Economy

The UK is on the “cusp” of a Brexit deal with the EU to overhaul Northern Ireland’s trading arrangements, Britain’s deputy prime minister Dominic Raab said on Sunday. The two sides are close to resolving the bitter dispute arising since the UK left the EU single market and customs union in 2021 by agreeing changes to the Northern Ireland protocol, which sets out the region’s trading regime and was part of the Brexit agreement finalised by Boris Johnson.Pro-British parties in Northern Ireland objected to how the protocol treats the region differently to the rest of the UK, while businesses complained about unnecessary bureaucracy.Rishi Sunak’s proposed Brexit deal is designed not only to restore devolved government in Northern Ireland, but also to improve the UK’s relations with the EU and the US, where Joe Biden’s administration has expressed concerns.British officials said the UK and the EU had held “positive” talks on Sunday in an attempt to finalise a deal which could be announced as early as Monday.“Hopefully there will be good news in a matter of days rather than weeks,” Raab told Sky News on Sunday. “We are not there yet, but we are obviously in a position where we are close to, on the cusp of, a deal.”Sunak told the Sunday Times he was “giving it everything” to try to strike a deal with the EU on the Northern Ireland protocol.But he could face a showdown with some Eurosceptic Conservative MPs and the Democratic Unionist Party, Northern Ireland’s largest unionist party, over the deal to overhaul the protocol. The DUP last year forced the collapse of Northern Ireland’s power-sharing government at Stormont in protest at how the protocol creates a de facto border in the Irish Sea.The DUP objects to how goods being shipped from Great Britain to Northern Ireland must undergo checks. This reflects how Northern Ireland remains part of the EU single market for goods in Johnson’s Brexit deal.Sunak told the Sunday Times that he did not believe the deal would leave Northern Ireland in the “orbit” of Brussels.The prime minister added he would try to resolve the concerns of the DUP, which also objects to how the European Court of Justice has a role in overseeing implementation of the Northern Ireland protocol.DUP leader Sir Jeffrey Donaldson has called for changes to the legally binding UK withdrawal agreement with the EU and has urged Sunak to get the right deal, even if that takes longer.Ireland’s taoiseach Leo Varadkar said on Saturday that the UK and EU were “inching towards conclusion” of a deal. “I would just encourage everyone to go the extra mile to come to an agreement because the benefits are huge,” he told reporters. Raab confirmed the proposed Brexit deal was designed to cut checks on goods moving from Great Britain to Northern Ireland and to limit the role of the European Court of Justice. A “green lane” with minimal checks would be set up at Irish Sea ports for goods going from Great Britain into Northern Ireland. A “red lane” involving substantive checks would be used for goods heading for the Irish Republic.Control over issues, including value added tax and state aid, would rest with London, rather than Brussels.

“If we can scale back some of the regulatory checks that apply and some of the paperwork that applies, that would in itself involve a significant, substantial scaling back of the role of the European Court of Justice,” said Raab.The deal is expected to reduce the influence of the European Court of Justice in Northern Ireland but keep it as the ultimate arbiter of disputes about EU law.Mark Francois, leader of the European Research Group of pro-Brexit Tory MPs, said cutting the influence of the European Court of Justice was not enough. He told Sky News the DUP could not accept a Brexit deal where EU law was superior to UK law in Northern Ireland.“Unless that legal text when we see it expunges EU law from Northern Ireland it’s very unlikely that the DUP will support it . . . less of a role is not enough,” said Francois. “We have to get rid of EU law in Northern Ireland.” More

(Reuters) – Nearly 85,000 households and businesses were without power in the Los Angeles area on Saturday, as storms continued to pummel parts of California, bringing snow to higher elevations and dumping rain and hail in the flatlands.Interstate 5, the largest highway leading north out of the city, remained closed at the steep grade known as the Grapevine due to heavy snow, while several more southern points of the freeway in and around Los Angeles were closed due to flooding, the California Department of Transportation said.In Northern California, San Francisco was expected to experience record cold temperatures on Saturday, and the National Weather Service warned residents of the state capital of Sacramento to avoid travel from Sunday through Wednesday as rain and snow started up again after a reprieve on Saturday.”Extreme impacts from heavy snow & winds will cause extremely dangerous to impossible driving conditions & likely widespread road closures & infrastructure impacts!” the agency said on Twitter.The next set of storms, expected to hit on Sunday, will bring wind gusts of up to 50 miles per hour (80 kph) in the Sacramento Valley, and up to 70 miles per hour in the nearby Sierra Nevada mountains. Yosemite National Park was closed through Wednesday due to severe winter conditions. A massive low-pressure system driven from the Arctic was responsible for the unusual conditions, said Bryan Jackson, a forecaster at the NWS Weather Prediction Center in College Park, Maryland.In Southern California, “this is a rare case of a cold, significant storm event,” Jackson said.In a sight that must have delighted many Angelenos on Friday, snowflakes even fell around the Hollywood sign atop Mount Lee in the hills above the city, known for its sunny days and palm trees.On Saturday, scattered showers and isolated thunderstorms were expected to bring rain, hail and a mixture of snow and moisture called “graupel” to the area, the National Weather Service said.A separate storm that clobbered the U.S. Plains, Midwest and Great Lakes regions earlier this week blew out to the Atlantic on Friday after passing over New England, the weather service said. More than 400,000 customers of Detroit based DTE Energy (NYSE:DTE) remained without power on Saturday, the Detroit News reported.Even before the latest storm, much of California had experienced an unusually rainy, chilly winter, starting with a spate of deadly “atmospheric river” storms that unleashed widespread flooding, felled trees and triggered mudslides in a state long plagued by drought and wildfires. More

Inflation is running at a 32-year high of 7.8% is only expected to slow to the top of the Reserve Bank of Australia (RBA)’s target range of 2-3% by mid-2025. Speaking from India, where he has been attending the G20 financial leaders’ meet in Bengalaru, Chalmers said the global economy was on an “incredibly narrow path” with “the inflation challenge on one side, and a big global downturn on the other”.”Everybody here is trying to navigate that narrow and perilous path, we do have a big inflation problem in the global economy and in our own economy,” Chalmers told Sky News television, according to a government transcript.”Even though the peak of inflation is likely to be behind us, it will still be higher than we’d like for longer than we’d like,” he said, citing the conflict in Ukraine as a key driver.The RBA has recently revised up its forecasts for core inflation and wage growth, and warned further hikes in interest rates would be needed to head off a damaging wage-price spiral.Australia’s central bank this month lifted its cash rate for a ninth straight time to a decade-high of 3.35%, taking total tightening since last May to 325 basis points, in a bid to curb surging prices.Inflation was the “defining challenge” in the Australian and global economy, said Chalmers, who warned against complacency.”At some future point, the focus will shift from inflation to growth, but for the time being inflation is the main game. It’s true of the world and it’s true of us.” More

For years wages have been slow to grow in Japan as cautious firms hoarded a record cash pile, while curbing labour costs, despite government pressure on companies to raise pay.The government has put a strong focus on wage hikes to stimulate private consumption that makes up more than half of the economy, hoping to stoke a positive cycle of economic growth and wealth distribution under Kishida’s new capitalism agenda.”Above all, wage hikes that beat price hikes are needed,” Kishida told an annual gathering of his ruling Liberal Democratic Party (LDP), which lays out its policy agenda for this year.”The wave of wage hikes must spread to small firms and local areas to enhance competitiveness amid heated competition to attract workers” amid labour shortages, Kishida said.While achieving “structural wage hikes,” Kishida pledged to continue to take steps to curb energy and food prices to ease the pain of inflation on households.Masakazu Tokura, head of Japan’s biggest business lobby Keidanren, expressed support for the wage push. “Now is the crucial stage to revive a strong economy,” he said. “Structural wage hikes and human capital investment are vital…”At this year’s labour talks, large firms are expected to offer the biggest pay hikes in 26 years, or an average of 2.85%, a poll of 33 economists by Japan Economic Research Center (JERC) shows.Still, that pace would fall short of consumer inflation which is running at 4.2%, and the 5% targeted by Rengo, Japan Trade Union Confederation. Moreover, the small companies that provide most of Japan’s jobs generally can’t increase pay, business owners, economists and officials say. More

As Shanghai re-emerges from a Covid-19 outbreak and three years of restrictions that hampered travel and trade, the financial hub is doing so without much evidence of what made it China’s most cosmopolitan city: foreign visitors. Before the pandemic, its iconic Bund was usually thronged with foreign travellers and business delegations. But on a recent blustery February day the tourists marvelling at the colonial architecture and soaring buildings were all from mainland China.The revival of China’s biggest and most international city will be a test of the country’s engagement with the outside world, as policymakers embark on a reopening years later than western counterparts. Shanghai was among the cities most afflicted by the government’s zero-Covid policy, enduring a draconian two-month lockdown in 2022 that strangled the economy.Last month, the city’s mayor Gong Zheng told reporters that foreign investment last year reached a record $23.5bn, which he argued “shows Shanghai is still one of the most attractive places for foreign investment in the world”. But after the uncertainty of navigating the zero-Covid regime, international business remains reluctant about an immediate return in force, as it continues to face visa delays and other frustrations. One exporter suggested some businesses still harboured doubts about travelling to the country, given its recent Covid wave.“Shanghai has a window of opportunity to rebuild the trust eroded over the past three years,” said Bettina Schön-Behanzin, chair of the Shanghai chapter of the European Chamber of Commerce in China, calling on the city’s government to take “tangible steps to build a business environment that is transparent and predictable”.Queues are forming outside restaurants again in Shanghai as the city reopens to domestic travellers © Qilai Shen/BloombergWhile domestic trade has taken off in the wake of Beijing scrapping pandemic restrictions late last year, Shanghai’s full global reintegration lags behind.Last month, the city welcomed just 180,000 international air arrivals, compared with 2.7mn in January 2019, according to data from the airport authority. Foreign tourists are also not yet permitted to enter China.Shanghai will be a crucial engine for reviving robust growth across China as consumption drags with the delayed reopening. The city contributes more to China’s economy than any other, but in 2022, its output declined 0.2 per cent, compared with a 3 per cent rise nationally. Exports, which buoyed the economy through much of the pandemic, have also been declining amid an uncertain global economic picture.Shanghai’s former Chinese Communist chief Li Qiang, the official responsible for overseeing Shanghai’s lockdown, is set to be named China’s premier at the National People’s Congress, making him the number two official to President Xi Jinping, with responsibility for the national economy.

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Observers expect international business to begin to return in earnest from March, when Apple chief executive Tim Cook is expected to visit China. After three years of isolation, Shanghai is eager to court foreign business. But many have a litany of gripes, including the difficulty of enticing staff to relocate from overseas after witnessing the hardships of lockdowns.“It’s about trying to convince European and American CEOs that China is still investable,” said one attendee at a recent private event in Shanghai for international business leaders.The Shanghai chapter of the European Chamber of Commerce in China this month made a series of recommendations to the local government, including fewer barriers to market access. Its position paper was deleted on WeChat, the Chinese social media platform, shortly after publication.“The European consumer is a massive job creation force in the Chinese economy,” said Jörg Wuttke, president of the chamber. “But the open accessible market for us is very small. In 2021, EU companies sold 23 per cent more into Switzerland than into China.”PCR testing booths that previously dotted nearly every street corner in Shanghai are being disassembled, with some even appearing for sale online © Alex Plavevski/EPA-EFEYang Jianwen, an economist at the Shanghai Academy of Social Sciences, said property and consumption were the “two biggest issues” China needed to solve. Shanghai was well placed to tackle both, he said, adding that the city’s real estate market was “not under great pressure”.Across Shanghai, the visible signs of China’s apparatus to deal with Covid are disappearing. Mobile booths, where the city’s 26mn residents underwent compulsory PCR tests almost daily, are being listed for sale on Xianyu, a second-hand shopping app. Queues are again forming outside restaurants, and face masks, ubiquitous in December and January as the virus again swept through the city, have almost disappeared from its streets.“It’s more bustling than I imagined,” said Zhang Yang, a university student in the nearby city of Hangzhou, who was visiting Shanghai for the first time with two friends. Only one of the trio was wearing a mask, but she said it was because she was not wearing any make-up.Shanghai Metro data showed an uptick in daily passengers in February to 9.5mn, closing in on pre-pandemic levels of more than 10mn.

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“The virus has died down, the children can go to school and we can travel,” said Zhang Baolian, a 70-year-old former electrical worker, who was visiting a bakery on Nanjing Road, the city’s most famous shopping street. “There’s nothing to be afraid of now.”

There have been nascent signs of returning business activity. Canadian coffee group Tim Hortons has partnered with Popeyes to relaunch the American fried chicken brand in China.Lei, a 37-year old Shanghai resident, plans to open a restaurant in March and rented his shop at the peak of the outbreak late last year. He says rents for similar shops have now increased 30 per cent. In a group on WeChat, he saw a villa on a popular road rented out within an hour of it being listed this week. “Although the city has not fully recovered, the queues for restaurants are back,” he said.A few doors down from a Popeyes location in central Shanghai last week, a long lunchtime line had formed outside Guang Ming Cun, a restaurant renowned for its local fare and popular with the city’s elderly.“This is my first time queueing like this in three years,” said Ma, 80, a retiree who was wearing a mask. “The queue will be about half an hour,” he added. “It used to be longer”. More

The next few months put Japan in line for a series of anniversaries it would probably prefer to forget. But these are dates which the leadership in China may be wise to mark: the detonation of timebombs with counters set ticking by a property bubble.For these are, some would argue, distinctly echoey times. New research suggests that, if it is not careful, China may be on track for a new wave of Japanification.Back in 2003, Japan could no longer fool itself that all was well. The 1990s had pitched the country off a trajectory on which it once seemed capable of overtaking the US. Its subsequent mishandling of the bad loan mountain built during its 1980s vainglory days put paid to the notion that the country could easily recover.Vast banking mergers, encouraged by Tokyo over the previous three years, were not enough to disguise a collection of interlocking and unresolved crises. In March 2003, Sumitomo Mitsui Financial Group conducted a panicky reverse merger with a subsidiary amid huge losses. In April, the first signs began to emerge that one of the country’s largest lenders, Resona, was flailing. By May, taxpayers had rescued it with a $17bn nationalisation programme. Later that year and with the emergency klaxons sounding, a once top-tier regional lender, Ashikaga, went bankrupt. All of these events were deferred explosions which might have done far less damage, had they gone off earlier.The problem, as a team of Citigroup analysts declared last week, is that China today looks “strikingly similar” to Japan in its post property bubble era. The countries’ respective demographic profiles, with China’s population now shrinking as Japan’s did years earlier, provide a reminder that after 1990, Japan’s housing price index fell as the 35- to 54-year-old cohort decreased. The report focuses its warnings on the potential risks for China’s banking system.Citigroup identifies several areas of similarity. Both countries entered extended phases of strong GDP growth (Japan’s began in the postwar era and China’s after joining the World Trade Organization in 2001) via investment in infrastructure and the encouragement of exports. Between 2010 and 2020, capital formation represented an average 43 per cent of Chinese GDP growth, according to the World Bank. When its bubble burst in 1990, Japan’s capital formation proportion was at roughly 36 per cent, and considered very high. Japan and China also financed their growth in a similar way. Japan’s bubble era was fuelled by indirect financing provided by commercial banks, which were nudged by the authorities into funnelling soft loans towards favoured industrial sectors. Similarly, says Citigroup, China has developed a financial system mainly dependent on indirect financing. As well as the tools available to the People’s Bank of China, the government can direct the lending activities of commercial banks via a series of mechanisms.Japan’s 1987-89 property and stock bubble expanded most rapidly after the authorities introduced easing policies to promote domestic demand. Borrowing expanded dramatically and liquidity was funnelled into stock and property until the point where, for companies, financial speculation became more profitable than actually running a business. China, decades later, has also allowed the real economy and the financial system to decouple. The country’s clearly bubbly property market, Citi estimates, hit $65tn by 2020, exceeding that of the US, EU and Japan combined. By 2021, 41 per cent of the total assets in China’s banking system were accounted for by property-related loans and credit. The run-up to the property bubbles of both countries was accelerated by the existence of a vast shadow banking market, which evolved to bypass state-imposed lending limits and other restrictions. Citi analysts even see a parallel between the two nations’ relationships with the US. As Japan’s trade surplus ballooned, competitive friction with America escalated to an outright trade war in the 1980s, with technology, intellectual property and security concerns at its heart. There are parallels in the way that, for example, recent legislation and other measures in the US have sought to restrict non-American access to advanced technology.These similarities may not be exact equivalents, but their overall effect could be. Twenty years ago, Japan was only just getting to the bottom of its post-bubble slump. Zombie company debt colonised the balance sheets of strained financial institutions, corporates and households were in a phase of long-term deleveraging and interest rates were kept low. This is Japanisation with Chinese characteristics, concludes Citi — and the risks investors should heed are those in the banking system. [email protected] More

(Reuters) – Roger Ng, the former Goldman Sachs Group Inc (NYSE:GS) banker convicted for helping to embezzle Malaysia’s 1MDB sovereign wealth fund, appealed to a New York court on Saturday not to force him to spend more time in prison.In anticipation of his sentencing hearing scheduled for March 9, Ng’s lawyers asked the court to show mercy and to sentence him to the prison time he has already served in Malaysia. Ng, Goldman’s former head of investment banking in Malaysia, spent six months in a Malaysian prison before he was picked up by the U.S. authorities on Nov. 1, 2018, according to the court filing.In October 2020, Goldman agreed to pay $2.9 billion and its Malaysian unit pleaded guilty to a corruption charge, to settle probes into the looting of billions of dollars from 1MDB and payment of bribes to win business for the Wall Street bank.A federal jury in Brooklyn convicted Ng in April last year of conspiring to violate an anti-bribery law and commit money laundering. Ng faces up to 30 years in prison. “Stripped of his dignity in a Malaysian prison, he has been made to be sick, afraid, alone and hopeless, and still suffers the debilitating effects of PTSD,” the lawyers said while they asked the judge to allow him to return to Malaysia, where he is still subject to criminal charges related to the massive theft of Malaysian funds. Reuters was not immediately able reach Malaysian prison officials to comment on the conditions.Prosecutors said that he helped his former boss Tim Leissner embezzle money from the fund, launder the proceeds and bribe officials to win business for Goldman.”Ng’s role in the offense was minimal, and the only claim to the contrary was provided by Tim Leissner, who was patently incredible,” the defense said in the court filing. More

BENGALURU (Reuters) – U.S. Treasury Secretary Janet Yellen said on Saturday that she believes the strong qualifications of the U.S. nominee to lead the World Bank, ex-Mastercard CEO Ajay Banga, will overcome any criticism of the selection process.In an interview, Yellen affirmed her support for the longstanding tradition of the United States choosing the World Bank’s leader and Europe choosing the head of the International Monetary Fund.But she said that privilege comes with a responsibility to “nominate the strongest possible candidate” for the job. “We’ve taken this very seriously and tried to identify a candidate that we think brings the right skill set to this job,” Yellen said. “And we hope that our candidate will be broadly accepted in both lending countries and borrowing countries.”Yellen said she was pleased so far with positive reviews from G20 finance officials for Banga, 63, an Indian-born U.S. citizen who has won accolades for his work transforming Mastercard (NYSE:MA) and working to lift people in developing countries out of poverty.But the swiftness with which President Joe Biden nominated Banga, in a surprise pick immediately after the World Bank’s board began accepting nominations on Thursday, drew criticism from some non-profit groups, climate and development professionals that the United States never wanted an open contest for the job and sought quickly to deter challengers.As the World Bank’s largest shareholder with 16.35% of its voting power, the United States wields strong influence over the bank’s policies, and the lender’s president works closely with the Treasury Department.”So much for a merit-based transparent process with female candidates strongly encouraged,” said Claire Healy, Washington director for the E3G climate think tank, referring to the board’s selection process announcement.”Time is short and the stakes are high, so concerns about the process will likely be set aside to get the reforms done,” Healy added.Yellen is pressing the World Bank to refine a package of sweeping reforms aimed at vastly expanding its lending resource and mission to tackle climate change and other global challenges.Banga will face a tough slate of issues around the institution’s finances and capital structure from the start — thorny problems he must address as he reshapes the bank into a force for combating climate change on top of its traditional role as a poverty fighter.”There’s broad agreement that we need to mobilize private capital,” Yellen said. “This is an individual who has a better chance of being able to accomplish that than anyone else I can honestly think of.”She added that his background “really is quite different” from past World Bank presidents, who were often picked from positions in government service.”This is somebody who grew up in emerging markets, spent most of his career working in Africa, the Middle East, Asia, really deeply understands and has lived in countries that face development challenges,” she said. More