Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Geopolitical tensions are driving more multinational companies to signal plans for moving production into countries that are politically closer to their final markets, according to a European Central Bank survey.The ECB found almost four times as many European multinationals said they would shift production to politically friendly countries — a phenomenon known as “friend-shoring” — as have done so in the past five years. While 42 per cent of the 65 companies polled by the ECB claimed they would increasingly produce more in politically friendly markets, a higher number — 60 per cent — flagged that changes to their supply chains and production locations have pushed up prices over the past five years. Of those surveyed over this summer, 45 per cent said they expected it to exert more inflationary pressures in the future.Economists fear the global trading system risks being fragmented into competing blocs, reflecting diplomatic rifts caused by Russia’s invasion of Ukraine, Israel’s war with Hamas and growing trade tensions between the US and China.The IMF warned earlier this year that its estimates showed the trend could cut global economic output by 2 per cent in the long term. ECB president Christine Lagarde said earlier this year the fragmentation of the global trading system had “contributed to the steep rise in inflation over the last two years”.“Geopolitical risk was the most frequently cited factor behind decisions to (re)locate production into the EU, while demand and cost factors motivate moves out of the EU,” the ECB said in a report published on Monday.However, reworking supply chains to avoid geopolitical risk is difficult, especially when many companies rely on inputs from China that are hard to find elsewhere, such as materials for making batteries.“Most analysis to date does not find evidence of significant changes in aggregate European trade patterns,” the ECB said. But it added that such shifts “may take time to unfold, given the challenges and costs involved in modifying business models, supply chains and contracts”.Many of the businesses polled, which together have an aggregate value-added equal to about 5 per cent of EU gross domestic product, expressed concern about their reliance on sourcing critical supplies from China.More than half of the companies said the supply of critical inputs from a specific country or countries was subject to “elevated risk”, the ECB said, adding that in “a large majority” of cases this related to China.Most companies said it would be “very hard” to find these critical inputs elsewhere. But many said they were trying to diversify their supplies, while others said they were holding more inventory, changing their product composition or monitoring risks more closely.The ECB said changes to companies’ production locations and supply chains was likely to reduce the share of jobs they have in the EU, due to a lack of labour availability and the cost of workers in the region. But at the same time, it said these changes seemed to be shifting more companies “towards greater use of EU suppliers”. More

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She will be succeeded by Lidiane Jones, CEO of Slack Technologies (NYSE:WORK), on Jan. 2, according to the report, which said that Wolfe Herd will remain as executive chair.Bumble did not immediately respond to a Reuters request for comment. The report comes a day ahead of the company’s third-quarter earnings.Bumble shares fell 1.5% in premarket trading. They have lost more than a third of their value so far this year. More

WASHINGTON (Reuters) – A trade program that grants exports from qualifying African countries duty-free access to the U.S. market should be extended by 16 years, said Democratic Senator Chris Coons, a leading voice on U.S.-Africa policy.Talks are underway for the renewal of the two-decade-old African Growth and Opportunity Act (AGOA), which is due to expire in 2025.African countries want a 10-year renewal of the pact ahead of the 2024 U.S. election. President Joe Biden’s administration is also seeking the program’s reauthorization but has called for certain reforms.Coons, a member of the Senate Foreign Relations Committee, has sponsored a bill that seeks to integrate AGOA and the African Continental Free Trade Agreement, which includes the majority of African nations. According to a draft version of the bill exclusively obtained by Reuters, the program would maintain benefits for countries as they grow wealthier, allowing them to remain until they are determined to be high-income for five years, instead of removing them if they reach that threshold for a single year.”My AGOA Renewal Act would extend this program, incentivizing investments that will create jobs, bolster economic development, and strengthen our standing in the region,” Coons said in a statement.Spokespeople for Senator Ben Cardin, the committee’s chairman, did not immediately respond to a request for comment.James Risch, the panel’s top Republican, wrote in a letter to Biden administration officials on Thursday that he supports the early reauthorization of the program, but wants to see changes to its eligibility criteria and other modifications.More than $10 billion worth of African exports entered the United States duty-free under the program in 2022. The pact has bipartisan support in Washington, but there are divisions on how to update it.U.S. Trade Representative Katherine Tai said on Saturday that AGOA should aim to boost usage of the program by countries that qualify, though she did not give details on how it would do so.American business groups have said they need certainty over AGOA, so that African countries are able to take advantage of a global push to reduce dependence on Chinese manufacturing. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.For Wall Street firms, China must be one of the most difficult places to make money right now. So it is highly revealing that many of the biggest names in global finance are set to arrive in Hong Kong this week. Goldman Sachs’ David Solomon, Morgan Stanley’s James Gorman and Citi’s Jane Fraser are due in town, though JPMorgan’s Jamie Dimon will instead be in Paris with the bank’s International Council, a group that Tony Blair chairs. Some of the most senior figures from Europe’s UBS, Barclays, HSBC and Deutsche Bank are visiting, as well as BlackRock, Blackstone and Apollo Global Management, among others. Few organisations could imagine being able to bring such a line-up together. But the Hong Kong Monetary Authority, the territory’s de facto central bank, is hosting them at a conference with the theme “Living with Complexity”. That phrase offers at least a nod towards how tough the financiers’ task will be. Part of the event’s purpose is to showcase Hong Kong as a crucial global financial centre, even as US-China tensions fray commercial ties built up over decades. Viewed from the US, the role of Wall Street titans in that narrative is tricky. Lately the US is making less of a distinction between it and the mainland. President Joe Biden’s executive order banning some US investment into Chinese technology, for example, applies equally to Hong Kong. John Lee, Hong Kong’s chief executive, is due to make a speech at the conference. But American financiers would probably be nervous about any one-to-one photographs with him. He is under US sanctions for “being involved in coercing, arresting, detaining or imprisoning individuals” under a draconian national security law that Beijing imposed on Hong Kong in the wake of pro-democracy protests in 2019. The sanctions would penalise American financial institutions if they did business with him. Hong Kong’s role is as a gateway to China, but many US investors have changed their tune on the country. “When we used to go [to the US], everyone wanted to talk about China,” said one senior Hong Kong-based executive who advises investment firms. Now, “it’s almost an uncomfortable topic — they try to change the subject”. Beijing’s crackdowns on technology companies and private education made investors fear the unpredictability with which their investments in the country could go wrong. China’s slowing growth and its real estate crisis have dulled the commercial rationale and raids on due diligence firms have rattled foreign investors. Among multinational corporations, the talk is of “decoupling” and “de-risking” from China amid trade restrictions and Beijing’s strict new anti-espionage laws on the use of data. Fears about the possibility of a war over Taiwan lie behind many of those conversations. “It’s all well and good to have these big public events where everyone espouses their views on the robustness of Hong Kong and China, but the reality is very different,” an asset management specialist based in Hong Kong said. “It’s quite depressing in terms of what’s happening on the ground — there’s not a lot.” The conference stage is unlikely to be a forum for the world’s most senior bankers to discuss these issues. Instead, the financiers will be busy trying to get through the event without mis-steps, and with as little attention as possible, aware that ruffling feathers could be particularly problematic in the run-up to an expected meeting between President Biden and President Xi this month. The fact that reporters are being kept out of the room, watching an electronic feed instead, should make the task easier. Bankers fear that if they are seen to talk up their firm’s China business, they could find themselves in the crosshairs of politicians back home, an executive at one US firm said. They must also avoid comments that could be construed as talking China down. It is telling that the world’s financial elite is willing to attend despite all of this. The HKMA, which has almost HK$4tn (£410bn) in its Exchange Fund, is an important client for banks and a major investor in private equity funds. Other asset managers in the room are or could become valuable clients too. Many of the attendees’ firms have a significant presence in China, which they are not abandoning, so they must try to build ties in Beijing, Hong Kong and the west. That is an increasingly tough task. But the biggest names in finance have decided they need, however carefully, to be in the room. [email protected] More

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen will meet with Chinese Vice Premier He Lifeng in San Francisco this week to try to deepen a fledgling economic dialogue between the world’s two largest economies ahead of a U.S.-hosted summit of Pacific Rim leaders.The Treasury said the Nov. 9-10 meetings will also convene the new economic and financial forums launched in October by the Treasury and China’s finance ministry and central bank.Yellen first met with He, China’s new economic czar, in July, when she visited Beijing to try to stabilize a deteriorating U.S.-China relationship amid growing U.S. restrictions on sensitive technologies.The San Francisco meetings will take place just before the Biden administration hosts ministers and leaders of Asia Pacific Economic Cooperation countries from Nov. 11-17 — a gathering during which U.S. President Joe Biden is aiming to meet with Chinese President Xi Jinping.A senior U.S. Treasury official downplayed the idea that there would be specific “deliverables” from the Yellen-He meetings, saying it was not a “policy trade” situation “where we trade one thing for another.”But the official said a key aim for Yellen was gaining a better understanding of how the new U.S.-China economic communication line will work, and how to make sure that “it is not vulnerable to shocks,” adding that there will be more frequent interactions.Yellen also is keen to discuss what steps Chinese officials are contemplating to support their flagging economic growth, and what circumstances might change their policy path.’NON-MARKET’ TOOLSAmid growing concerns that China will try to dump more manufactured goods on U.S. and global markets, Yellen is expected to warn He against using massive industrial subsidies to state firms and shutting U.S. companies out of domestic markets, the official said.”This week, I will speak to my counterpart about our serious concerns with Beijing’s unfair economic practices, including its large-scale use of non-market tools, its barriers to market access, and its coercive actions against U.S. firms in China,” Yellen said in an opinion piece published by the Washington Post.She reiterated that the U.S. was seeking “healthy competition” with China and was not trying to “trigger a “disorderly wholesale private-sector pullback from China with actions to diversify supply chains and protect U.S. national security.”The communications so far have helped U.S. officials to explain policies such as export controls and restrictions on outbound U.S. investment to China to counterparts in Beijing.NOT S&EDBut Yellen said her engagement with He was not meant to reconstitute the broad, Obama-era U.S.-China Strategic and Economic Dialogue, which was widely criticized for its ineffectiveness.Instead, Yellen said she was “focusing on specific, high-priority economic topics on which we can make tangible progress.”Among these are cooperating on global challenges such as tackling climate change, speeding debt relief to poor countries, and reducing illicit financial flows that support terrorism and the illegal drug trade. More

BRASILIA (Reuters) – Brazil’s Finance Minister, Fernando Haddad, said on Monday that revenue shortfalls resulting from past tax changes have an impact on new fiscal rules approved by Congress during President Luiz Inacio Lula da Silva’s administration.Speaking at an event hosted by BTG Pactual bank, Haddad reinforced that he had informed the president that the ministry had been observing considerable frustration in public revenues since July. More

The Expropriation Bill contradicts the requirements of the African Growth and Opportunity Act (AGOA). AGOA provides zero-tariff market access to nations that are progressing towards a market-based economy and safeguarding private property rights. The proposed legislation, however, introduces EWC for reasons such as the appropriation of hijacked buildings and invaded land.At the AGOA Forum in Johannesburg, the risk of South Africa’s exit from AGOA due to the EWC provisions in the Expropriation Bill was largely overlooked. To be eligible for AGOA, an African nation must protect private property rights. However, the Expropriation Bill approved by the National Assembly, which is set to be enacted before the 2024 election, threatens these rights by endorsing EWC on various grounds.Despite no public warnings from US delegates, some US lawmakers have voiced concerns over the bill’s impact on US-South Africa trade. Congressman Jim Baird questioned the potential implications of the bill, while Congressman John James labeled EWC a “disastrous policy” that threatens South Africa’s constitutionally protected private property rights.The Biden administration, known for its stringent AGOA eligibility criteria, has recently removed several African countries from potential benefits. This move highlights the seriousness with which the US government views adherence to AGOA criteria. While South Africa’s Expropriation Bill is yet to become law, its potential effects on trade relations and private property rights are already causing concern among stakeholders.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More