Economy

Investing.com — Jerome Powell returns to Capitol Hill for more testimony a day after rattling global markets with warnings that the Federal Reserve may step up the pace of rate hikes again. The comments pushed the dollar to a three-week high, two-year note yields to a 16-year high, and inverted the U.S. yield curve to a degree not seen since 1981. The ADP jobs report and the Labor Department’s monthly survey of job openings are both due. U.S.-China relations continue to deteriorate as House Speaker Kevin McCarthy prepares to meet Taiwanese leader Tsai-Ing Wen. The Senate introduced a bill on Tuesday that could see video app TikTok banned in the U.S. on security concerns. And oil prices stabilize after plunging on Tuesday – with U.S. inventory data due at 10:30 ET. Here’s what you need to know in financial markets on Wednesday, 8th March.1. Brace, brace…The dollar hit a three-month high and yields on short-dated Treasury bonds rose to their highest since 2007 after Federal Reserve chair Jerome Powell opened the door to a 50 basis point hike in the fed funds rate at the central bank’s next meeting in two weeks’ time.Powell continues his Congressional testimony in the House of Representatives at 10:00 AM ET (15:00 GMT) after telling the Senate Banking Committee that rates are likely to peak above the Fed’s last implicit forecast of 5.1%, while also warning that the Fed was willing to raise in larger increments again, after slowing the pace of monetary tightening after its last two meetings.The benchmark 2-year note now yields 5.04%, more than a full percentage point above the 10-year note at 3.97%. That degree of inversion – widely seen as a herald of recession – was last seen in 1981, when a certain Paul Volcker was running the Fed.2. Potential pitfalls from the labor market; Bank of Canada rate decision eyedAhead of Powell’s second day of testimony, U.S. economic data have the potential to either calm nerves or upset the applecart again.ADP publishes its monthly hiring report at 08:15 ET, while the Labor Department publishes its Job Openings and Labor Turnover Survey for January at 10:00 ET. Given the Fed’s focus on the labor market, a big deviation from consensus could cause quite a stir.Also due are weekly mortgage applications numbers, which will cast fresh light on how bad the recession in the U.S. housing market is getting. Applications have fallen for four of the last five weeks and now stand at their lowest in 28 years.Outside the U.S., the Bank of Canada will be hoping it’s second-guessed Powell correctly when it announces its interest rate decision at the same time as the Fed chief starts speaking. The BoC conspicuously paused its tightening cycle last month, leaving its key rate at 4.5%.3. Stocks seen under pressure at opening U.S. stock markets are set to stay under pressure at the open, posting only a modest bounce after heavy losses in response to Powell’s testimony on Tuesday.By 06:30 ET, Dow Jones futures were up 45 points, or 0.1%, while S&P 500 futures were up 0.2% and Nasdaq 100 futures were up 0.3%. The S&P 500 cash index had fallen back below 4,000 on the news, while the Dow had fallen 1.7%.Stocks likely to be in focus later include Crowdstrike (NASDAQ:CRWD), which beat expectations with its quarterly update late on Tuesday, and Stitch Fix (NASDAQ:SFIX), which posted a wider-than-expected loss. The stocks are going in opposite directions in premarket, accordingly.Also in focus are Adidas (OTC:ADDYY), which slashed its dividend as it ponders what to do with over $1 billion unsellable Yeezy inventory, and Rivian (NASDAQ:RIVN), which hit a new all-time low on Tuesday after rival BYD (OTC:BYDDY) announced a big expansion into commercial vans.4. U.S.-China ties fray as Senate introduces TikTok killerRelations between the U.S. and China continue to deteriorate. The Senate introduced a new bill on Monday that would give the administration the power to ban apps that it considers a security threat.That designation would most likely affect the short-form video app TikTok, whose storage of its user data in China exposes it to undue influence from Beijing.Senator John Thune (R., SD) said the bill could lead to the app being banned in the U.S., something that would remove a key source of competition to the likes of Facebook (NASDAQ:META) owner Meta and Snapchat owner Snap (NYSE:SNAP).The European Union separately banned the use of TikTok on official devices earlier this month.5. Oil inventory drop corroborates Powell’s warning on economic resilienceCrude oil prices are stabilizing after taking a battering from Powell’s comments on Tuesday, which boded ill for U.S. and global consumption for the rest of the year.Powell overshadowed a surprising and large drop in U.S. crude inventories of over 3 million barrels last week, as estimated by the American Petroleum Institute. The numbers were a rare flash of resilience in U.S. demand after a string of inventory builds. The government releases its official data for last week at 10:30 ET.By 06:45 ET, U.S. crude futures were down 0.1% at $77.48, having lost over $3 a barrel on Tuesday. Brent was up less than 0.1% at $83.33 a barrel. More

The representative, Vahram Stepanyan, said the IMF team would be led by Gavin Gray, the IMF mission chief for Ukraine.”An IMF mission, led by Gavin Gray, starts policy discussions today with the Ukrainian authorities on a potential Fund-supported program,” Stepanyan said in a brief statement that provided no further details.Ukrainian officials have said they hope to agree a $15-billion multi-year program with the IMF, in what could be the largest loan package for the country since Russia’s full-scale invasion a year ago.Ukraine’s central bank said it hoped for a four-year program that would be structured in two stages – during the war and after the war.”We aim to reach an agreement with the IMF mission on the program for extended financing during March and submit the agreement for the consideration of the IMF’s board of directors,” central bank governor Andriy Pyshnyi said in a statement.”We are determined to have a productive discussion and search for common solutions.” More

COLOMBO/WASHINGTON (Reuters) – Sri Lanka looks set to get a sign-off on a long-awaited $2.9 billion four-year bailout from the International Monetary Fund (IMF) on March 20 after the crisis-hit country secured new financing support from China.The IMF and the island nation confirmed on Tuesday that Sri Lanka had received assurances from all its major bilateral creditors, a key step to deploy financing and an important moment for the country engulfed in its worst economic crisis since independence from Britain in 1948.Sri Lankan President Ranil Wickremesinghe told parliament there were signs the economy was improving, but there was still insufficient foreign currency for all imports, making the IMF deal crucial so other creditors could also start releasing funds.”Sri Lanka has completed all prior actions that were required by the IMF,” Wickremesinghe said, and that he and the central bank governor had sent a letter of intent to the IMF.”I welcome the progress made by Sri Lankan authorities in taking decisive policy actions & obtaining financing assurances from all their major creditors, incl. China, India & the Paris Club,” IMF chief Kristalina Georgieva said on Twitter, adding that she looked forward to presenting the IMF-supported program to the executive board on March 20.Approval is expected since the board generally will not add items to its agenda unless its members are ready to act.The country’s international debt and currency soared higher on the news, with bonds adding around 3 cents in the dollar, while the Sri Lankan rupee jumped as much as 7.8% to a 10-month high. Stocks closed more than 2% higher.A new letter by the Export-Import Bank of China (EXIM) sent on Monday to Sri Lanka resolved the stalemate. Sources close to the talks said EXIM provided “specific and credible” financing assurances for a debt restructuring, with a specific link to the IMF program and clear language on debt sustainability.The first tranche of funding was expected to be released shortly after the board meeting, the sources added.In a letter in January, EXIM had offered Sri Lanka a two-year debt moratorium, but sources said this was not enough to meet IMF conditions.”This is a positive development: it might be the first time that China provides textbook financing assurances to the IMF outside of a Common Framework process,” said Theo Maret, senior research analyst at Global Sovereign Advisory, in Paris.By end-2020, Sri Lanka owed EXIM $2.83 billion, or 3.5% of its central government debt, according to IMF data. In total, Sri Lanka owed Chinese lenders $7.4 billion, or nearly a fifth of public external debt, by end-2022, calculations by the China Africa Research Initiative showed.IMF financing provides an anchor for countries to unlock other funding sources. Sri Lanka was in negotiations with India, its second biggest creditor, to extend a $1 billon credit line due to expire by March 17, two sources said.Sri Lanka needs to repay about $6 billion on average each year until 2029 and will have to keep engaging with the IMF, Wickremesinghe said.Countries in debt distress such as Zambia and Sri Lanka have faced unprecedented delays in securing IMF bailouts as China and Western economies have clashed over how to provide debt relief.Sri Lanka has been waiting for about 187 days to finalise a bailout after reaching a preliminary deal. This compares to a median of 55 days it took low- and middle-income countries over the past decade to go from preliminary deal to board sign-off, according to data compiled by Reuters.”Debt restructurings both within and outside the Common Framework have been taking longer than usual due to issues with creditor coordination and foot-dragging by China,” said Patrick Curran at Tellimer. “The restructurings in Sri Lanka and Zambia are likely to set important precedents for future restructurings.”Chinese Foreign Minister Qin Gang said on Tuesday that Beijing would continue to participate in the settlement of international debt problems in a constructive manner.Responding to a question on the sidelines of an annual parliament meeting, Qin also said China should be the last to be accused of causing debt traps and called on other parties to share the burden.(This story has been corrected to say central government debt instead of external debt in paragraph 12) More

The NUKIB agency recommended that TikTok should not be installed on phones whose users access critical and other significant infrastructure. “The Agency is concerned about potential security threat stemming from the use of TikTok primarily due to the amount of user data that is collected by the app as well as the way the data is handled.” NUKIB said.”Such large-scale data collection is concerning due to the legal and political environment of the People’s Republic of China (PRC), given that ByteDance, the developer and administrator of TikTok, falls under the legal jurisdiction of the PRC.”NUKIB also recommended politicians and officials to avoid using TikTok, and said the wider public should consider whether to use the app as well, especially for sharing content.TikTok did not immediately respond to a request for comment.ByteDance has said previously that concerns about the app are fuelled by misinformation, and has denied using it for spying. Beijing has also repeatedly denied having any intention to use the app for espionage. Several countries have taken steps to limit TikTok’s use.The United States last month set a 30-day deadline to purge the app from federal devices and systems. The European Parliament, the European Commission and the EU Council have banned TikTok from staff phones. More

WASHINGTON (Reuters) – U.S. President Joe Biden’s public approval rating edged up to 42%, its highest level since June, as inflation has eased in the United States and job growth has stayed strong, a new Reuters/Ipsos poll showed.Biden’s popularity had suffered since the first days of his presidency in early 2021, declining almost steadily until the May-July period of last year, when it touched as low as 36%.Since then, his approval level has risen gradually, with this week’s 42% job approval up from 41% recorded a month earlier. The Reuters/Ipsos poll has a margin of error of three percentage points either way.Biden’s approval also remains quite low by historic standards. In past decades, presidents only occasionally went through extended periods with approval as low as that of Biden, although Donald Trump spent much of his 2017-2021 presidency with similar levels of approval and at points sank even lower, hitting 33% in December 2017.Biden, 80, is expected to launch another run for the White House in the coming weeks. The small upswing in his popularity comes as the pace of consumer price increases has slowed to 6.4% in the 12 months through January, from 9.1% in June.He is expected to unveil a budget proposal this week that could highlight goals for a second term, which are expected to include efforts to protect and possibly expand the social safety net while also reducing the federal deficit by taxing wealthy Americans more. Biden’s administration is currently defending in court an program to forgive some student loans made by the federal government, and the Reuters/Ipsos poll showed sharp partisan divisions on the issue, much like they have on Biden’s own performance.Eighty-one percent of Democrats support the federal government’s loan forgiveness program, compared to 29% of Republicans. Similarly, 81% of Democratic respondents said they approve of Biden’s performance, though only 10% of Republicans said the same.Eighty-four percent of Republican respondents said they supported making it harder for migrants on the U.S. southern border to seek asylum in the United States, compared to just 35% of Democrats. Partisan divisions in the poll were less pronounced on whether federal courts should overturn government approval of a medication used for miscarriage and abortion care. On that question, 70% of respondents – including 82% of Democrats and 53% of Republicans – said they opposed a court intervention banning the medication, mifepristone, nationwide.The Reuters/Ipsos poll, conducted throughout the United States, gathered responses from 1,023 adults, using a nationally representative sample. More

ZURICH (Reuters) -A concert cellist linked to Russian President Vladimir Putin moved millions of francs through Swiss bank accounts without any proper checks, Swiss prosecutors said on Wednesday at the start of a trial of four bankers accused of helping him. Prosecutors alleged that Sergey Roldugin, a close friend of the Russian president, deposited millions of francs in Swiss bank accounts between 2014 and 2016. The four bankers – three Russians who worked in Zurich and one Swiss – appeared at Zurich District Court on Wednesday and denied charges of lacking diligence in financial transactions. They cannot be identified under Swiss reporting restrictions.The prosecution told the court they failed to do enough to determine the identity of the beneficial owner of the funds. Sums of around 30 million Swiss francs ($31.84 million) were involved in the case, said public prosecutor Jan Hoffmann.Roldugin was named the owner of two accounts opened at Gazprombank Switzerland in 2014.This was despite Roldugin who appears on Switzerland’s list of sanctioned Russians – having no listed activity as a businessman on his bank documents.At the time, the musician told the New York Times that he was certainly not a businessman and did not himself own millions, according to the indictment. Roldugin was among scores of members of Putin’s inner circle sanctioned by the West, including Switzerland, after Russia launched its invasion of Ukraine in 2022.Reuters has approached his representatives for comment.The case highlights how people like Roldugin were used as “strawmen”, the indictment seen by Reuters said, a way to hide the true owners of money.”All the evidence runs contrary to Sergey Roldugin being the real owner of the assets,” prosecuting lawyer Hoffmann told the court.Defence lawyer Bernhard Loetscher said there was no proof that Roldugin was not the real owner of the assets.”Doubts about the identity of the true owner are not enough from a criminal law point of view,” Loetscher told the court.Prosecutors are seeking suspended sentences of seven months for each of the bankers. The trial is expected to last one day.QUESTIONS ABOUT PUTIN’S ASSETSThere is little trace of Putin’s assets.”It is well known that … Putin officially only has an income of 100,000 Swiss francs, and is not wealthy, but in fact has enormous assets which are managed by persons close to him,” the indictment said.Reuters has asked the Kremlin for comment on Putin’s relationship with Roldugin and about his own wealth and assets.Putin has in the past said that Roldugin is a friend, a brilliant musician and benefactor who has honestly earned some money from a minority stake in a Russian company.The Kremlin has previously dismissed any suggestion that Roldugin’s funds are linked to the Russian leader as anti-Russian “Putinophobia”. Putin’s finances are a matter of public record, says the Kremlin, saying he has regularly declared his assets and salary to Russian voters. GODFATHER The bankers in the case did not carry out sufficient checks to see if Roldugin was the true owner of the assets in question, the indictment said.”At the time of the opening of the account it was reported in various articles … that Sergey Roldugin was a close friend of Russian President Vladimir Putin and godfather of his daughter,” it said.Other red flags were ignored, and the defendants did not attempt to clarify the plausibility of Roldugin being the real owner of the assets, or the money’s origin, it added.In the bank’s documents, only Roldugin’s professional activity as a musician was listed, making his ownership and involvement “in no way plausible”, the court documents said.In Switzerland, banks are obliged to reject or terminate business relationships if there are doubts about the identity of the contracting party.Both of the accounts in Roldugin’s name were closed in September 2016.($1 = 0.9421 Swiss francs) More

Good morning. For two hours yesterday, Jay Powell grimaced through senators’ harangues, some of which were even related to monetary policy. But the only news came in his opening statement:The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.Markets took this as Powell putting 50 basis point tightening increments back on the table. The two-year Treasury yield shot up 12bp, taking it above 5 per cent for the first time since 2007. Stocks sold off.This is an important change from Powell, because it suggests the Fed’s view of data-dependence is shifting. He has been emphasising the ultimate resting place of rates while downplaying the significance of how long it takes to get there. Now, after a clutch of hotter economic data, he is saying pace matters again.The advantage of taking increases 25bp at a time is optionality. Until recently, the data has been confusing, and with 400bp of tightening hitting the economy on a lag, it made sense not to rush. Yet if the economy really is hotter than we thought, stopping inflation from becoming ingrained in expectations is, in the balance of risks, more pressing.That “if” remains an open question. As Powell mentioned yesterday, stronger January data was probably skewed by a very warm winter in the north-east (a fifth of the US economy). The jobs report on Friday and consumer price index next Tuesday will decide the Fed’s next move. But markets have already rendered their verdict. After Powell spoke, the market-implied probability of a 50bp rise this month rose from 30 per cent to 70 per cent.Email us: [email protected] and [email protected]. Revaluing the software industryThe US software industry is extremely big and important. Just the 10 largest companies have a market capitalisation of $2.9tn — about 7 per cent of the stock market. Microsoft alone accounts for $1.9tn of that.The way these companies pay their employees and report their results makes them look (to many investors, at least) more profitable than they really are. Many software stocks had a brilliant run between the end of the great financial crisis and the beginning of the pandemic, as investors went all-in for growth. That is changing now, and the industry’s finances may be in for a reassessment. The implications for stock prices are obvious.The illusion of extraordinary profitability is the fact that software companies pay their employees largely in stock. Many companies report adjusted profits excluding this form of pay. This is insane, for reasons we detailed yesterday.It is important to understand that this is an industry-wide issue. Mark Moerdler of AllianceBernstein calculates that over the past 10 years, as the good times have rolled, share based compensation has risen from 4 per cent to almost 12 per cent of revenue for global software companies, on average (median). In an industry with operating margins of 30-40 per cent, that means excluding SBC pumps up operating margins by as much as a third. At younger companies, the figure can be much higher: at Snowflake, a $45bn cloud software company, SBC was 42 per cent of revenue last year — all excluded from adjusted profit.Established companies are not immune. Adobe has spent $13.5bn repurchasing 31mn of its own shares over the past three years. Over that period, the company share count has fallen by only 21mn shares. Billions in value are leaking out of Adobe every year to pay for something the company (insanely) excludes from adjusted profits.But at companies that do not adjust away SBC, its mere presence makes their results harder to follow. Microsoft is a good example, as we argued yesterday. The point is worth repeating. The company spent $33bn repurchasing 95mn of its own shares last year, but it issued 40mn shares to give to employees. In other words, the company spent something like $13bn of its free cash flow — about a fifth of the cash it generated last year — paying employees.Anyone who is valuing Microsoft (or other software companies) on cash flow and who doesn’t take the (considerable!) trouble to adjust for SBC is making a mistake. And to the degree that unadjusted cash flow drives software companies’ stock prices, the whole sector may be overvalued relative to other industries.In a note to clients last week, Ryan Hammond’s team at Goldman Sachs wrote that the difference between adjusted and unadjusted earnings is far larger in software than in any other sector. They expects that “the market backdrop will remain challenging for stocks with high SBC and low GAAP margins” as higher rates increase the focus on real profitability. Here is their chart of the relative performance of the top and bottom quartile of the stock market companies, ranked by SBC as a percentage of revenue:

Companies that exclude SBC from adjusted earnings should stop doing so; it’s a shameful practice. And investors should be especially watchful of software companies that buy back a lot of shares. These companies tout buybacks as “returning cash to shareholders”, but a big chunk of the cash often goes to employees instead.More on inflation targetingReaders had much to say on Monday’s discussion of the Fed’s inflation target.Several wrote in to argue the Fed ought to consider replacing its fixed 2 per cent target with a target range. The Bank of Canada already does something like this; officially it tries to keep inflation “at the 2 per cent midpoint of a target range of 1 to 3 per cent”. One reader at a financial research shop wrote that a range could help the Fed cope with structurally inflationary forces:Powell and former vice-chair [Lael] Brainard keep bringing up the loss of 3.5 million workers due to Covid (early retirement and deaths) . . .San Fran Fed President Mary Daly’s comments over the weekend lean in a similar direction. She mentioned how global price competition is declining and how the transition to a ‘greener’ economy will also require more investment. Both would mean higher inflation for longer.It wouldn’t surprise me if the central bank were to shift to an inflation target range, say like 2% to 3%, when it gets close. That way, it gives the Fed an out without completely destroying economic output.Target ranges are more commonly used by emerging market central banks, such as South Africa, which shoots for 3 to 6 per cent inflation. These looser ranges are meant to create credibility in the face of more volatile EM inflation, another reader, Bruce Hodkinson, pointed out. If advanced-economy inflation starts behaving more like EM inflation, a range seems sensible enough.Other readers proposed a return to tradition — namely, the sorts of “intermediate” targets used by central banks in the 1980s. These focus on variables indirectly related to the central bank’s ultimate goals. Canonically, it means targeting the money supply, but some propose targeting nominal gross domestic product too. Thomas Mayer of the Flossbach von Storch think-tank had an interesting suggestion:Today, monetary targeting is of course out of fashion (though neglecting money was probably a mistake, as the recent BIS-study shows). But the [old] Bundesbank approach could be calibrated to the mainstream economics of today by pursuing minimisation of the output gap [ie, how far current growth is from its highest sustainable level] as the “intermediate target” and leaving 2 per cent inflation as the ultimate target to be achieved over the undefined medium-term.Lastly, Roger Aliaga-Diaz, chief economist at Vanguard’s in-house think-tank, made the important point that the Fed is not acting in a vacuum. All things equal, a higher US inflation target would weaken the dollar, reflecting lower US purchasing power. But because of the dollar’s reserve currency status, the spillover effects could be profound:Beyond the academic debates on whether 2% target is the right target or not, policymakers cannot neglect the practical implications of moving the goalposts because of a) credibility issues (as you discuss in your column), and b) because that target is really a foundational pillar of (implicit) global monetary policy co-ordination.On the latter, all major central banks that have adopted inflation targeting have coalesced around the common 2% goal. This is not a coincidence. In a post Bretton Woods world of flexible exchange rates and mostly free capital mobility, harmonisation of long-term average inflation rates (ie targets) is required. So, changing the inflation target by the Fed would require massive international co-ordination with other major central banks, requiring unanimous agreement. A unilateral move could also trigger widespread accusations of starting a new currency war (remember when QE was introduced) by policymakers from emerging markets, etc. It’d be really messy.Messy indeed. (Ethan Wu)One good readHow is China going to pay off all its debt? Stiffing street sweepers, for one. More

Executives at Switzerland’s biggest banks say rich Chinese clients have become much more worried about parking money in the country because of its tough approach to applying sanctions since Russia invaded Ukraine.“We were not just surprised but shocked that Switzerland abandoned its neutral status,” said one board director who oversees Asian operations at his bank. “I have statistical evidence that literally hundreds of clients that were looking to open accounts are now not.” Although Chinese companies have been flocking to IPO in Switzerland, the Financial Times spoke to senior bankers from six of Switzerland’s 10 biggest banks about their experience with private clients and all of them told a similar story. Many said they were worried about the chilling effect on a lucrative line of business and crucial source of future growth.“The question of sanctions has come up with clients,” one banker said. “It was definitely a topic of concern with clients late last year. They were asking whether their money would be safe with us.”Anke Reingren, analyst at RBC, highlighted what was at stake for the Swiss banking sector, which accounts for 10 per cent of the country’s gross domestic product.“Asia has been a strong contributor to profitability for Swiss banks,” she said. “If you look at their share prices, they are very closely correlated to Asian indexes because such a large part of earnings has been coming from the region and historically a large part of the earnings growth in wealth management.”Some Swiss banks said they were already “war gaming” how to handle the fallout if international relations with China worsen significantly, and how to protect and reassure their biggest Chinese clients.Andreas Venditti, a Vontobel analyst who covers banks, said all Swiss wealth managers were having to weigh the impact of the country’s approach to sanctions. “It’s the topic high on the agenda at board and executive level,” he said. “They are all trying to prepare for what comes next.”Since Russia’s invasion of Ukraine last year, the Swiss government has moved in lockstep with the EU in imposing sanctions against Russia and wealthy Russians close to Vladimir Putin.In recent weeks, several incidents have brought the possibility of sanctions against China closer, including the spy-balloon spat and Beijing’s possible supply of weapons to Moscow.A US diplomat based in Bern said officials in his office were “keeping a close eye” on Chinese wealth in Switzerland.One of the bank executives who talked to the FT said he believed Switzerland had moved against Russian clients too quickly. “At some place, we must draw a line on what [Switzerland] will and won’t get involved in.” The government maintains the country’s neutrality remains sacrosanct but said sanctions against Russia involved weighing the “credibility of Swiss neutrality” against the magnitude of Russia’s “violation of the fundamental norms of international law”.Foreign minister Ignazio Cassis has nevertheless opened a domestic debate on what neutrality means and has publicly advocated a more “co-operative” approach with like-minded partners.Switzerland is still the world’s number one centre of offshore wealth, responsible for a quarter of the global total.About SFr7.5bn ($8bn) of Russian money is currently frozen by Swiss sanctions — a small proportion of the SFr46.1bn of Russian assets domiciled in the country by around 7,500 wealthy Russians, according to the Swiss State Secretariat for Economic Affairs. Over the past decade, however, Asia has become a far more important source of revenues.The Swiss government has not disclosed the scale of Chinese assets in the country, but a cache of files released in 2014 to the International Consortium of Investigative Journalists revealed Swiss banks had set up accounts for many of China’s ruling elite and their children, including the son of former premier Wen Jiabao.Swiss bankers say the majority of their Chinese clients do not fit this profile. One said in his experience, most were successful, small-scale entrepreneurs, with fortunes in the SFr10mn-SFr50mn range.Cutting those kind of people off from Switzerland’s banks would be a major blow to the industry, he said.But another senior figure in the wealth management industry sounded more sanguine. “I’ve had conversations with Chinese clients who were wary about Switzerland adopting sanctions last year, but they are not staying away yet.“There was $700bn of trade between China and the US last year — that’s not going to change any time soon.” More