Economy

Over 40 years ago, the Reagan-Thatcher revolution was born. Taxes were slashed. Unions were squashed. Markets were deregulated and global capital unleashed. But economic pendulums swing. And over the last couple of weeks, it’s become quite clear that anything remotely related to trickle-down theory is now political Kryptonite.The most obvious example is, of course, the backlash against UK prime minister Liz Truss’s bizarre plan to lower taxes on the rich after announcing major spending on energy subsidies. Trussonomics is now off the table, and the prime minister’s own leadership is in jeopardy.But it’s not only the UK that is facing the downhill slope of neoliberalism. I recently met a senior Biden administration official who told me that many chief executives are now coming to Washington and asking for “a signal from government — where should we invest? Should we be in Vietnam or Mexico? Which sectors do you want us in?” While the government isn’t yet in the business of picking winners and losers, the White House has already made the shift to a post-neoliberal era — and many in the business community are preparing for it as well. CEOs may not like the idea of a deglobalising world with more regulation, greater state control and growing labour power. But they can usually find a way to make money as long as they understand the rules of the market.So what are the new rules? The Biden administration recently put out a clear blueprint of the economy it wants, which included five key elements. One is empowering workers, which it has endeavoured to do by using federal budgets to support unionised labour. Another is leveraging as much fiscal policy as is possible in a polarised Congress to bolster working families in areas such as healthcare and childcare, which are increasingly unaffordable for many Americans.But as commerce secretary Gina Raimondo put it to me a few months ago, government should be about more than just cutting taxes and redistributing wealth. This administration wants to play a bigger role in directing the supply side of the private sector. In particular, it wants to encourage the making of things, not just via the push to “Buy American”, but through a more fundamental shift in policy focus from distribution to production.That means industrial policy. And while there isn’t yet a fully articulated strategy in Washington, there are clear signs that laissez-faire economics is over. One of these is the fact that many companies will soon have to choose between the US and China. Formal decoupling between the two countries is gaining steam — there are a record number of American jobs being reshored from China, and calls for stricter rules on technology transfers.Another is that resilience and redundancy in crucial supply chains is becoming ever more important. Just a few days ago, Micron became the second big business (after Intel) to announce a major semiconductor investment in the US, putting $100bn into a new foundry in upstate New York. Federal investment in electric vehicles is also bringing new jobs to beleaguered parts of the South and Midwest. While the strong dollar may become a headwind to the administration’s hopes of growing a larger manufacturing and export economy, the lower cost of energy inputs in the US relative to Europe at the moment is a tailwind.Support for economic “patriotism” is now the operating principle on both sides of the political divide in Washington. Robert Lighthizer, former US trade representative under Donald Trump, was famously a fan of getting rid of America’s trade deficit. But recently, Democratic California congressman Ro Khanna — a rising figure in progressive circles — called for the same thing, advocating that the US achieve a trade surplus with the rest of the world by 2035.As Khanna put it, “Trade deficits some years are fine, when balanced by trade surpluses in other years. But the country has been in constant trade deficit since 1975”. He believes that the government should help rectify this by offering zero-interest loans for factories, and increased use of federal purchasing to underwrite markets.I heard Khanna speak last week at the launch of “Reimagining the Economy”, a Harvard Kennedy School initiative led by economists Dani Rodrik and Gordon Hanson. It aims to replace neoliberal policy paradigms with something new and is one of several such programmes at major universities around the US. Many of these institutions are vying to become the epicentre of fresh economic thinking, just as the University of Chicago was the epicentre of neoliberalism.Khanna summed up the challenge of the moment: “If we can’t get the economy right, we won’t have a multiracial democracy.” That phrasing itself represents something new — in the past, the conversations between racial equity and class inequality in the US have been separated. But Democrats are increasingly trying to link the two together, as they work to find the contours of a post-neoliberal economics. That was the topic of another big shindig last week, sponsored by the Roosevelt Institute, in which progressive politicos (many from within the administration) gathered to discuss the details of America’s industrial policy. While these aren’t completely clear yet, one thing is — all of this is the opposite of trickle-down. [email protected] More

Brussels is pushing for Washington to rethink “discriminatory” provisions in its new flagship green legislation, as alarm mounts among EU officials that the rules could prompt European companies to move production to the US. Margrethe Vestager, Europe’s competition enforcer, said Brussels wants to use a meeting of the transatlantic Trade and Technology Council (TTC) in December as a vehicle to address a brewing dispute over America’s new rules contained in its Inflation Reduction Act, which became law in August. The hope, she told the Financial Times, was that this strategy would yield quicker results than legal action through the World Trade Organization. “As a matter of principle, you should not put this up against friends,” Vestager said of provisions in America’s new Inflation Reduction Act that offer substantial incentives to bolster domestic production of electric cars and other green technologies. “You have what we see as an unbalanced subsidy.”EU officials are concerned that the policies in the Inflation Reduction Act discriminate unfairly against electric vehicles produced outside of the US, amounting to a breach of WTO rules. The act includes tax credits for electric vehicles made in North America as well as provisions seeking to boost the US battery supply chain and its renewable power sector. The tax credits have raised concerns in other jurisdictions, including South Korea. Seoul is furious that electric vehicles manufactured by Hyundai in South Korea will no longer be able to access the credits after a visit by US president Joe Biden earlier in the year led to expectations that they would be. EU officials fear the tax breaks in the US will disadvantage the EU and prompt companies to shift production across the Atlantic, leading to job losses. While the EU has been examining whether the US provisions violate WTO rules, Vestager suggested action via the Geneva-based organisation was not the preferred option. It can take up to a year for a dispute to reach arbitration, and a further year for a judgment. “A lot of good things can be said about the WTO process; fast is not one of them,” she said. She suggested it was in both sides’ interests to avoid a subsidy race. “They could have a better deal if the subsidies would be done in a way that is not discriminatory towards the EU,” Vestager added. Many details in the US legislation have yet to be hammered out, with officials in Washington likely to issue further clarifications early next year. US Treasury secretary Janet Yellen said that members of Congress were also discussing the matter when asked about European concerns in an interview. “We are meeting with a lot of different parties because we need to draft the regulations — these are tax credits — that specify exactly what companies have to do to qualify for them,” she told the FT. “So we’re engaging in conversations.”In remarks on Friday at the Roosevelt Institute, a left-leaning think-tank, Katherine Tai, the US trade representative, said that as both the US and the EU sought to reduce their carbon footprints, “we’re each going to do things that cause anxiety”. Tai’s remarks referred to both the Inflation Reduction Act and consternation in Washington over the EU’s carbon border adjustment mechanism, which would levy tariffs on imports from countries that do not yet tax carbon emissions. But Tai said there was scope for common ground. “This also creates an opportunity for us to work together, to tackle this existential crisis that threatens all of us,” she said.  EU trade chief Valdis Dombrovskis will be in Washington this week and will hold discussions with his US counterparts with the Inflation Reduction Act expected to feature on the agenda. The EU’s hope in December’s meeting of the TTC is to achieve some “damage control”, rather than force fundamental change of the act, according to one person with direct knowledge of the talks.“The WTO is the stick, but the TTC is the carrot,” the person said, adding that this would be the first time since the council was set up for it to prove its worth as a mechanism to solve disputes.The person added that the commission was conducting an “exhaustive” survey of European companies to determine how many could move at least part of their supply chains to the US because of tax breaks. “We want to sit down with the Americans to smooth the edges of the act and to get them to quickly and publicly send a message to companies to stay in the EU,” the person added.Additional reporting by Harry Dempsey in London and Andy Bounds in Brussels More

Just over a month into the job, Truss and her team are fighting for credibility after they were forced into a humiliating U-turn over a decision to scrap Britain’s highest rate of income tax. Her governing Conservative Party’s annual conference last week was beset by division and unrest among the party’s members of parliament (MPs), and opinion polls give Labour a huge lead. “Those plotting against the prime minister are helping to usher in a Labour government. Conservative MPs should be supporting our party leader, not working against her. Division will only result in drift, delay and defeat,” senior Cabinet Office minister Nadhim Zahawi wrote in Mail on Sunday.He was one of four cabinet ministers to pen articles for a Sunday newspaper to call on their party to back Truss, ahead of the return of parliament from a short break on Tuesday.”As a party, we must unite around her now,” interior minister Suella Braverman wrote in the Sun on Sunday.’PUNCH AFTER PUNCH’Truss faces a battle over whether to limit increases in some benefit payments to less than inflation as she seeks ways to fund her tax-cutting growth plan, something many lawmakers say would be inappropriate when millions of families are struggling with the soaring cost of food and energy.While ministers say they have yet to take a decision, the Sunday Times reported Truss was expected to give in to pressure from ministers to rule out a real-terms reduction in welfare.It cited two unnamed cabinet ministers saying the government did not have the support to get a vote through parliament on raising benefits in line with earnings rather than inflation.”She can either get ahead of this now and make it go away or we will be dragged kicking and screaming towards another screeching U-turn when they realise it’s a game of arithmetic and the numbers will not stack up,” it quoted one as saying.Cabinet minister Penny Mordaunt, who days ago said benefits should rise in line with inflation, wrote in the Sunday Telegraph that tough decisions were needed.”It’s far easier to embrace the status quo. Anyone can wave to the cameras. Anyone can be all things to all people. That’s the easy bit. You measure leaders when they are in the ring dazzled by the media lights taking punch after punch and taking the hard decisions required,” she wrote. More

If we were not constantly told otherwise, we would be celebrating the health of the labour market. The number of French, German, Canadian, Japanese, Dutch, Korean and Italian jobs as a share of working-age adults is higher than it has ever been. In the US, the UK and Spain the employment rate has only been higher than it is now at a few short moments in history — at the tail ends of long booms or recoveries in 2000, 2007 or 2019. Workers dissatisfied with their job have also rarely had more vacancies to choose from. And just as one would expect in a market economy where employers are competing for workers, rather than workers competing for jobs, nominal wages are rising, also at record rates (though not fast enough to match supply shock-driven price spikes).In short, workers in western countries are benefiting from the strongest labour markets in more than two decades, arguably in more than half a century. Yet our central bankers and other economic policymakers seem determined, even eager, to kill it. In fact, they may already have dealt it a fatal blow.We know the justification, of course: that ending the jobs boom is necessary to bring down inflation. But this argument is heavy on the risk of letting high price growth persist and light to the point of obfuscation on the fallout from forcing price growth down. It glosses over just how good the labour market, which we seem about to sacrifice willingly, really is.One can understand why employers might dislike a “shortage” of workers. It weakens their bargaining power. It could, if permitted to last, allow workers to take a slice of the economy’s value creation away from company owners. And it forces managers already struggling with rising input costs to find more productive ways to use staff they must pay more to hold on to. Employers who cannot up their productivity game are probably losing their workers to more productive rivals. Data from the US show job switchers’ wage growth outpacing those who stay put by the most since the late 1990s.But government policymakers, including central bankers, are charged with protecting the public interest. This is not the same as, and may in fact run counter to, that which gives today’s business owners an easy life. A truly competitive capitalism does not do that. Yet rather than welcoming the most worker-friendly labour market in generations as “strong”, central bankers are more likely to condemn it as “tight”. This would be an appropriate word for running out of workers. But most major economies keep pulling more people into work at an astonishing pace. In the last quarter of available comparable data, just before the summer, the employment rate rose by 0.3 percentage points in the US and Canada, 0.4 in the EU and Japan and 0.6 in Korea. These blockbusting numbers tell of labour markets which are not tight, but responding to incentives. (In the UK, struggling with distinctive problems of its own, the rate has flatlined.) But these millions of new jobs are being treated as bad news: the universal reaction to Friday’s solid US jobs data was an expectation of reinforced Federal Reserve hawkishness.Let’s be frank: central bankers are about to address a cost of living shock by willingly inflicting a hit to growth and jobs that could go as far as causing a global recession. They claim this is preferable to the alternative. But they must spell out better why the alternative is so much worse. Their “credibility” is itself no more valuable than what it allows you to do.If the aim is to avoid inflation settling at a moderately higher level, we need to be told why that is worse than giving up on a stellar jobs market. If it is to prevent a self-reinforcing dynamic in which wages and prices keep driving each other up, then truly independent central bankers should hold fire until they see the whites of the eyes of such a wage-price spiral. Instead they increasingly leave an impression of buckling under political pressure that comes with high inflation reports today, which they cannot influence. Instead they should be focusing exclusively on the (much more benign) medium-term inflation outlook, which they can.This approach of tightening monetary policy to counteract a huge supply-driven price shock may end in tears. If central banks are wrong, they will be criticised for having caused unforced hardship for millions of people worst placed to bear it, just when our geopolitical security requires popular unity. If they are right, it amounts to asserting that a strong labour market is too good a thing for workers to have. Either way, it is hard to see how our independent monetary policymakers come out of this crisis politically [email protected] More

China’s economic growth rate this year is set to fall behind the rest of Asia for the first time since 1990. This forecast by the World Bank, if it materialises, not only signals a cooling in global wealth creation. With President Xi Jinping set to be anointed to a third term by a Communist party congress starting next weekend, it also challenges Beijing to find new sources of propulsion for the world’s second-largest economy. China has suffered slowdowns in the past but this time its defining problems are structural. Although the country’s controversial “zero-Covid” policies have dealt a heavy blow, longer-term vulnerabilities derive from the cratering of the property market and growing stress in local government finances. Even after an expected post-Covid rebound, these drags on the economy are likely to persist. They are accentuated by a rapidly ageing society and a birth rate that has slumped by about 45 per cent between 2012 and 2021. Similarly, an ebb in the vast tides of rural-urban migration that fuelled China’s manufacturing boom is withering the impetus behind city construction. Inefficiency in allocating capital is diminishing the returns from deploying a vast pool of national savings. And while China’s role in international trade remains strong, US sanctions on trade and technology could impact its competitiveness over time.All these problems are, to some degree, structural. They presage an economic future that may be very different from China’s past three decades. If the World Bank’s forecast of 2.8 per cent growth this year is borne out, it will represent a sharp reduction from Beijing’s official target of 5.5 per cent. It could also foreshadow significantly slower growth rates in the longer term.Conventional wisdom has long been that the solution is for China to aim to boost consumer spending. Doing that will require more redistribution to poorer and middle-income households, leaving them with more disposable income to spend on themselves — in part by reducing factors that drive them to save a huge chunk of their income. The very high level of Chinese household savings is one reason behind China’s high gross national savings rate — which stands at 44 per cent of gross domestic product compared to an OECD average of 22.5 per cent. The motives driving families to salt away more than in almost any other country on earth are revealing. The break-up of the state-run economy from the late 1980s smashed an “iron rice bowl” of housing, healthcare, pension and other benefits, inculcating a sense of insecurity. The hundreds of millions of workers who have migrated from farms to factories in recent decades do not qualify for city welfare benefits, forcing them to save. The one-child policy, introduced from the 1980s, meant that parents could not expect to rely on an extended family in old age.These stresses — combined with underfunded state pensions, and the spiralling costs of education and medical treatments (exacerbated by hospital corruption) — reinforce a savings mindset. This is crimping consumer spending, especially when most asset values are falling along with property prices and stock market indices. Building a more sophisticated financial system could ensure that even a less gargantuan amount of savings would finance more productive investments.If China is to put growth on to a more sustainable footing, it needs to empower its consumers. In particular, Beijing should allocate hefty fiscal transfers into state pension funds for both city and rural dwellers. This will cost a great deal. But if Xi is serious about creating “common prosperity” for future generations, he should make it a priority. More

One of the world’s most dramatic post-Covid spending squeezes is expected to deliver a bigger-than-expected budget surplus for Chile’s leftwing government this year, pleasing investors who had worried about radical President Gabriel Boric’s expensive campaign promises.“We are expecting a surplus of 1.6 per cent of gross domestic product this year,” said finance minister Mario Marcel. “It’s the first surplus in nine years. The current government has made an effort to be disciplined which means that our results this year will be better than expected.”Marcel, a technocrat who gained a reputation for caution in his previous role as governor of the country’s central bank, is adamant that the Boric administration will not repeat the economic mistakes made by leftwing governments elsewhere in the region.“Many times ambitious reforms have been put forward which aroused a great deal of hope among the population, but which later could not be continued because of weakness in the economy and a lack of state resources,” Marcel told the Financial Times. “That is not something we want to see ourselves exposed to.”Chile’s prudence comes as officials and economists fear that a surge in interest rates will place governments under financial pressure. The volume of outstanding IMF loans is expected to hit a record high this year, while borrowing costs in several emerging markets and some advanced economies, such as the UK, have soared. Analysts are concerned that, beyond next year, Santiago will struggle to deliver better public services without straining the budget. “The biggest challenge is to implement a very ambitious social spending agenda in pensions, housing, education and the care system without affecting the sustainability of economic growth and investment,” said Sebastian Rondeau, southern cone economist at Bank of America. “That’s a big challenge.”Finance minister Mario Marcel says Chile is taking a prudent line to avoid the mistake others have made in passing reforms that raise people’s hopes but then cannot be sustained © Cristobal Olivares/BloombergThe government, however, believes it can lift spending by using tax reform to raise more revenue. Chile’s tax take is one of the lowest in the OECD at 19.3 per cent of GDP in 2020. Marcel said the planned changes would gradually raise tax revenue by around four percentage points of GDP by 2026.“In Chile, there’s a very strong conviction in politics, particularly in the centre-left, that if you don’t have healthy public finances, you can’t make the reforms you want to pass sustainable,” Marcel said. Investors have also been unsettled by a debate over Chile’s constitution, which began when the previous government agreed to a demand from protesters for a new document. A draft charter produced by an elected assembly dominated by the hard left was rejected by voters last month and discussions are continuing over how to move forward. Marcel remains confident that the revised charter will not lead to turmoil. “What’s become clear is that we’re converging towards a more moderate constitutional setting,” Marcel told the FT in a separate conversation ahead of the plebiscite on September 4.Boric’s government took office in March promising to spend more on health, education and pensions. But it has had to rein in the budget drastically after the previous conservative administration led by Sebastián Piñera unleashed a consumer spending boom with a lavish Covid support package worth 14.1 per cent of GDP, according to IMF figures. Early pension withdrawals further fuelled spending.Growth surged, with the economy expanding 11.7 per cent last year, but inflation also jumped, prompting the central bank to tighten monetary policy. Chile first began raising rates in July 2021 while Marcel was central bank governor, eight months before the US Federal Reserve.The Chilean central bank raised rates to 10.75 per cent in September and Marcel said he expected “probably one final increase before rates stabilise and we start to see more results on the inflation side”. Analysts at Citi expect prices to rise 13.5 per cent this year and rates to peak at 12 per cent by December. They predict Chile’s growth will slow to 2 per cent in 2022 and the economy will contract 0.5 per cent next year.“In one year we absorbed all of the huge deficit that we inherited last year,” Marcel told the FT. “We’re far more advanced in the stabilisation of our economy when compared to other countries.” “If you compare the 2021 deficit with the surplus we will have this year, that means [a fiscal adjustment of] almost 10 percentage points of GDP,” he explained. “Public spending has been reduced by 24 per cent in real terms.”After stabilising the public finances, the government is now planning a modest expansion of 4.2 per cent in spending next year, according to a budget proposal last week. Most of the extra money will be used to fund a better state pension for almost 2.3mn Chileans, with smaller sums for infrastructure.President Gabriel Boric took office in March promising to spend more on health, education and pensions © Cristobal Basaure Araya/SOPA/LightRocket/Getty ImagesMarcel was confident that the country could yield greater benefits from its natural resources to achieve its spending aims and move its economy to a more environmentally sound footing. The South American nation is the world’s biggest copper producer and the second-largest producer of lithium. Mining, said Marcel, is “undergoing a major transformation from a so-called ‘dirty’ industry towards a clean one, using less water and more renewable energy. In our case that is reflected in the use of water and energy sources.” The Boric administration wanted to channel some of the income from lithium into developing the production and export of environmentally friendly hydrogen, he said.Chile’s northern desert and its long coastline offer some of the world’s most concentrated sources of solar and wind power. This opens the possibility of using abundant renewable electricity to produce pollution-free hydrogen, a green fuel. Marcel said the government was working with the World Bank and the Inter-American Development Bank to find ways of funding the ports and pipelines required to develop the fledgling industry.Swift development will enable Santiago to pursue a sound fiscal policy, while delivering its ambitious social spending plans. “Chile has traditionally been valued as a country with solid institutions, good macroeconomic policy and an open economy,” he said. “We aspire to add to that being an environmentally friendly economy, a green economy.” More

LVIV, Ukraine (Reuters) -Victoriia Maslova abandoned her herbal cosmetics factory in the Ukrainian town of Bucha on the first day of Russia’s invasion of the country, fleeing to Poland with her mother and three younger brothers when rockets began hitting a nearby airport.A month later, they were back in Ukraine, determined to keep manufacturing Maslova’s plant-based cosmetics brand, Vesna.”We love Ukraine. We wanted to return to our country and work here,” says Maslova, 24, who founded the business seven years ago with her mother, Inna Skarzhynska, 44.To reverse the economic shock caused by the biggest war in Europe since World War Two, Ukraine’s government is pinning its hopes on the entrepreneurial resolve of people like Maslova, along with the return of millions of refugees – and large-scale international financial aid.Waiting until after Russia’s chaotic withdrawal in April from Bucha, a town near Kyiv now notorious for an occupation that left civilians’ bodies strewn in the streets, Maslova’s mother returned to the factory. The shop floor had been looted and was in disarray, but she salvaged some equipment and loaded it on a truck. They set up a new operation in the relative calm of Lviv, some 450 km (280 miles) west near the Polish border. Five months later, Vesna products are sold in more countries than ever, including Poland and Lithuania, and Maslova recently won a deal to produce goods for a private label in the United States, she said. All the while, the company has been donating skincare and haircare products, labeled “You are our hero”, to women and men serving at the front.The war, which Moscow calls a “special military operation”, is now nearing its eighth month. Despite recent wins for Ukraine on the battlefield, experts believe it could drag on for a long time yet, leaving millions of Ukrainians displaced within the country and nearly 8 million outside its borders.So, at the same time as Ukraine’s forces fight to regain territory seized by Russia since the Feb. 24 invasion, the government in Kyiv is racing to steady the economy, and to find employment opportunities for those who fled homes, jobs and businesses in the east and south.The economy is expected to shrink by more than a third this year, but with businesses reopening, Economy Minister Yulia Svyrydenko sees output stabilizing and growing by as much as 15% in 2023, albeit from a low base. And in a decade, she dreams of it more than doubling from pre-war levels to reach $500 billion, helped by foreign investments and European Union accession.”We always say that we have two fronts: one is the military one and the other one is the economic front,” Svyrydenko told Reuters in an interview in the basement of Ukraine’s imposing Soviet-era Cabinet of Ministers building, where the corridors and windows are crowded with sand bags. “The economic one is not less important than the military one.”Small- and medium-sized businesses like Maslova’s are core to the government efforts.Economic activity froze across the country after the war began, but restaurants, retail shops and even night clubs are now visibly open again in Kyiv, Lviv and other non-occupied cities, even in Zaporizhzhia, near a besieged nuclear power plant. The economy ministry has helped 700 companies relocate from frontline areas, of which 480 have already resumed operations, Svyrydenko said. Those companies are benefiting from the return of an estimated 3 million refugees, helping demand, while money trickles back into the economy from renewed exports, including from three Black Sea ports.To help displaced companies make a fresh start, the Ukraine Investment and Trade Facilitation Center in Lviv, is offering firms rent-free access to office and manufacturing space, a valuable lifeline.The task facing the country, and entrepreneurs like Maslova, is daunting, given a recent World Bank and European Union estimate of war damages totalling nearly $100 billion and ongoing Russian strikes on civilian infrastructure. Ukraine also faces mounting budget problems, despite a freeze in debt payments agreed by Western government creditors this month and by private creditors in August. It is seeking foreign aid, but also needs private capital to rebuild.Any investments will require security assurances and strong accountability, given what the German Marshall Fund called Ukraine’s “history of corruption”, in a report last month.Top economic experts from Ukraine, the World Bank, International Monetary Fund and other donors will work through some of these questions at a recovery conference hosted by Germany in Berlin on Oct. 25.The International Monetary Fund on Friday approved $1.3 billion in additional emergency financing for Ukraine that could catalyze support from other donors, with an eye to a larger, full-fledged program in the future. ‘BRAVE BUSINESSES, BRAVE PEOPLE’Iryna Tytarchuk, who heads the investment center in Lviv, helps connect displaced business owners to resources, including government micro-credits and loans of up to $68,000, and U.S. Agency for International Development funds earmarked for women-owned firms that helped Maslova get back on her feet.”These are brave businesses and brave people who haven’t left everything and gone abroad, but decided to start again and again,” she said. Tytarchuk recalled that many firms saw a bounce in revenues in 2014 when they shifted away from Russian markets after the annexation of Crimea.”Now, even more markets are opening for them,” she said, noting that a number of businesses in Britain had reached out to her looking specifically for products “Made in Ukraine.”Close to the front line, Mykolaiv, 800 kilometres (500 miles) to the southeast of Lviv, comes under regular artillery barrages. Here, Julia Konovalova is biding her time, eager to restart Fresh U & detox, her once-thriving healthy food delivery business, when the fighting stops.Konovalova stayed when more than half Mykolaiv’s population fled. She donated her supplies to the army when the war started, and has been coordinating food aid for the World Central Kitchen relief group in recent months.”I still have all my equipment. Now I’m waiting until the war is over, and then I’ll start again,” the former hotel manager said. “We just need to survive.”Near the Russian border, fierce fighting has drained Ukraine’s second-largest city, Kharkiv, of three-quarters of its 2 million residents, although the recent Ukrainian advances have taken back nearby territory.Rockets damaged Evgeniy Safonov’s wine bar in Kharkiv, but he is already scouting out new locations in safer cities and wants to return to Kharkiv eventually.”Our investors are interested, even now,” he says. “Call me brave or stupid, I know. But our planning horizon is a matter of days. You never know what tomorrow will bring.”LOOKING FOR INVESTMENTS Svyrydenko concedes Ukraine faces big challenges, but says she and other officials are hunting for investments wherever they can, citing estimates that every $10 billion invested will generate a 5-percentage point jump in national output.Her ministry is studying 50 requests from the United States, Germany, Britain and Poland submitted after the launch of a new “Advantage Ukraine” investment portal at the New York Stock Exchange last month that maps out $400 billion in investment opportunities, but said it was too soon to provide details.The World Bank’s private funding arm, the International Finance Corporation, and the European Bank of Reconstruction and Development last month also said they would put $70 million into a private equity fund investing in tech and export-oriented businesses in both Ukraine and neighboring Moldova. It aims to raise up to $250 million over the next 12 months.Andy Hunder, who heads the American Chamber of Commerce in Ukraine, said Ukraine’s economy was demonstrating “phenomenal resilience,” with internet and banking services functioning better in wartime Kyiv than in some parts of Europe at peace.The group’s latest survey, released this week, showed 77% of its 600 member companies believe the war will end in 2023, and all but 2% plan to keep doing business here.Yulia Zavalniuk, whose small Villa Verde flower farm about 40 km west of Kyiv was heavily damaged by Russian forces four days into the war, initially contemplated moving to Slovakia, but decided to relocate to Lviv temporarily, while selling plants to keep paying salaries and cover basic business costs.”Now is the time for us – small entrepreneurs,” she told Reuters. “We have to be the most creative, service- and quality- oriented to produce goods, sell them and pay taxes,” she said. More

China has been placed on high alert as Covid-19 cases creep up just days before President Xi Jinping is set to start his third term as Communist party leader.On Sunday, China reported more than 1,700 cases over the previous 24 hours, more than triple the figure from the previous week. The growth in infections follows a week-long national holiday as travellers returned from tourist spots with Covid outbreaks. “Over the National Day Golden Week holiday, China’s overall Covid situation evidently deteriorated,” Ting Lu, Nomura’s chief China economist, wrote in a note. The growth in cases is being fuelled by BF.7, a spin-off of the Omicron sub-variant BA.5. The US Centers for Disease Control and Prevention has warned that BF.7 “appears to be more infectious” than previous Omicron strains and predicted it would cause a surge in infections this winter. As Beijing prepares to host the Communist party congress, the capital has tightened interprovincial travel to prevent residents from returning from their holidays. Zhang Ke is one of the many Beijingers unable to return home because their health code records them as having been near a Covid outbreak. Many others have taken to social media to complain that they have been locked out of the city, despite not having travelled to a high-risk area.The 27-year-old hospitality worker visited Zhangjiakou in Hebei province to spend the holiday with her family. She had only been at home a day before her family’s compound was put under lockdown. “I never left the neighbourhood after coming home from the high-speed railway station,” she said. Zhangjiakou has not declared a citywide lockdown, but Zhang said “95 per cent of the residential compounds are closed. Shopping malls and supermarkets are closed. No one is on the streets.”Some analysts were optimistic that Xi would use the congress, which begins next Sunday, to ease his contentious zero-Covid policy that has throttled growth and created a cascade of social and political problems. But Ting noted that the dismissal of local officials in Hohhot, the capital of Inner Mongolia, for failing to confine an outbreak confirmed that the policy remained “fully intact”. China’s adherence to zero-Covid has stunted growth, prompting economists to revise down gross domestic growth forecasts for the world’s second-largest economy.

The World Bank forecast that China’s economy would grow 2.8 per cent this year and that its economic output would lag behind the rest of Asia for the first time since 1990. In April, the bank had predicted growth of between 4 and 5 per cent. Chinese economic data reveal the continued economic damage wrought by the implementation of lockdowns. In September, when Chengdu in Sichuan and Dalian in Liaoning were under lockdown, services activity contracted for the first time in four months. On Saturday, the Caixin services purchasing managers’ index fell to 49.3 in September, down from 55 in August. Any reading below 50 indicates a contraction in activity. The threat of lockdowns has also damped consumption. The Golden Week holiday is usually a time of peak domestic tourism and consumer spending when far-flung corners of the country welcome visitors who prop up the local economy. But this year, battered consumer sentiment and widespread fears of getting caught in lockdowns far from home have severely curtailed travel. The daily number of passengers travelling around China during this year’s festival week was about 60 per cent below that in 2019. Revenue from tourism fell more than 55 per cent in the same period.

Video: Is China’s economic model broken? More