Economy

Inflation has surged in the United States, hitting a new 40-year annualized high of 6.6% in March, and U.S. Federal Reserve policymakers appear set to deliver a series of aggressive interest rate hikes to cool prices.Buffett said he did not know what level inflation would be in the next month or decade, but that rising prices were having an impact.”Inflation in our own business, it’s extraordinary how much we’ve seen,” Buffett said. “For two years the prices have kept coming in higher.” Berkshire noted cost increases in some of its businesses when it reported earnings https://www.berkshirehathaway.com/qtrly/1stqtr22.pdf.Geico, the auto insurer, posted an underwriting loss in the first quarter because loss claims rose as used vehicle prices and parts surged higher.”Inflation swindles the bond investor … it swindles the person who keeps their cash under their mattress, it swindles almost everybody,” Buffett said. More

NEW DELHI (Reuters) -India said on Saturday it had seized $725 million from the local bank accounts of China’s Xiaomi (OTC:XIACF) Corp after a probe found the smartphone maker had made illegal remittances to foreign entities by passing them off as royalty payments.The Enforcement Directorate had been investigating the Chinese company’s business practices over suspected violations of Indian foreign exchange laws.The financial crime fighting agency said on Saturday it had seized the bank account assets from Xiaomi Technology India Private Limited after finding the firm had remitted the foreign currency equivalent of 55.5 billion rupees to three foreign-based entities, including one Xiaomi group entity, “in the guise of royalty” payments.The remittance to two other unidentified and unrelated U.S.-based entities was also for “the ultimate benefit of the Xiaomi group entities”, the agency added in a statement. “Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities,” the directorate said.Xiaomi said in a statement issued later on Saturday that it complies with Indian laws and believed its “royalty payments and statements to the bank are all legit and truthful”.”These royalty payments that Xiaomi India made were for the in-licensed technologies and IPs used in our Indian version products … we are committed to working closely with government authorities to clarify any misunderstandings,” it added.The directorate’s actions against Xiaomi signal widening scrutiny of the Chinese smartphone maker, whose India office was raided in December in a separate investigation over alleged income tax evasion. Some other Chinese smartphone markers were also raided at the time.Reuters reported on April 12 that Xiaomi’s former India head, Manu Kumar Jain, had been summoned for questioning as part of the directorate’s investigation.Jain, who is now a global vice president at Xiaomi based in Dubai, appeared before investigators earlier this month, said a source with direct knowledge of the probe, asking not to be named due to the sensitivity of the matter.The Enforcement Directorate also asked the company for details of foreign funding, shareholding and funding patterns, financial statements and information of key executives running the business. Xiaomi was India’s leading smartphone seller in 2021, with a 24% market share, according to Counterpoint Research. South Korea’s Samsung (KS:005930) was the No. 2 brand with a 19% share.Many Chinese companies have struggled to do business in India due to political tensions following a border clash in 2020. India has cited security concerns in banning more than 300 Chinese apps since then, including popular ones like TikTok, and also tightened norms for Chinese companies investing in India. More

ISLAMABAD (Reuters) – Pakistan said on Saturday it would maintain subsidies to keep fuel and power prices steady for consumers, going against International Monetary Fund (IMF) recommendations as the country seeks to boost its rescue package with the fund.The IMF said on Monday that Pakistan had agreed to roll back unfunded subsidies to the oil and power sectors ahead of the resumption next month of a review of the $6 billion package signed in July 2019.But Prime Minister Shehbaz Sharif rejected a proposal to raise the prices of petroleum products “so as not to burden the consumers”, a finance ministry statement said.The prices are reviewed every two weeks. Pakistan is set to give more than $2 billion in subsidies to the oil and power sectors from April to June, which was announced by ousted Prime Minister Imran Khan in his last days in power.Fuel and electricity prices have been the subject of public pressure amid double-digit inflation.An IMF mission is due to arrive in Pakistan in May to resume discussions over policies for completing the seventh review of the country’s Extended Fund Facility (EFF), which Islamabad has asked the IMF to increase the size and duration of.If the IMF review is cleared, Pakistan will get more than $900 million, which would in turn unlock additional external funding.The South Asian nation is in dire need of external finances due to a widening current account deficit and foreign reserves falling as low as $10.5 billion, equivalent to less than two months of imports. More

Industry players should not make up false information on supply levels and costs that could heat up the market, the National Development and Reform Commission (NDRC) added in its statement. The NDRC said it was setting out what it considered as price-pushing behaviours to maintain market order. China has been trying to rein in controls amid surging commodity prices and looking into setting up a price index of products such as coal and iron ore.Any significant rises in coal prices without a good reason would not be allowed, the NDRC added.A “substantial price increase” would be any medium-to-long term contract coal sales prices higher than the upper range of government requirement, or spot prices rising more than 50% of the limit. China said on Thursday it was exempting all types of coal from import tariffs from May till the end of March 2023. More

China’s currency has fallen steeply against the dollar over the past two weeks, hit by the economic impact of the country’s Covid lockdowns, the war in Ukraine and the prospect of tighter US monetary policy. But the renminbi has not moved in isolation: analysts warn it is dragging down other emerging market currencies with it, including those outside of the Asian manufacturing complex.With food and energy prices soaring, currencies of commodity-exporting emerging markets such as Brazil and South Africa are among the few to have gained any advantage from Russia’s invasion of Ukraine in late February. Many such currencies also benefited from Chinese demand for industrial commodities, such as copper and iron ore, earlier this year. In April, however, the combination of China’s slowing economy and the global fallout of the war sent emerging-market currencies around the world into reverse.Yerlan Syzdykov, global head of emerging markets at Amundi, says the proliferation of strict lockdowns in China is causing weakness across the economy. The worst-case scenario projected by Amundi’s analysts is that lockdowns will cause a 10 per cent reduction in manufacturing and an 18 per cent fall in steel production. Amundi was bearish on Chinese growth before the recent lockdowns began. Its house view was for GDP growth this year to come in at almost a full percentage point below the IMF’s forecast of 4.4 per cent. But even that figure is now under pressure, said Syzdykov.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

“This is having a negative effect on commodity prices — those countries especially in Latin America that have had a positive effect so far on their terms of trade, they are going into retreat,” he said. “This will definitely affect their longer-term prospects.”In late April, the Brazilian real was one of the best-performing currencies in the world earlier this year, with a 20 per cent gain against the dollar. A sharp pullback since then has left it a more modest 13 per cent higher.Meanwhile, the Peruvian sol and Colombian pesos have fallen heavily. The Chilean peso and South African rand, have wiped out almost all of this year’s gains.

Central banks in Brazil and several other emerging markets reacted early to the prospect of rising US interest rates and a stronger dollar by lifting borrowing costs from the first half of last year. But while the expectation before the Ukraine war was that inflation in developing economies would peak around the middle of this year, Syzdykov said, this was now likely to be delayed by at least another three months — potentially putting more sustained pressure on those countries’ currencies.It is only after that point that a fresh recovery might ensue, Syzdykov suggested. “That would be the moment when international investors start going back in, and those flows will help to propel those currencies again,” he said. More

SHANGHAI/BEIJING (Reuters) -Shanghai said on Saturday it had detected no new daily COVID-19 cases outside quarantine areas, marking a milestone in its battle to contain the virus, which has paralysed the city of 25 million and put residents in the capital Beijing on edge.Streets in Beijing were eerily quiet at the start of a five-day Labour Day break, with residents anxious that authorities would impose further restrictions during a holiday when many typically travel or socialise.”You look at a city that used to be crowded and now is void. You wonder how these people manage to survive,” said Li, 35, who works in the finance sector in Beijing, breaking into tears.In the eastern commercial capital of Shanghai, scenes of houses and buildings ringed with fences to prevent residents from leaving have grabbed headlines at a time when most other countries in the world are learning to live with COVID.China maintains a zero-COVID policy aimed at eradicating the disease, leading to frustration, especially in Shanghai, where many residents have been cooped up for more than a month. Some, struggling to find food and other daily necessities, have shown rare public opposition to the government’s stringent controls. If the zero-tolerance campaign works, however, it would be a victory for President Xi Jinping’s approach in a year when he is expected to secure a precedent-breaking third term. Shanghai officials did not discuss the break in COVID transmission at their daily news conference, but social media cheered the news.”Shanghai has finally reached zero at the community level!!! May Shanghai wake up as soon as possible!!,” said one post on the Weibo (NASDAQ:WB) platform. Friday’s zero cases outside quarantine areas in Shanghai compared to 108 for Thursday. Some, however, played down the milestone, noting that most of the city’s residents were locked in some form of quarantine. On Saturday, health authorities said there were close to 16,000 sealed-off areas in Shanghai, with more than 4 million people prevented from leaving their homes. A further 5.4 million people were blocked from leaving their compounds. In practice, many of the remaining residents in low-risk prevention areas are still not allowed to leave their compounds.”The city’s epidemic and prevention control is currently still at a critical state, and the trend is still that people need to strengthen controls,” said Zhao Dandan, deputy director of Shanghai’s health commission. ECONOMIC IMPACT The battle to curb the highly transmissible Omicron variant in Shanghai has come at a high cost for the economy, with logistic chains gummed up by the restrictions.China’s factory activity in April shrank at the fastest rate in 26 months to the lowest since the early months of the pandemic, first detected in central China, as lockdowns halted industrial production and disrupted supply chains. The data released on Saturday raised fears of a sharp slowdown in the second quarter that will weigh on global growth.Shanghai officials, who say they are eager for factories to get back to work, said more than 80% of 666 prioritised companies had restarted production and that they had drawn up a second list of 1,188 firms.Infections are easing as China enters the Labour Day break, which runs through Wednesday, traditionally one the busiest tourist seasons.Some observers say authorities have been less strict in making people take tests in recent days. But Beijing’s local government said residents must provide nucleic acid test results before going to public places or taking public transport, effective after the holiday break. Theme parks and entertainment venues in the capital are only permitted to operate at half capacity over the Labour Day holiday with advance reservations required. Beijing will also implement a further two rounds of COVID tests on May 1 and May 3 in its most populous district of Chaoyang, known for its night life, malls and embassies. The city will halt all restaurant dining between May 1 and 4, an official from the local commerce bureau said, calling for residents to “cook at home”.Officials have provided no timeline or strategy for returning to some semblance of normality.Nomura estimates 46 cities are in full or partial lockdowns, affecting 343 million people. Societe Generale (OTC:SCGLY) estimates that provinces experiencing significant restrictions account for 80% of China’s economic output. In response to COVID and other headwinds, China will step up policy support for the economy, a top decision-making body of the Communist Party said on Friday, lifting stocks from two-year lows.Shanghai reported 47 COVID-19 deaths for Friday, down from 52 a day earlier. Some have questioned the fatality rate, as many residents have said relatives or friends have died after catching coronavirus as early as March. Beijing has reported 295 new COVID-19 cases since April 22, the local health authority said, of which 123 cases were found in the Chaoyang district. Overall, mainland China reported 10,793 daily COVID-19 cases, down from 15,688 new cases a day earlier, the National Health Commission said on Saturday. More

Xi called on Friday for a healthy development of China’s capital markets, preventing financial risks and focussing on tackling risks from non-performing assets and bubbles, Xinhua said. “Capital is an important force to promote social productive forces,” Xi was quoted as saying as he chaired a study session after a Politburo meeting. “And it has a profit-seeking nature.””If it is not regulated and retrained, it will bring immeasurable harm to economic and social development.”Xi was quoted as saying China would crack down on corrupt behaviour related to disorderly capital expansion and platform monopolies, and would strengthen supervisions.The authorities will improve economic opening, attracting more international capital to invest in China while encouraging domestic firms to go overseas, Xinhua said. The Politburo, the top decision-making body of the ruling Communist Party, pledged to step up support for the COVID-hit economy, including embattled internet platforms, and to expand economic policy adjustments. More

The official manufacturing Purchasing Managers’ Index (PMI) fell to 47.4 in April from 49.5 in March, in a second straight month of contraction, the National Bureau of Statistics (NBS) said on Saturday. That was the lowest since February 2020.A Reuters poll had expected the PMI to ease to 48, well below the 50-point mark that separates contraction from growth on a monthly basis. The headline PMI reading, combined with an even sharper crimp in services, offered the first clues into the performance of an economy ravaged by expanding COVID curbs, such as an extended shutdown of the commercial hub, Shanghai.Factory activity shrank at its steepest pace in 26 months, a Caixin survey of private business showed, with the new export orders index diving to its lowest since June 2020, suggesting a weakening in one of the few bright spots in the economy.In a statement, the statistics bureau linked COVID disruptions to as significant decline in both demand and supply in the manufacturing sector.”Some companies face difficulties in key raw material and component supplies, finished products sales and rising inventories,” the NBS said, with matters seen improving with the pandemic under control and the adoption of supporting policies. Dozens of major Chinese cities are believed to be in full or partial lockdown, thanks to a strict COVID policy.With hundreds of millions stuck at home, consumption is taking a heavy hit, prompting more analysts to cut growth forecasts for the world’s second-largest economy.The production sub-index slipped to 44.4 in April from 49.5 a month earlier, while new orders fell to 42.6 from 48.8 in March, according to the NBS. RISING RISK OF RECESSION? Electric car maker Tesla (NASDAQ:TSLA) has flagged a temporary drop in production due to China’s curbs after it said last week shutdowns had cost about a month of build volume at its Shanghai factory.Some analysts are even warning of rising recession risks, saying policymakers must provide more stimulus to reach an official 2022 growth target of about 5.5%. Apart from COVID curbs and heightened risks from the Ukraine War, persistently soft consumption and a prolonged downturn in the property market are also weighing on growth, analysts say. Authorities have promised more help to shore up confidence and ward off further job losses in a politically sensitive year.China will step up policy support, the Politburo, a top decision-making body of the ruling Communist Party has said, giving some cheer to battered stock markets.However, analysts say their task will become harder unless China eases its zero-COVID policy, which it has shown few signs of doing.”While these (official) messages are positive, the key is about the specific policies and their implementation,” Zhiwei Zhang, president and chief economist of Pinpoint Asset Management said in a client note on Friday.Moreover, analysts say traditional policy tools, such as interest rate cuts and larger liquidity injections, may have limited impact if lockdowns paralyse activity.President Xi Jinping chaired a meeting of top leaders this week that announced a big infrastructure push to boost demand, reinforcing Beijing’s preference for big-ticket projects to spur growth.But such projects take time, and Beijing is seen as wary of another massive stimulus programme such as its spending of 4 trillion yuan ($605.82 billion) during the global financial crisis in 2008 and 2009 that created a mountain of debt.An abrupt U-turn to more aggressive easing could also spur more capital outflows, adding to headaches for policymakers.China’s yuan currency fell more than 4% in April, its biggest monthly drop in 28 years, while stock markets have been the second worst performers this year after sanctions-hit Russia. [CNY/] China’s gross domestic product (GDP) grew 4.8% in the first quarter from a year earlier, beating analysts’ expectations for a 4.4% gain, but March data weakened sharply, with a contraction in retail sales and the highest jobless rate since May 2020. A sub-index of construction activity, a key economic driver Beijing hoped would prop up growth this year, stood at 52.7 in April, down from 58.1 in March. Construction equipment maker Caterpillar Inc (NYSE:CAT) warned on Thursday that demand for excavators in China, one of its largest markets, could slip below pre-pandemic levels in 2022. Lockdowns have also hurt sales of companies such as General Electric (NYSE:GE) Co and 3M Co.One banker at a top-ten Chinese bank said she had seen the greatest impact among small to medium-sized enterprises.”The smaller borrowers, especially those in manufacturing are really suffering this time round, because they don’t have the cash reserves,” she said. More