and I have seen some incredible changes over the past four years. I remember back in March 2018, the chairman of a key Apple supplier told me it would be “impossible” for suppliers to move production outside of China, despite the rapidly growing tensions between Washington and Beijing.But the impossible happened, and Apple began moving its AirPods production to Vietnam while HP, Dell and Google have been shifting their production to south-east Asia, too.Today, geopolitics and the COVID-19 pandemic are reshaping the tech supply chain in ways that few could have imagined, and both businesses and consumers are feeling the effects. We are here to bring you in-depth stories on the next “impossible” developments.Shanghai under strainThe situation for tech and auto suppliers in Shanghai is becoming critical.Top executives in China, including Huawei’s Richard Yu, are warning of “massive losses” across industries if COVID-19 restrictions in and around the city don’t ease soon. Xpeng Motors founder He Xiaopeng has said all of the country’s automakers would basically have to suspend production from May if manufacturing operations in the Shanghai area were not allowed to resume quickly.Criticism of the government’s handling of the COVID situation from such prominent figures is rare, and underscores the growing concern that prolonged disruptions to supply chains will have knock-on effects for the wider economy, Nikkei Asia’s Cissy Zhou, Cheng Ting-Fang and Lauly Li write.Their warnings also highlight how Shanghai is as much a tech hub as a financial centre. Over half of Apple’s 200 main suppliers have facilities in the city and in Jiangsu Province, Nikkei Asia’s analysis showed. Shanghai also boasts the world’s busiest port, which is straining under the COVID-related travel restrictions. Local authorities, judging by their remarks, are painfully aware of the dilemma. But with Beijing insisting it will stick to its zero-COVID policy, managers and executives worried that relief will not come soon enough.Keyboard wizardsYield Guild Games, a Philippine start-up, is recruiting online gamers — it calls them “scholars” — to play video games that earn cryptocurrency. Under the set up, YGG provides the initial funding for scholars, who in turn split their earnings with the company. One YGG investor calls the company’s model “the future of work,” and it has proved explosively popular in Southeast Asia, writes Nikkei Asia’s Wataru Suzuki.But building a business around cryptocurrency is not for the faint of heart. Valuations of digital coins can swing wildly, and a $600 million heist involving crypto gaming company Sky Mavis last month underscored the security risks in the sector. The other challenge for YGG and the games it backs: making sure all of these newly minted scholars stick to their “studies.”Xiaomi takes on AppleSmartphone maker Xiaomi, and its larger-than-life founder Lei Jun, were the embodiment of China’s technology ambition. Lei, who conducted Apple-style product launches in Steve Jobs’ signature black shirts, built the company from nothing to one of the world’s top phone players in the space of just 10 years, writes the Financial Times’ Primrose Riordan in Hong Kong.Xiaomi grabbed market share in countries from India to Spain thanks to a no-frills philosophy of combining strong specifications, such as advanced processors, with affordability. Now Lei wants to go even bigger and beat Apple and Samsung in the premium market within the next three years.But convincing global customers of its high-end credentials might be Xiaomi’s biggest challenge yet, according to current and former executives. They say that while the brand has a successful playbook in the low and mid-range markets, and the company is making strides in gaming and advertising, its efforts to go premium have had only middling results so far.Branding is one of the biggest hurdles in achieving the goal. The supply chain issues plaguing the wider tech industry are another. With investor doubts mounting — the company’s stock is down by 50% over the past year — and China’s tech crackdown continuing, Lei will need to harness all the charisma and energy he is known for to take up the fight with Apple and Samsung.The price of successBushes and scrubland cover much of the Ciaotou district of Kaohsiung, in southern Taiwan, but real estate agents are already popping open the champagne. News that Taiwan Semiconductor Manufacturing Co. will build its first chip plant in the harbour city has sent property prices soaring.Kaohsiung used to be a hub for oil refining and petrochemicals, but it was left behind when semiconductors and other high-tech business came to dominate the Taiwanese economy. “Old” and “poor” were how politicians described the once-bustling city. The imminent arrival of TSMC — and other tech heavyweights, including Foxconn and ASE Technology — promises to change that image.Transforming the southern city from a heavy industrial centre into a new chip and EV cluster would tick a number of boxes for the government. Most immediately, it would help spread the economic benefits of Taiwan’s tech prowess. More strategically, expanding the island’s tech manufacturing footprint will help bolster its all-important chip industry, the cornerstone of Taiwan’s global strategic importance.But not everyone is celebrating. One local resident says that not a day goes by that he doesn’t regret not buying a home in the area before TSMC’s plans were announced.Nikkei Asia’s Cheng Ting-Fang and Lauly Li visit Kaohsiung to reveal how Taiwan’s greatest economic strength can also be a source of major headaches for ordinary people.Recommended readsTech Tonic Podcast: US-China Tech Race: Shock and Awe (FT)Red-hot Chinese chip investment fuels boom in used equipment (Nikkei Asia)Mitsubishi Heavy aims to build ‘reactor-on-a-truck’ by 2030s (Nikkei Asia)The tortuous route of Toshiba’s path to auction (FT)The robot dogs policing Shanghai’s strict lockdown (FT)ASML sees chip production capacity remaining tight into 2023 (Nikkei Asia)TSMC raises revenue forecast as global chip shortage persists (FT)Rakuten will double ecommerce turnover by 2030: CEO Mikitani (Nikkei Asia)LG-Magna venture breaks ground on EV motor factory in Mexico (Nikkei Asia)Lex: Binance: crypto platform’s US affiliate could find chilly market reception (FT)We hope you are enjoying #techAsia. If so, please recommend to your friends to receive it every week by signing up here.If you have any comments, or ideas on stories you would like to see us cover, we would be happy to hear from you at [email protected]. More