Economy

NAIROBI (Reuters) -Chinese lenders approved loans worth $4.61 billion to Africa last year, marking the first annual increase since 2016, an independent study showed on Thursday.Africa secured more than $10 billion in loans a year from China between 2012-2018, thanks to President Xi Jinping’s Belt and Road Initiative (BRI), but the lending fell precipitously from the start of the COVID-19 pandemic in 2020.Last year’s figure, a more than three-fold increase from 2022, shows China is keen to curb risks associated with highly indebted economies, the study by Boston University’s Global Development Policy Centre found.”Beijing appears to be looking for a more sustainable equilibrium level of lending and experimenting with a (new) strategy,” said the university centre, which runs the Chinese Loans to Africa Database project. The new data comes as Beijing prepares to host African leaders next week for the Forum on China-Africa Cooperation, which takes place every three years.There were 13 loan deals last year involving eight African countries and two African multilateral lenders, the study found. Last year’s biggest items include a nearly $1 billion loan from China Development Bank to Nigeria for the Kaduna-to-Kano Railway and similar size liquidity facility by the lender to Egypt’s central bank. China has vaulted to the top bilateral lender for many African nations like Ethiopia in recent years. It has lent the continent a total of $182.28 billion between 2000-2023, the Boston University study found, with the bulk of the finances going to Africa’s energy, transport and ICT sectors. Africa featured prominently in the initial years of BRI, as China sought to recreate the ancient Silk Road and extend its geopolitical and economic influence through a global infrastructure development push.China, however, started to turn off the cash spigot in 2019, a shift that was accelerated by the pandemic, leaving a series of incomplete projects around the region, including a modern railway meant to link Kenya with its neighbours.The reduction in loans was caused by China’s own domestic pressures and growing debt burdens among African economies. Zambia, Ghana and Ethiopia have gone into protracted debt overhauls since 2021.More than half of the loans committed last year, or $2.59 billion, were to regional and national lenders, underscoring Beijing’s new strategy, the study by Boston University found.”Chinese lenders’ focus on African financial institutions most likely represent a risk mitigation strategy that avoids exposure to African countries’ debt challenges,” it said.Nearly a tenth of 2023 loans were for three solar and hydropower energy projects, the study found, illustrating a desire by China to move into funding renewable energy instead of coal-fired power plants.Still, the discernible trends in last year’s figures did not offer a clear direction of China’s financial engagement with the continent, the study showed, since Chinese institutions also wrote loans to ailing economies like Nigeria and Angola.”It remains to be seen whether China’s partnerships in Africa will retain their quality,” the Global Development Policy Centre said. More

Americans are being asked to tip more often and in more places than ever before: at fast food counters and corner stores, at auto garages and carwashes, even at self-checkout kiosks. That has rankled many customers and divided both employers and tipped workers.It may soon get worse. Both major-party presidential candidates have embraced proposals to eliminate income taxes on tips, a move that would, in effect, subsidize tipping and prompt more businesses to rely on it.Economists across the political spectrum have panned the tax idea, arguing that it is unfair — favoring one set of low-wage workers over others — and could have unintended consequences. Even some tipped workers and groups that represent them are skeptical, worrying that over the long term the policy could result in lower pay.But the debate alone underscores how service-sector workers have emerged from the pandemic as an economically and politically potent force. The spread of tipping in recent years was, in part, a result of the intense demand for workers, and the leverage it gave them. The presidential candidates’ dueling proposals signal that they see the nation’s roughly four million tipped workers as a constituency worth wooing.“I do think it’s a reflection of this change in which people are finally hearing and recognizing that these workers matter,” said Saru Jayaraman, president of One Fair Wage, an advocacy organization. “Tipped workers had never seen their needs named in any way by any presidential candidate, ever.”Ms. Jayaraman isn’t a fan of the tax exemption idea, though she is optimistic that the attention being paid to the issue could lead to policies she considers more important. One is the elimination of the subminimum wage, which allows businesses in some states to pay workers as little as $2.13 an hour as long as they receive enough in tips to bring them up to the full minimum wage.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Despite the growth of wind and solar power in Latin America’s largest economy in recent years, more than half of Brazil’s power supply still comes from hydroelectric plants.Aneel implements a “green”, “yellow”, “red level 1” and “red level 2″ pricing system.”Green” means that no additional charges are levied on power bills, while from “yellow” onwards additional tariffs are gradually implemented, also stoking inflation concerns in the country.In September, Aneel said in a statement late on Friday, it has decided to activate the “red level 2” rank, meaning that Brazilians will pay an additional 7.88 reais ($1.40) for each 100 kilowatt-hour of power they consume.It is the first time since August 2021, when Brazil grappled with a major drought, that “red level 2” is implemented.The move came after rainfall was forecast at about 50% below average in September in Brazil’s main hydroelectric areas, Aneel said, noting it would force power generators to increase the use of thermoelectric plants, which are more expensive.In August, no extra charges had been levied on consumers.($1 = 5.6121 reais) More

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Petersburg, Alaska, is as pretty a seaside town as any you’ll find across the filigree of fjords and foggy islands that make up the state’s maritime coast. Statuary and floral designs evidence its proud Scandinavian heritage, and bald eagles soar across the narrow strait that separates it from a national forest. It doesn’t have room for the giant cruise ships that disgorge thousands of passengers into Ketchikan and Juneau, but it is perfectly situated for its sustaining industry: fishing.Norwegian fishermen settled in Petersburg in the 1800s, finding it an ideal jumping off point to pursue salmon, crab and halibut. Hundreds of vessels now dock in there and sell their catch to the two major processors, which head and gut the fish before either canning or freezing it on its eventual path to the dinner table. One of the plants was built more than a century ago, and its owner is the town’s largest private employer.Few people know the business better than Glorianne Wollen, a fisherman’s daughter who operates a large crab boat in a partnership and also serves as harbor master, working from a tiny desk tucked into a bustling office with a little dog at her feet. A Petersburg native, she’s seen a lot of change.“In the good old days, the town was very alive with discussion, everybody was involved so everybody had a stake, everybody knew what was going on, things happened in real time,” Ms. Wollen recalled. That buzz receded as boats got bigger and more efficient, pursued more species and stayed on the water for more of the year to maximize their investment.“It takes two guys to do what 20 used to,” she said. “There’s just fewer of us.”Petersburg doesn’t have room for the giant cruise ships that dock in other Alaskan cities, but it is perfectly situated for its sustaining industry: fishing“There’s just fewer of us,” said Glorianne Wollen, a Petersburg native and fisherman’s daughter who now serves as the town’s harbor master.The Ranks of Alaska Fishermen Are ThinningAcross all fisheries, the number of people holding permits who harvest fish commercially each year has fallen precipitously since the 1980s.

Source: Commercial Fisheries Entry Commission, State of AlaskaBy The New York TimesSalmon Prices Have Been Mostly Flat for DecadesAdjusted for inflation, prices that fishermen are paid per pound of salmon they deliver to processors rose slightly in the 2010s and took a big hit in 2023.

Source: Alaska Department of Fish and GameBy The New York Times More

The investment bank notes that M&A activity remains below long-term averages but has shown modest improvement from the lows experienced in early 2023. This uptick is partly attributed to growing confidence that the Federal Reserve may achieve a softer economic landing.Further, the increasing likelihood of interest rate cuts starting in late 2024 and continuing into 2025 has fueled optimism among investors that deal activity could rise as financing conditions become more favorable.In most mergers, the acquiring company typically offers a premium over the target company’s current stock price. While the majority of the price difference (or spread) between the offering price and the current price closes quickly following the announcement, a portion of the premium usually remains, hinging on the successful completion of the merger.According to Wells Fargo, most Merger Arbitrage strategies aim to capture this post-announcement spread.”The primary drivers of these strategies include the size of the residual premium, the time it takes to complete the merger, and the risk that a merger may not be finalized,” strategists said.“Current premiums and the length of time required to close a deal have remained in-line with longer-term averages, yet deal activity has been slow to recover,” they added.They suggest that the current high-interest rate environment, coupled with corporate leaders’ lack of confidence and sluggish economic growth, could be factors contributing to the slow pace of deal activity.”We continue to look for green shoots, and a more accommodative financing environment may be enough to spawn greater levels of activity in the coming quarters,” the note concludes.Fed Chair Jerome Powell signaled on Friday that interest rate cuts are on the horizon, though he refrained from specifying the timing or scale of the reductions.“The time has come for policy to adjust,” Powell stated during his keynote address at the Fed’s annual Jackson Hole conference in Wyoming.“The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”As markets looked for clues on future monetary policy, Powell reviewed the factors that led to the Fed’s 11 rate hikes between March 2022 and July 2023. He also acknowledged progress in curbing inflation, indicating the Fed can now give equal attention to maintaining full employment. More

“In June the ECB initiated the easing cycle with a 25bp cut. Our current baseline has the ECB cutting rates twice more in 2024, with 25bp cuts in September and December, and a terminal rate in a landing zone of 2.00-2.50% later in 2025 or early in 2026,” the analysts said. To facilitate quicker and more substantial rate cuts, the ECB needs to navigate several critical conditions.Firstly, the ECB’s ability to cut rates rapidly hinges on its perception of medium-term inflation risks. The ECB is particularly concerned with the possibility of inflation undershooting its 2% target in the medium term. This concern is influenced by various factors, including the risk of a hard-landing for the economy and the stability of inflation expectations. Analysts at Deutsche Bank Research note that while the risk of a hard-landing has increased, it is not yet a foregone conclusion. Weaker labor market conditions and potential fiscal tightening could heighten these risks. Currently, there is some evidence of a softening labor market, with a composite employment PMI falling below 50, yet this has not yet translated into significant job losses or reduced wage pressures. The ECB will need to see clearer indications that labor market weakness is affecting wage growth. Moreover, fiscal policy expectations, including the withdrawal of energy shielding measures and the reactivation of fiscal rules, could further dampen economic recovery, influencing the ECB’s decisions.The ECB’s stance on inflation being transitory or persistent is another crucial factor. The bank initially hiked rates rapidly in response to unexpected inflation, and to reverse course as quickly as it hiked would require a belief that inflation is now transitory. Given that inflation remains above target and there is no immediate sign of a dramatic decrease in inflation metrics, the ECB is unlikely to cut rates as swiftly as it raised them. Deutsche Bank Research flags that current inflation expectations, though slightly lower, are still above levels that would typically prompt significant easing. Without a significant drop in these expectations, the ECB may be hesitant to accelerate rate cuts.The concept of the neutral rate also plays a significant role in the ECB’s policy decisions. When the ECB initially hiked rates in 2022, it aimed to return to a neutral level of about 1.50-2.00%. With current rates at 3.75%, reducing to a neutral level implies further cuts. Analysts suggest that if the ECB identifies the neutral rate as being around 2.00-2.50%, it could justify more rapid rate reductions, particularly if inflation risks diminish. The bank’s previous experience with rapid hikes when rates were far from neutral suggests that it could also cut rates quickly if necessary.Lastly, the current policy stance could be considered counterproductively restrictive, which might prompt faster rate cuts. If financial conditions were to tighten sharply or if credit conditions deteriorated significantly, the ECB might respond more aggressively. However, recent data indicate that financial conditions are not currently tightening in a way that would necessitate immediate action. Analysts at Deutsche Bank observe that while real interest rates have been rising, there is no clear evidence that the current policy stance is excessively restrictive.Deutsche Bank Research suggests that while the market currently anticipates modest rate cuts in September and December, there is room for a more aggressive approach if downside risks become more pronounced. The ECB will remain attentive to evolving data and broader economic conditions. Any shift towards weaker inflation and growth could prompt faster rate reductions. More

Silicon Valley Bank’s (SVB) collapse last year was one of the largest in U.S. banking history and left its joint venture with Shanghai Pudong Development Bank (SPD) – SPD Silicon Valley – in the lurch after no buyers emerged to acquire SVB’s stake.In a statement on Friday, the National Financial Regulatory Administration’s Shanghai branch said it had agreed the bank could adjust its shareholder ratios so that SPD holds 100% of the shares and to adjust down the bank’s registered capital to the equivalent of 1 billion yuan ($141 million) from 2 billion. ($1 = 7.0900 Chinese yuan renminbi) More