Economy

(Reuters) – U.S. online holiday sales are expected to rise this year at their slowest pace since at least 2015, according to a report, as shoppers feel the brunt of decades-high inflation and soaring interest rates.Adobe (NASDAQ:ADBE) Analytics forecast online sales in November and December to rise 2.5% to $209.7 billion, compared with an 8.6% increase a year ago, as more people also return to in-store shopping and bring forward purchases to as early as October.This is another sign of a gloomy holiday season, with FedEx Corp (NYSE:FDX)’s Ground division expecting to lower volume forecasts to reflect customers’ plans to ship fewer holiday packages. Last month, Mastercard (NYSE:MA)’s SpendingPulse report also forecast a slowdown in shopping for the holidays.With annual inflation running 8.3% in August, Americans have been forced to cut back on discretionary purchases, while the U.S. Federal Reserve’s aggressive interest rate hikes are expected to further hit spending power.”This is a radically different year than even any of the COVID fluctuations that we’ve seen in the past,” Adobe Digital Insights senior director Taylor Schreiner said.”As the cost of basics like food and gas go up, consumers become much more price-conscious shoppers … and that influences consumers’ plans to wait for discounts and shop a little more vigilantly over the course of the season,” Schreiner said.Companies such as Amazon.com Inc (NASDAQ:AMZN), Target Corp (NYSE:TGT), Walmart (NYSE:WMT) Inc and Best Buy Co Inc (NYSE:BBY) have been delving out early discounts to spur demand and get rid of excess stock, eating into the expected sales on major shopping days. Adobe expects discounts for electronics to be around 27%, compared to 8% a year ago.Black Friday online sales are expected to grow just by 1% and Thanksgiving sales are anticipated to fall 1%, the Adobe report said.Adobe’s forecast relies on direct consumer transactions based on over 1 trillion visits to U.S. retail websites. More

The bond market has had a lousy year. And no one holds more bonds than central banks, which have amassed a fixed income portfolio worth well north of $30tn over the past decade. But do their mounting losses actually matter? Yes and no. Central banks are obviously pretty unique institutions. On one hand they have a balance sheet and a P&L like anyone else, and right now they’re not looking great. Toby Nangle estimates the Bank of England’s losses alone are currently around £200bn, and the Federal Reserve says it had notched up almost $720bn of unrealised losses by the end of the second quarter (updated with newer data).

On the other hand, central banks are constructs of sovereign states and can literally create money out of thin air, which makes the whole bankruptcy question take on a different dimension. Morgan Stanley’s chief economist Seth Carpenter wrote one of the definitive papers on the subject while at the Fed a decade ago, and revisited the subject over the weekend. Given the timeliness we thought we’d share and paraphrase liberally from it. Central bank profits and losses matter . . . but only when they matter. Before the 1900s, the subject of economics was called “political economy.” Central bank losses that affect fiscal outcomes may have political ramifications, but the banks’ ability to conduct policy is not impaired . . . . . . Starting with the Fed, all the income generated on the System Open Market Account portfolio, less interest expense, realized losses, and operating costs is remitted to the US Treasury. Before the Global Financial Crisis, these remittances averaged $20-25 billion per year; they ballooned to more than $100 billion as the balance sheet grew. These remittances reduce the deficit and borrowing needs. Net income depends on the (mostly fixed) average coupon on assets, the share of liabilities that are interest free (physical paper currency), and the level of reserves and reverse repo balances, whose costs float with the policy rate. From essentially zero in 2007, interest-bearing liabilities have mushroomed to almost two-thirds of the balance sheet. As the chart below shows, the US central bank’s net income (which have been passed back to the US Treasury) has turned negative, and Morgan Stanley forecasts the losses will rise as interest rates rise.

Carpenter points out that most central banks, including the Fed, don’t mark to market, so any losses are unrealised and don’t flow through to the central bank’s income statement until they actually sells asset. But that obviously raises a lot of interesting questions. So, what do losses mean? Is there a hit to capital? Bankruptcy? An inability to conduct monetary policy? No. First, remittances to the Treasury end, and the Treasury issues more debt. The Fed then cumulates its losses and, rather than reducing its capital, creates a “deferred asset.”1 When earnings turn positive again, remittances stay at zero until the losses are recouped; imagine the Fed facing a 100% tax rate and offsetting current losses with future income. Profitability will eventually return because currency will keep growing, lowering interest expense, and QT will shrink interest-bearing liabilities.Things are similar elsewhere, but with local twists, such as the Czech central bank’s longstanding negative equity, or the fact that the Bank of England obtained an explicit UK government indemnification to be made whole from any losses when it started passing on its QE profits. The effect is essentially the same as with the Fed, but the political economy differs. Where HMT and the BoE share responsibility, the Fed is on its own. Passive unwinding for the BoE is hard, given the lumpy maturity structure of gilt holdings, while the Fed has up to $95 billion per month running off passively. For the BoE, a one percentage point increase in Bank Rate lowers remittances by roughly £10 billion per year, a material sum for a country grappling with fiscal issues. The proposal to lower expense by prohibiting interest payments on reserves deserves scrutiny. If no authority remains, the BoE would have to sell assets to regain monetary control, realizing losses. The losses exist; it is the timing that is in question.The ECB’s balance sheet is structured quite differently, but the logic is similar. Our European team projects the depo rate at 2.5% by next March, which implies ECB losses of around €40 billion next year. Bank deposits receive the depo rate, which will be much higher than the yield on the portfolio. The BoJ’s balance sheet has similarly swelled, but as of March (the latest available data), the BoJ was in an unrealized gain position. We think that yield curve control (YCC) will be maintained through the end of Governor Kuroda’s term, but when it ends, if the JGB curve sells off sharply, the losses could be large, though unrealized.The most interesting variant is the Czech National Bank. The CNB has had a negative equity position for most of the past 20 years. Managing a small, open economy means focusing on the exchange rate, and most assets are foreign currency-denominated. If the central bank is credible and the Czech koruna rises, the value of its assets falls. The same is true for the Swiss National Bank, whose profits and losses have swung by billions in some years, yet it has not lost control of policy.Central bank negative equity; coming to a Fed or BoE or ECB near you soon? More

Hello, and welcome to Trade Secrets. Remember the global supply chain crisis? What was that all about? Obviously it’s a hostage to fortune to say this, but the snarl-ups in global shipping and logistics that have been exercising us all since late 2020 are easing very rapidly. Ever alert to the dark cloud inside any silver lining, though, I suggest we be careful what we wish for. Charted waters looks at the gloomy outlook ahead of the World Bank and IMF’s annual meetings this week.Dark days in the economic ecosystemFirst, a slight diversion. We shouldn’t really call them “supply chains”. It’s a more accurate reflection of the flexible, multi-stranded nature of the global goods trading system to use the less snappy (hence my not using it in the headline) “supply networks” or the even unsnappier “supply ecosystems”. A chain is useless as soon as its weakest link breaks, but networks and ecosystems find ways to compensate when one branch or node is ruptured. The enormously important context for the logistics crisis is that the extraordinary increase in shipping delays and freight rates since late 2020 didn’t actually stop a pretty healthy recovery in world trade and economic growth after the initial blow of the pandemic.That pedantic exercise in terminological exactitude out of the way, let’s get on with the show. It’s now clear the crunch is rapidly uncrunching. Freight rates and waiting times at ports are dropping rapidly. The US logistics managers’ index shows spare transportation capacity shooting up and prices falling. The New York Fed measure of global supply chain pressure, which weights together delivery times, backlogs and inventories, is back down to levels last seen at the end of 2020.

Inflation remains high, but the Institute of International Finance, whose chart of delivery times and costs is below, calculates that it’s now driven by the energy shock from the Ukraine war rather than the cost of supply disruption.

As supply ecosystems malfunctioned last year, explanations fell into two basic camps. I was in Team Transitory Demand Effect, which argued it reflected mainly the huge resurgence of consumption and particularly consumer durables (e-bikes rather than food delivery) after lockdowns lifted, putting pressure particularly on the inefficient ports on the US West Coast. The other gang was Team Deep-Seated Supply Problems, who were all about the crisis in globalisation and geopolitics and fragile supply networks and underpriced risks of offshoring and what have you. A bit of a simplification, but that’s how the sides lined up.Well, not to declare ultimate victory, but the demand explanation is surely the most likely for what’s changing right now. There’s a lot of gloom about a global recession ahead, which if history is a guide will hit goods trade particularly hard. By contrast the supply side hasn’t notably improved: geopolitics and certainty about the robustness of supply networks isn’t all rainbows and kittens. And I can’t find anyone who thinks the Port of Los Angeles and associated trucking services have suddenly perked up. Jennifer Bisceglie, chief executive of the supply chain consultancy Interos, says it’s about buying behaviour. “First, consumers don’t need the same hard goods: they’re back to doing travel, they’re back to buying services. The second is there’s so much uncertainty in the economy and there’s inflation. The third is that companies are sitting on inventory and so there isn’t the same throughput.” As for the idea that the reduction in congestion reflects a sudden increase in capacity or efficiency, Bisceglie says: “If after three years you’re waiting for a big bang change in supply chains based on the pandemic, I think it’s already happened.”Not all the data points line up. Flexport, the freight forwarding company that monitors these things, points out that relative consumer durables demand is still high.

But those figures are from past months. Forward-looking indicators, especially in container shipping, are looking pretty grim: orders are dropping and the number of “blank sailings”, where carriers cancel trips, is rising. The World Trade Organization is forecasting a big slowdown in trade next year.Phil Levy, chief economist at Flexport, posits there’s a non-linear relationship: “It’s quite possible you can get some big impacts on supply chain congestion with a relatively small reduction in volumes, the same way that a freeway that’s 90 per cent full might be moving quite well but one that’s 99 per cent full is at gridlock.”Now, of course I’ve slightly caricatured and given a stark either-or framing of the different explanations, particularly for expository convenience and partly to make myself seem cleverer. Clearly there are some supply-side problems — the Covid-related port and trucking shutdowns in China being one of them — which made the demand-driven congestion and shipping costs worse and which have somewhat been resolved. Changes aren’t the same as levels: if what we’re seeing is a serious downturn, there might still be some congestion problems when demand returns to long-term trend. There could well also be some big structural changes going on in patterns of sourcing and supply networks that have yet to work themselves out, particularly since the geopolitical situation can always get a lot worse.However, if you’re looking for an explanation for the past couple of years of high costs and choking congestion, the demand one is most likely. It’s a shame it needs the prospect of a big slowdown to prove it — I’d rather have growth with snarled-up ports than a recession with plain sailing — but that’s the way things are.As well as this newsletter, I write a Trade Secrets column for FT.com every Wednesday. Click here to read the latest, and visit ft.com/trade-secrets to see all my columns and previous newsletters too.Charted watersTo quote the name of another FT newsletter, we live in disrupted times. The latest confirmation of this is the twice-yearly Brookings-FT Tracking Index for Global economic recovery (Tiger), which showed momentum in the world economy stalling and several countries either on the brink of recession or already plunged into one.The data were released as global financial officials gathered in Washington for the World Bank and IMF’s annual meetings this week. Both bodies are expected to publish reports warning that the world economy is on the brink of recession.Any bright news? Yes, if you are India. It is the world’s only large economy described as a “bright spot” in the Tiger research, with strong indicators pointing to robust growth this year and next. (Jonathan Moules)Trade linksThe EU is continuing to complain about electric vehicle tax credits in the US Inflation Reduction Act, which favour North American suppliers.China’s semiconductor industry is bracing itself for a repeat of the pain the US inflicted on Huawei by imposing far-reaching export controls.Henry Farrell and Abraham Newman, two of the great gurus of economic interdependence, say that weak links in finance and supply chains are easily weaponised. If you’re interested in the politically charged saga of waivers for IP protection for Covid vaccines and treatments in the WTO, the Geneva Health Files news service has collected all its great in-depth reporting. The Zambian sovereign debt crisis is setting international precedents on debt restructuring, as is Sri Lanka’s.Trade Secrets is edited by Jonathan Moules More

Total sight deposits, which include other deposits on sight in Swiss francs, declined to 639.332 billion francs from 669.585 billion francs in the previous week.Last week’s drop was the second biggest decline in sight deposits – cash of commercial banks held with the central bank – since weekly records began 11 years ago. It follows a 77.5 billion franc drop the week before and likely represents the SNB selling bills and repos into the market as part of its strategy to raise the Swiss Average Rate Overnight (SARON) towards the central bank’s policy rate of 0.5%, economists said.The SNB raised its policy rate to 0.5% last month as it sought to battle inflation in Switzerland.It declined to comment on Monday about its actions.Credit Suisse economist Maxime Botteron said the decline in sight deposits was likely the result of liquidity-absorbing operations by the SNB such as the sale of repos and of SNB Bills.As the Swiss franc weakened last week, it was also possible the SNB had been selling some of its foreign currencies to maintain its value, which has been helpful limiting the extent of imported inflation.Governing board member Andrea Maechler said again last week the SNB was prepared to intervene with foreign currency purchases or sales if the franc became too weak or too strong. “I expect that the SNB continues to absorb liquidity from the market by issuing more bills and fine-tuning with more repos if the SARON remains too far below the policy rate,” said Karsten Junius, an economist at J.Safra Sarasin.”At 0,445% the SARON today is not that far away from the official policy rate such that further interventions through bills or repos don’t seem that urgent,” he said.($1 = 0.9977 Swiss francs) More

That’s industrial policy folks. It used to be that all developed nations with the exception of the US engaged in it, albeit quietly. Now, it’s back in public vogue, and even Americans are keen on it. It has always been central to the Biden administration, but now, according to a senior administration official I interviewed recently, business leaders are coming to Washington and asking for a signal in the noise of deglobalisation — should they be in Vietnam, Mexico, South Carolina? Should they put investment into clean technology or biotech, or both? They are also looking for increased public support for more domestic production in the wake of the semiconductor industry’s multibillion-dollar boost.But what is industrial policy exactly? And how should it be used — if at all — in the US?Let’s start by understanding that the contours of industrial policy differ depending on the country. Command and control states like China explicitly pick winning sectors, and even companies, and lavish public incentives on them for better or worse. They also engage in mercantilism and protectionism of all kinds to ring fence and support local markets. European countries like France support “national champions” (think Airbus) and Germany is well-known for its co-determination model of corporate governance in which the public sector, private sector and labour all play a role in how companies operate.But the US is different. The country has for the past half a century been run like a company — lean and mean. As long as consumer prices were falling, it didn’t matter how many industries were lost or jobs outsourced and/or displaced by technology. That’s now changing (see my Monday column on the death of trickle-down economics) for all sorts of reasons, from national security and environmental concerns to technological and demographic shifts that favour more domestic production and labour. Both the right and the left in particular are trying to figure out what the contours of more government directed economic policies should be. How do we make industrial policy something that supports equitable growth, rather than simply becoming a boondoggle for already wealthy corporations?This past Friday, I spoke at a Roosevelt Institute event “Progressive Industrial Policy: 2022 and Beyond”, which was a terrific deep dive into this topic (see the live stream of the event, here). Below are five of my top takeaways:We need more data. Over the past couple of decades, most of the offices within the federal government dedicated to gathering data about production of goods have been defunded. That’s one reason it took longer than it might have to increase production of personal protective equipment during the Covid pandemic. We didn’t even know how much stuff we were producing, or who was doing it. Basic data gathering doesn’t cost that much money, and having this kind of information about what is or can be manufactured in the country would be a great starting point for shaping better policy (on that score, we should also roll back the Donald Trump-era budget cuts of the Office of Financial Research, which gathers similar info on financial markets).Environmental sustainability and good jobs are critical economic organising principals. We’ve always lived in a world in which incentivising gross domestic product growth was priority one. But in the future, managing climate change and issues of income distribution (at both the national and global level) will probably be the top priorities. So policymakers will have to ask whether their prescriptions support lower use of fossil fuels, the transition to clean energy, and middle-class job creation.Manufacturing isn’t simply a “fetish for keeping white males with low education in the powerful positions they are in”, as the Peterson Institute for International Economics economist Adam Posen put it, rather shockingly, at the Cato Institute recently. Rather, it’s a building block for place-based economics (particularly in the era of high-tech manufacturing, which blends services and technology in deeper ways than old factory line jobs did, it’s the core of a strong and diverse economy). By the way, I continue to be shocked at how little mainstream economists get how businesses are run, or indeed how geopolitics works. Perhaps the economics profession itself is a way to keep white males with high education in the powerful positions they are in.Services matter, too. Growth is people plus productivity. Getting more minorities and women into the labour market is crucial for growth, and since most of them are in service sectors, you have to bake that into industrial strategies. That’s why unions are focused on organising home healthcare workers, for example (amazing fact: these workers were cut out of the social security system years ago and are fighting for pensions; Washington just became the first state to award them).Implementation is hard. Neoliberalism has died hard because it was simple — a share price is the only metric of success, government should just step out of the way. Getting more voices in the room is tougher — but that doesn’t mean we shouldn’t try.Recommended viewingI’m three weeks into a two-month book tour circuit, so I haven’t had much time to read over the past week or two. As anyone who has written a book knows, you have to become a self-centred heat-seeking missile for publicity (at least temporarily) in order to get your message out.So, I’ll just ask that Swampians give a watch of my first-ever FT film production, which looks at the problems of Big Ag and the dysfunction in America’s food systems. I’m super excited about this, as it’s based on my upcoming book, Homecoming: The Path to Prosperity in a Post Global World, which is out on October 18. My colleagues Joe Sinclair, Gregory Bobillot and I travelled around the country looking at why industrial farming has become as toxic as it has, and what’s being done to change the paradigm in how we grow what we eat. Hint: smaller is better. This is the first in a three-part series; the second will air in November.Edward Luce will return on Friday. Your feedbackAnd now a word from our Swampians . . . In response to ‘The Saudi prince’s ominous axis with Putin’:“Delighted to finally read the positive slant on high oil prices; the new rush to renewables and how a stoic reduction in domestic use will reduce global warming. It’s a shame that the politicians in the UK are not telling the Brits to buck up and cut down on their consumption after all.” — L Stevens More

A new round of US curbs on China’s access to US technology has arrived. Previous sanctions on Huawei almost broke the Chinese smartphone and network gear maker. The latest restrictions not only threaten entire sectors but Beijing’s broader policy goals too.The latest US measures include restrictions on the export of advanced chips used in artificial intelligence as well as curbs on the sale of chipmaking equipment to any Chinese company. The US has blacklisted more Chinese buyers.Beijing has long wanted to achieve self-sufficiency in chip making. It aims to become the world’s leading centre for innovation in artificial intelligence by 2030. It also targets global leadership in electric cars. China wants to build a centralised data bulwark and network architecture. That requires stable access to the most advanced chips. The timing is especially bad for China. Its largest chipmaker Semiconductor Manufacturing International Corp began mass-producing 14nm chips last month. These processors are generations behind the latest types made by global peers such as Samsung and TSMC. Making them in volume nevertheless reduces Chinese dependence on imports. It still has no alternative to importing the most advanced 3nm and 5nm chips.Now mass production of any type of chip will become difficult. Local makers have been catching up rapidly with design and development aspects of chipmaking in recent years. But the final stage — making chips and etching the precise patterns on silicon wafers — remains highly reliant on imported gear.SMIC uses equipment made by US chip gear makers Lam Research and Applied Materials. Secondary sanctions would extend to Dutch peer ASML, the world’s biggest supplier of advanced chipmaking gear. The US is said to have been pressuring the Netherlands to ban gear sales to China since July. It is unclear whether China could continue to import chips from Taiwan’s TSMC, which also uses US equipment. Shares in China’s chipmakers, including SMIC and Shanghai Fudan Microelectronics, fell more than 4 per cent on Monday, while Hua Hong Semiconductor Group dropped more than 9 per cent. Those losses are not yet large enough to reflect the risk that restrictions last more than just a few months. The arrested development of local artificial intelligence, data centres, electric and smart cars sectors could easily prove to be the heaviest technological blow the US has meted out to China. More

The hiring frenzy that has gripped developed economies since the start of the pandemic is easing as employers worry about rising costs, falling demand and a darkening economic outlook.On both sides of the Atlantic, unemployment rates remain low but data published in the past week suggested vacancies were falling from historically high levels and companies were growing cautious about taking on staff. This combination, if it persists, would be good news for central bankers, who are keen to cool wage growth in their battle against high inflation without triggering a surge in unemployment.“In all advanced economies, we are at peak labour market tightness” — Simon Macadam at consultancy Capital EconomicsCentral banks in the US and Europe are engaged in the most aggressive rate-raising cycle since the early 1980s to combat soaring prices. Officials are concerned that a rush to attract workers could trigger a 1970s-style wage-price spiral in which inflation lingers for years.In the US, data released last week showed openings fell at their sharpest rate since the start of the pandemic.Thanks for reading FirstFT Americas. Now, here is the rest of today’s news — AbbyFive more stories in the news1. US and Germany call for climate action from World Bank The US and Germany are leading calls from shareholders in the World Bank for an overhaul of its business model to boost action on climate change. US Treasury secretary Janet Yellen last week called on the bank to develop an “evolution road map by December”. Yellen and the US administration have stepped up their pressure on the bank this year.2. China chip stocks fall as tougher US export controls bite Shares in top Chinese chipmakers shed $7.7bn in market value on Monday, after Washington unveiled new export controls on Friday that restrict the sale of semiconductors made with US technology unless vendors obtain an export licence.3. Russia strikes Kyiv and other cities after Crimea bridge explosion Kyiv and other major Ukrainian cities came under sustained missile and rocket attacks on Monday, a day after President Vladimir Putin accused Ukraine of terrorism over an attack on a bridge linking the occupied Crimean Peninsula with Russia’s Taman region. At least five people were killed in Kyiv, an adviser to the interior minister said on Telegram.

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4. US Republicans pull $1bn from BlackRock The company has lost more than $1bn in asset management business in US Republican states upset with the company’s green investing policies. One analyst said the Republicans’ ESG backlash was “political posturing” ahead of elections in November, adding that BlackRock’s underlying business had not been affected.5. US banks to set aside $4bn for potential loan losses The biggest US banks will signal their worries about the US economy in third-quarter earnings reports starting next week, with analysts expecting they will collectively provision about $4.5bn to cover potential losses from bad loans.The day aheadIMF and World Bank meetings The IMF and the World Bank kick off a week of joint meetings in Washington today. The IMF is expected to downgrade its global economic forecasts this week for the fourth consecutive quarter.Lael Brainard to make keynote address Lael Brainard, vice-chair of the Federal Reserve board of governors, is set to provide the keynote address, discussing how to restore price stability in an uncertain economic environment, at the 64th annual meeting of the National Association for Business Economics. Chicago Fed president Charles Evans will speak about monetary policy and the US economic outlook during opening remarks at the same NABE meeting, which is taking place in Chicago.Jobs data After a week of data from the US labour department indicating that domestic job growth is cooling, the Conference Board will release its employment trend index reading for September. Any turning point in the index, which aggregates eight labour market indicators and has hovered around a two-decade high in 2022, is a sign of directional change in job numbers in the months ahead.What else we’re readingElon Musk has Lunch with the FT At Musk’s favourite Mexican restaurant, Fonda San Miguel in Austin, Texas, the Tesla chief talks to FT editor Roula Khalaf about moving to Mars, saving free speech via Twitter — and why ageing is one “problem” that should not be solved.

Elon Musk: ‘I’m subject to literally a million laws and regulations and I obey almost 99.99 per cent of them’ © Seb Jarnot

BoE governor’s week of tough questions in Washington Andrew Bailey will face intense scrutiny as the central bank prepares to end its emergency backstop support for government bonds on Friday. The central bank governor will need to reassure investors that both the market dysfunction is over and that the bank has a grip on inflation.US economist Jason Furman argues Fed cannot ease up on inflation “Everyone should wake up every morning figuring out how to get paid more, or if they’re running a business how to make more of a profit. And it’s up to the central bank to ensure that, when they’re doing that, their incentives are consistent with inflation being lower.” US economist and former chair of the US’s Council of Economic Advisers spoke with the FT’s chief features writer, Henry Mance — keep reading. Janet Yellen criticises Opec oil production cuts The US Treasury secretary said the move by Opec+ to cut oil production was “unhelpful and unwise” for the global economy. The Opec cartel agreed on Wednesday to collectively reduce output by 2mn barrels a day, sending shockwaves across energy markets.How global crises are reshaping agriculture Climate change and surging costs for supplies such as fertiliser are driving a return of the so-called regenerative agriculture movement. Its aim is to make agriculture a solution to the environmental crisis, rather than a leading contributor, by restoring natural ecosystems.FilmHollywood was wary of backing a film about African women warriors — but now The Woman King is a big box office hit. Film critic Danny Leigh sits down with director Gina Prince-Bythewood to discuss what it takes to make a successful action movie and promote diversity.

Lashana Lynch as Izogie in ‘The Woman King’ © Ilze Kitshoff More

Shares in top Chinese chipmakers shed $8.6bn in market value on Monday, as new US export controls threatened to obstruct Beijing’s plans for technological self-sufficiency.Semiconductor Manufacturing International Corp, China’s largest chipmaker, fell 4 per cent in Hong Kong on Monday, while Hua Hong Semiconductor tumbled 9.4 per cent and Shanghai Fudan Microelectronics plunged 20.2 per cent.The sharp losses came after Washington unveiled new export controls on Friday that restrict the sale of semiconductors made with US technology unless vendors obtain an export licence. The controls also bar US citizens or entities from working with Chinese chipmakers without explicit approval and limit the export of manufacturing tools that would allow China to develop its own equipment.The US commerce department said on Friday that it had added 31 companies to its “unverified list” in an effort to make it more difficult for Chinese companies to manufacture or obtain advanced computer chips vital to cutting-edge technologies.Shenzhen-listed Naura Technology, which said one of its units had been added to the list, fell the maximum 10 per cent allowed in Shenzhen on Monday. Other major losers in mainland Chinese markets included ACM Research Shanghai and Advanced Micro-Fabrication Equipment. “Most of the new companies are not listed, but the restrictions are still affecting overall sentiment in the market,” said Dickie Wong, head of research at Kingston Securities in Hong Kong.The restrictions had already sent the Philadelphia Stock Exchange Semiconductor index down more than 6 per cent on Friday as analysts warned that Chinese chip producers would take a substantial hit from the new restrictions. The Chinese semiconductor market, based on end users, accounts for almost a quarter of global demand.“The tensions between China and the US are not going to ease up, so any addition to any entity list is not going away,” Wong added. “We have to expect that in the near term, more companies will be added to the list as well”.

The falls for Chinese chipmakers outstripped losses for broader Chinese markets as traders returned from a week-long national holiday in the mainland. The CSI 300 index of Shanghai- and Shenzhen-listed shares fell 2.2 per cent while benchmark Hong Kong’s Hang Seng index fell 3 per cent.“Washington is never going to back down on this,” said Andy Maynard, a trader at brokerage China Renaissance, adding that share price volatility was being exacerbated by low turnover.Traders said the restrictions were also expected to hit big suppliers across the rest of the Asia-Pacific region, but that any market reaction in Japan, South Korea and Taiwan would be delayed until those markets returned from national holidays on Tuesday.

Video: China’s unseen war for strategic influence More