Finance

Around a decade ago Carl Benedikt Frey and Michael Osborne, two economists, published a paper that went viral. It argued that 47% of American jobs were at risk of automation. A deluge of research followed, which suggested the poorest and least-educated workers were most vulnerable to the coming revolution. Such fears have intensified as artificial-intelligence (ai) capabilities have leapt ahead. On November 2nd, speaking after Britain’s ai summit, Elon Musk predicted: “There will come a point where no job is needed.”image: The EconomistYet at the same time, economists have become more optimistic. Recent studies have found that fewer workers are exposed to automation than Messrs Frey and Osborne supposed (see chart 1). In 2019 Michael Webb, then of Stanford University, showed that ai patents are more targeted at skilled jobs than those for software and robots. New ai seems better at coding and creativity than anything in the physical world, suggesting low-skilled jobs may be insulated. In March Shakked Noy and Whitney Zhang, both of the Massachusetts Institute of Technology (mit), published an experiment showing that Chatgpt boosted the productivity when writing of lower-ability workers more than that of higher-ability workers.Although ai is still in its infancy, some industries have been eager adopters. A close look at three of these—translation, customer service and sales—is broadly supportive of the optimistic shift among economists, though not without complications. In translation, perhaps the first industry to be heavily affected by language modelling, workers have become copy editors, tidying a first draft undertaken by ai, which eases the path of newbies into the industry. In customer service, ai has helped raise the performance of stragglers. But in sales, top performers use the tech to find leads and take notes, pulling away from their peers. Will ai boost the incomes of superstars more than those of stragglers, much as the internet revolution did? Or will it be a “great equaliser”, raising the incomes of the worst off but not those of high flyers? The answer may depend on the type of employment in question.Roll the diceRoland Hall has been translating board games and marketing material from French to English for 27 years. He recalls that even in the 1990s software was used to render specific words from one language to another. Today the tools are more advanced, meaning the types of job available have split in two. One type includes texts where fluency is less important. An example might be a several-thousand-page manual for an aircraft, says Mr Hall, where readers simply need to know “what part to look for” and “do you turn it left or right”. The other type includes literary translations, where the finest details matter.The first type has been most affected by ai. Many workers now edit translations that have gone through a machine similar to that underlying Google’s translation service. They are paid at a steep discount per word, but more work is available. Lucia Ratikova, a Slovakian who specialises in construction and legal translations, reckons that such work now makes up more than half of listings on job sites, up from a tenth a few years ago. A larger pool of businesses, many eager to expand into global markets, are taking advantage of the drop in price.image: The EconomistIf machines are able to do what humans do more cheaply, employers will turn to computers. But as prices fall, overall demand for a service may rise, and possibly by enough to offset the increased use of machines. There is no law to determine which effect will dominate. So far in America the number of translators has grown, yet their real wages have fallen slightly (see chart 2)—probably because the profession now requires rather less skill.Customer service offers more difficult terrain for ai. Firms have been trying to automate it for years. Thus far they have mostly just annoyed customers. Who doesn’t try to game the chatbot in order to speak to an actual human? The American Customer Satisfaction Index has been falling since 2018, and workers also appear fed up. Turnover in American “contact centres” hit a record high of 38% last year.But there may be consolation: the workforce is becoming more welcoming to the low-skilled. Erik Brynjolfsson of Stanford, as well as Danielle Li and Lindsey Raymond of mit, studied the roll-out of an ai assistant to more than 5,000 customer-support agents earlier this year. The assistant offered real-time suggestions to workers. This lifted the productivity of the least-skilled agents by 35%, while the most-skilled ones saw little change.It would be reasonable to assume that the impact on salespeople would be fairly similar to the one on customer-service workers. But that is not the case. Marc Bernstein of Balto, a firm that creates ai software for both sales teams and call centres, notes that “style points” (ie, charisma and the ability to develop a relationship) matter much more in sales than in customer service, where the important thing is getting the right answer quickly.ai might even create sales superstars. Skylar Werneth has been in the industry for eight years and is now at Nooks, a startup that automates sales. Software analyses his calls, identifying which tactics work best. It also helps him call many people at once. Most customers do not pick up; dialling in parallel ensures Mr Werneth is talking more and listening to dial-tones less. He reckons the tools Nooks offers makes him three times more productive, earning him a solid amount more than before.What does this mean for labour markets? Sales representatives are given bonuses based on the number of clients they bring in over a threshold. When productivity grows across a firm, bosses tend to raise the threshold. Because not everyone is able to meet it, low performers are pushed out of the workforce, since demand for products does not grow in parallel with sales performance, as would be necessary to justify retaining them. The result is a shrinking set of highly productive salespeople. At least, given high turnover in the industry, the shift to this state of affairs might mean hiring fewer people, not mass firings.AI carambaIf ai eventually becomes superhuman, as many attendees at Britain’s recent summit believed possible, all bets are off. Even if ai advances in a less epochal fashion, labour markets will see profound change. A study by Xiang Hui and Oren Reshef of Washington University in St Louis and Luofeng Zhou of New York University, published in August, found that earnings for writing, proofreading and copy-editing on Upwork, a freelancing platform, fell by 5% after Chatgpt was launched last November, compared with roles less affected by ai. A survey of 400 call-centre managers by Balto found that the share using at least some ai grew from 59% in April to 90% by October. Mr Bernstein thinks that although “today ai is not capable of replacing a human [in call centres]…in ten years, quite possibly five, it will be there.”The flipside of ai disruption is new jobs elsewhere. Modelling in 2019 by Daron Acemoglu of mit and Pascual Restrepo of Boston University suggests that the impact of automation is worst for workers when productivity gains are small. Such “so-so” automation creates little surplus wealth to increase the demand for workers in other parts of the economy. Our investigation of industries at the front line of ai change suggests that the new tech has a shot at leading to much greater efficiency. The picture on inequality remains murkier. Better to be a superstar than a straggler, then, even if only to be safe. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

The tome opens with Ray Dalio laying into an employee he apparently knew to be pregnant. He calls her an “idiot” over and over, until she runs from the room sobbing. The founder of Bridgewater Associates, the world’s largest hedge fund, was supposedly “delighted”. His “probing” of this woman was evidence of his commitment to “truth-seeking” at any cost. The meltdown, which had been recorded, was uploaded to a library of firm meetings. He had it edited into a clip to be shown to future employees.This is just the first of many damaging titbits in “The Fund”, a new book about Mr Dalio by Rob Copeland, a reporter at the New York Times. The book’s narrative builds to two points. One is that Mr Dalio’s “principles”, a philosophy he described as being centred on “radical transparency”, are really little more than time-wasting tools which he uses to bully employees. The system requires meetings to be recorded, for employees to rank one another and for them to upload complaints onto a platform. This is supposed to foster an “ideas meritocracy” but instead leads, at best, to petty gripes about how the peas in the cafeteria are too “wrinkled” and, at worst, to a culture of fear. Mr Dalio is supposed to have manipulated this system so that his opinion always mattered most.The second is that there is “no secret” to Bridgewater’s success. Mr Dalio’s hundreds of research staff write reports he does not even read. Mr Copeland claims Mr Dalio made all the investing decisions himself, or with some input from lieutenants. Far from having a codified set of rules, as he tells clients, he uses hunches and simple “if then” statements such as: if interest rates fall in a country then you should sell its currency. These worked, the story goes, for a while, but the rise of high-frequency traders and quantitative funds, which often follow market “momentum”, eroded his edge. Returns for Bridgewater’s flagship “Pure Alpha” fund have been pretty paltry for the past 10 or 15 years.The conclusions of the two intertwine: the cult of Bridgewater is pointless. Bridgewater’s employees have time to waste on nonsense because the investing process is simple, really. Mr Dalio might have been a gifted investor—since 1991 he has earned $58bn for those who have bought into his funds—but his efforts to codify investment rules and culture were a waste of time. His legacy will fade.Mr Copeland’s deep reporting unearthed damning tales, but they seem to have been told so as to place Mr Dalio in the worst possible light. Take, for example, a passage where Mr Dalio invites Niall Ferguson, a celebrated historian, to Bridgewater. Mr Dalio supplied Mr Ferguson with a copy of his book, which offers a sweeping theory of economic history and a model of “the economic machine”—only for Mr Ferguson to tell the assembled staff that there was no way of modelling history since models could not account for the “caprices of decision-makers”. Mr Dalio began shouting at Mr Ferguson, who soon left. Mr Copeland writes that Mr Dalio then sent round a poll asking who won the debate (Mr Dalio triumphed).It is one of many anecdotes that are supposed to reveal that Mr Dalio is unprincipled. Far from listening to unfiltered criticism he uses his power to silence others. But apparently Mr Dalio later solicited advice asking whether he had behaved inappropriately. His employees implored him not to invite people to Bridgewater just to shout at them—advice to which he is said to have listened. Mr Dalio’s radical transparency might be strange and misguided, but perhaps he is not a hypocrite.The book’s arguments about Mr Dalio’s investment process are harder still to swallow. Macro funds that follow trends are a dime a dozen, and few come close to touching Bridgewater’s record. As for the erosion of his edge, the earliest momentum funds were established in the 1980s, before Bridgewater set up its first funds. They grew in the 1990s and 2000s, when his edge was as sharp as ever. How Mr Dalio achieved what he did is something of a mystery. Perhaps some of the magic could have been codified or captured. It was worth trying, anyway.Mr Dalio dismisses Mr Copeland’s book out of hand. He has written that it is “another one of those sensational and inaccurate tabloid books written to sell books to people who like gossip”. The hagiography of Mr Dalio already exists: he penned his own tale in 2017. Mr Copeland seems to have written its foil, which can find only the ill in Bridgewater’s founder. The book is worth a read—but only with that in mind.■Read more from Buttonwood, our columnist on financial markets: Forget the S&P 500. Pay attention to the S&P 493 (Nov 8th)What a third world war would mean for investors (Oct 30th)Investors are returning to hedge funds. That may be unwise (Oct 26th)Also: How the Buttonwood column got its name More

Young investors, as well as everyone starting to save, have no shortage of lessons to learn. The main ones are classics. Begin early to give the magic of compounding time to work. Cut costs to stop that magic from being undone. Diversify. Do not try to time the market unless it is your job to do so. Stick to your strategy even when prices plummet and the sky seems to be falling in. Do not ruin it by chasing hot assets when the market is soaring, others are getting rich and you are getting jealous.To this time-worn list, add an altogether more dispiriting lesson specific to today’s youngsters: you will not enjoy anything like the returns your parents made. Even accounting for the global financial crisis of 2007-09, the four decades to 2021 were a golden age for investors. A broad index of global shares posted an annualised real return of 7.4%. Not only was this well above the figure of 4.3% for the preceding eight decades, but it was accompanied by a blistering run in the bond market. Over the same period, global bonds posted annualised real returns of 6.3%—a vastly better result than the 0% of the preceding 80 years.That golden age is now almost certainly over. It was brought about in the first place by globalisation, quiescent inflation and, most of all, a long decline in interest rates. Each of these trends has now kicked into reverse. As a consequence, youngsters must confront a more difficult set of investment choices—on how much to save, how to make the most out of markets that offer less and how to square their moral values with the search for returns. So far, many are choosing badly.The constant refrain of the asset-management industry—that past performance is no guarantee of future returns—has rarely been more apt. Should market returns revert to longer-run averages, the difference for today’s young investors (defined as under-40s) would be huge. Including both the lacklustre years before the 1980s and the bumper ones thereafter, these long-run averages are 5% and 1.7% a year for stocks and bonds respectively. After 40 years of such returns, the real value of $1 invested in stocks would be $7.04, and in bonds $1.96. For those investing across the 40 years to 2021, the equivalent figures were $17.38 and $11.52.This creates two sources of danger for investors now starting out. The first is that they look at recent history and conclude markets are likely to contribute far more to their wealth than a longer view would suggest. A corollary is that they end up saving too little for retirement, assuming that investment returns will make up the rest. The second is even more demoralising: that years of unusually juicy returns have not merely given investors unrealistically high hopes, but have made it more likely that low returns lie ahead.Antti Ilmanen of AQR, a hedge fund, sets out this case in “Investing Amid Low Expected Returns”, a book published last year. It is most easily understood by considering the long decline in bond yields that began in the 1980s. Since prices move inversely to yields, this decline led to large capital gains for bondholders—the source of the high returns they enjoyed over this period. Yet the closer yields came to zero, the less scope there was for capital gains in the future. In recent years, and especially recent months, yields have climbed sharply, with the nominal ten-year American Treasury yield rising from 0.5% in 2020 to 4.5% today. This still leaves nowhere near as much room for future capital gains as the close-to-16% yield of the early 1980s.The same logic applies to stocks, where dividend and earnings yields (the main sources of equity returns) fell alongside interest rates. Again, one result was the windfall valuation gains enjoyed by shareholders. Also again, these gains came, in essence, from bringing forward future returns—raising prices and thereby lowering the yields later investors could expect from dividend payouts and corporate profits. The cost was therefore more modest prospects for the next generation.As the prices of virtually every asset class fell last year, one silver lining appeared to be that the resulting rise in yields would improve these prospects. This is true for the swathe of government bonds where real yields moved from negative to positive. It is also true for investors in corporate bonds and other forms of debt, subject to the caveat that rising borrowing costs raise the risk of companies defaulting. “If you can earn 12%, maybe 13%, on a really good day in senior secured bank debt, what else do you want to do in life?” Steve Schwarzman, boss of Blackstone, a private-investment firm, recently asked.image: The EconomistEven so, the long-term outlook for stocks, which have historically been the main source of investors’ returns, remains dim. Although prices dropped last year, they have spent most of this one staging a strong recovery. The result is a renewed squeeze on earnings yields, and hence on expected returns. For America’s S&P 500 index of large stocks, this squeeze is painfully tight. The equity risk premium, or the expected reward for investing in risky stocks over “safe” government bonds, has fallen to its lowest level in decades (see chart 1). Without improbably high and sustained earnings growth, the only possible outcomes are a significant crash in prices or years of disappointing returns.All this makes it unusually important for young savers to make sensible investment decisions. Faced with an unenviable set of market conditions, they have a stronger imperative than ever to make the most of what little is on offer. The good news is that today’s youngsters have better access to financial information, easy-to-use investment platforms and low-cost index funds than any generation before them. The bad news is that too many are falling victim to traps that will crimp their already meagre expected returns.A little flushThe first trap—holding too much cash—is an old one. Yet youngsters are particularly vulnerable. Analysis of 7m retail accounts by Vanguard, an asset-management giant, at the end of 2022 found that younger generations allocate more to cash than older ones (see chart 2). The average portfolio for Generation Z (born after 1996) was 29% cash, compared with baby-boomers’ 19%.image: The EconomistIt could be that, at the end of a year during which asset prices dropped across the board, young investors were more likely to have taken shelter in cash. They may also have been tempted by months of headlines about central bankers raising interest rates—which, for those with longer memories, were less of a novelty. Andy Reed of Vanguard offers another possibility: that youngsters changing jobs and rolling their pension savings into a new account tend to have their portfolios switched into cash as a default option. Then, through inertia or forgetfulness, the vast majority never end up switching back to investments likely to earn them more in the long run.Whatever its motivation, young investors’ preference for cash leaves them exposed to inflation and the opportunity cost of missing out on returns elsewhere. The months following Vanguard’s survey at the end of 2022 provide a case in point. Share prices surged, making gains that those who had sold up would have missed. More broadly, the long-run real return on Treasury bills (short-term government debt yielding similar rates to cash) since 1900 has been only 0.4% per year. In spite of central banks’ rate rises, for cash held on modern investment platforms the typical return is even lower than that on bills. Cash will struggle to maintain investors’ purchasing power, let alone increase it.The second trap is the mirror image of the first: a reluctance to own bonds, the other “safe” asset class after cash. They make up just 5% of the typical Gen Z portfolio, compared with 20% for baby-boomers, and each generation is less likely to invest in them than the previous one. Combined with young investors’ cash holdings, this gives rise to a striking difference in the ratio between the two asset classes in generations’ portfolios. Whereas baby-boomers hold more bonds than cash, the ratio between the two in the typical millennial’s portfolio is 1:4. For Gen Z it is 1:6.Given the markets with which younger investors grew up, this may not be surprising. For years after the global financial crisis, government bonds across much of the rich world yielded little or even less than nothing. Then, as interest rates shot up last year, they took losses far too great to be considered properly “safe” assets.But even if disdain for bonds is understandable, it is not wise. They now offer higher yields than in the 2010s. More important, they have a tendency to outpace inflation that cash does not. The long-run real return on American bonds since 1900 has been 1.7% a year—not much compared with equities, but a lot more than cash.The name of the third trap depends on who is describing it. To the asset-management industry, it is “thematic investing”. Less politely, it is the practice of drumming up business by selling customised products in order to capture the latest market fad and flatter investors that they are canny enough to beat the market.Today’s specialised bets are largely placed via exchange-traded funds (ETFs), which have seen their assets under management soar to more than $10trn globally. There are ETFs betting on volatility, cannabis stocks and against the positions taken by Jim Cramer, an American television personality. More respectably, there are those seeking to profit from mega-themes that might actually drive returns, such as ageing populations and artificial intelligence. An enormous subcategory comprises strategies investing according to environmental, social and governance (ESG) factors.Niche strategies are nothing new, and nor are their deficiencies. Investors who use them face more volatility, less liquidity and chunky fees. Compared with those focused on the overall market, they take a greater risk that fashions will change. Even those who pick sensible themes are competing with professional money managers.However the ease with which ETFs can be customised, advertised and sold with a few taps on a phone screen is something that previous generations of investors did not have to reckon with. So is the appeal to morality accompanying their marketing. ESG vehicles are presented to youngsters as the ethically neutral option. If there are investments that will save society and the planet while growing your savings at the same time, what kind of monster would buy the ordinary, dirty kind?This both overstates the difference between ESG and “normal” funds, and papers over their impact on costs and returns. According to a recent study by the Harvard Business School, funds investing along ESG criteria charged substantially higher fees than the non-ESG kind. Moreover, the ESG funds had 68% of their assets invested in exactly the same holdings as the non-ESG ones, despite charging higher fees across their portfolios. Such funds also shun “dirty” assets, including fossil-fuel miners, whose profits are likely to generate higher investment yields if this shunning forces down their prices.Next to the vast difference between the investment prospects of today’s youngsters and those of their parents, the benefits to be gained by avoiding these traps may seem small. In fact, it is precisely because markets look so unappealing that young investors must harvest returns. Meanwhile, the investment habits they are forming may well last for some time. Vanguard’s Mr Reed points to evidence that investors’ early experiences of markets shape their allocations over many years.image: The EconomistOrdering the portfolios of Vanguard’s retail investors by the year their accounts were opened, his team has calculated the median equity allocation for each vintage (see chart 3). The results show that investors who opened accounts during a boom retain significantly higher equity allocations even decades later. The median investor who started out in 1999, as the dotcom bubble swelled, still held 86% of their portfolio in stocks in 2022. For those who began in 2004, when memories of the bubble bursting were still fresh, the equivalent figure was just 72%.Therefore it is very possible today’s young investors are choosing strategies they will follow for decades to come. Mr Ilmanen’s treatise on low expected returns opens with the “serenity prayer”, which asks for “the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference”. It might be the best investment advice out there. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

In its fiscal second-quarter earnings report Thursday, Burberry reported that comparable store sales growth slowed to just 1%, down from 18% in the previous quarter, as momentum in China fizzled out.
Softer demand for luxury goods is weighing on companies around the world, as economic uncertainty and higher inflation curtail consumer spending on luxury items.

Pedestrians walk past a Burberry Group Plc store, left, in the Causeway Bay shopping district of Hong Kong, China.
Xaume Olleros | Bloomberg | Getty Images

LONDON — Burberry shares plunged 9% on Thursday after the British luxury fashion retailer warned that full-year operating profit will come in at the low end of forecasts amid a global slowdown in luxury spending.
The company also cautioned that it may miss its annual revenue projections for low double-digit growth.

In its fiscal second-quarter earnings report Thursday, Burberry reported that comparable store sales growth slowed to just 1%, down from 18% in the previous quarter, as momentum in China fizzled out.
The company recorded a half-year operating profit of £223 million ($276.64 million), down 15% from last year, but CEO Jonathan Akeroyd said Burberry was making “good progress” on its strategic aims.
“We continued to build momentum around our new creative vision with the launch of our Winter 23 collection in September, the first designed by Daniel Lee,” Akeroyd said in a statement.
“While the macroeconomic environment has become more challenging recently, we are confident in our strategy to realise our potential as the modern British luxury brand, and we remain committed to achieving our medium and long-term targets.”

Softer demand for luxury goods is weighing on companies around the world, as economic uncertainty and higher inflation curtail consumer spending on luxury items.

The world’s largest luxury group, LVMH, also reported a quarterly sales slowdown last month, while Cartier-owner Richemont has warned of weaker growth.
“The slowdown in luxury demand globally is having an impact on current trading. If the weaker demand continues, we are unlikely to achieve our previously stated revenue guidance for FY24*,” Burberry said in its earnings report.
“In this context, adjusted operating profit would be towards the lower end of the current consensus range (£552m-£668m)*.”
Along with the global issues facing the industry, Burberry has been vocal about the idiosyncratic challenge it is currently facing in the U.K. due to the government axing VAT-free shopping for international visitors.
Many British retailers, including Burberry, have called on Prime Minister Rishi Sunak and Finance Minister Jeremy Hunt to reconsider the decision on what critics call a “tourism tax.”

The Americas was also a particular problem for Burberry this quarter, with comparable store sales falling by 10%.
“The Americas is Burberry’s worst performer and sorting this out will be top of the agenda for CEO Jonathan Akeroyd,” said Russ Mould, investment director at stockbroker AJ Bell. 
“In one sense Burberry shareholders will be reassured to see other luxury peers struggling as it suggests the company is not facing problems of its own making. All it can do right now is protect and invest in its brand and wait for an improvement in the backdrop.” More

U.S. President Joe Biden and Chinese President Xi Jinping have agreed to resume high-level military communication, according to both countries.
U.S. Secretary of Defense Lloyd Austin will meet with his Chinese counterpart when that person is selected, a senior Biden administration official told reporters after the Biden-Xi summit.
China has yet to name a defense minister after dismissing Gen. Li Shangfu from the position without explanation in late October.

U.S. President Joe Biden and Chinese President Xi Jinping agreed to resume high-level military communication when they met in person Wednesday for the first time in a year in San Francisco on the sidelines of the Asia-Pacific Economic Cooperation conference.
Brendan Smialowski | Afp | Getty Images

BEIJING — U.S. President Joe Biden and Chinese President Xi Jinping have agreed to resume high-level military communication, according to both countries.
The two leaders met in person for the first time in a year Wednesday local time in San Francisco on the sidelines of the Asia-Pacific Economic Cooperation conference.

“We’re back to direct, open, clear communications,” Biden said at a press conference after the talks.
China has conducted military exercises around Taiwan, while its navy has been engaging in aggressive maneuvers in the South China Sea in a standoff with the Philippines as both countries stake their territorial claims.
The U.S. has wanted to revive the military communication, especially after some near-miss incidents where China’s ships almost collided with American forces.
“Vital miscalculations on either side can cause real trouble with a country like China or any other major country,” Biden said at the post-meeting press briefing.
China’s Defense Ministry declined a call with its U.S. counterpart in early February after the discovery of an alleged Chinese spy balloon over U.S. airspace. The balloon incident delayed U.S. Secretary of State Antony Blinken’s highly anticipated trip to China by more than four months.

In June, the defense chiefs from both countries attended an annual security summit in Singapore, but they did not have a formal meeting.

When Blinken finally visited China, he said he “repeatedly” raised the need for direct communication between the two countries’ militaries but failed to revive such talks.
China has yet to name a defense minister after dismissing Gen. Li Shangfu from the position without explanation in late October.
U.S. Secretary of Defense Lloyd Austin will meet with his Chinese counterpart when the Chinese defense chief is selected, a senior Biden administration official told reporters after the Biden-Xi summit.

Read more about China from CNBC Pro

As part of the agreement, senior U.S. military commanders including that of Pacific forces in Hawaii will engage with their Chinese counterparts, the official said.
The two countries also plan to establish ways for ship drivers and others to discuss incidents and, potentially, best practices, the official said.
A readout published by Chinese state media added the resumption of such military talks was “on the basis of equality and respect,” according to a CNBC translation.

Taiwan

At the presser, Biden reiterated the U.S. position that Taiwan maintains its sovereignty, despite China’s claims to the contrary.
“We maintain the agreement that there is a One-China policy and I’m not going to change that, that’s not going to change. That’s about the extent to which we discussed,” he said.

According to Chinese state media, Xi pointed out during the bilateral meeting that Taiwan has always been the “most important and sensitive” issue in China’s relations with the U.S.. He said in the report that China “takes seriously” positive statements the U.S. made during his meeting with Biden last year in Indonesia.
“The U.S. should use concrete actions to reflect its stance of not supporting ‘Taiwan independence,’ stop arming Taiwan and support China’s peaceful reunification,” state media reported. “China will ultimately be reunified and will inevitably be reunified.”
Beijing considers Taiwan part of its territory, with no right to independently conduct diplomatic relations. The U.S. recognizes Beijing as the sole government of China but maintains unofficial relations with Taiwan, a democratically self-governed island.

AI, fentanyl and more

Chinese state media also said the two sides agreed to establish an intergovernmental dialogue on artificial intelligence, set up a working group on drug control, “significantly” increase flights between the two countries next year and expand exchanges in areas such as education, business and culture.
The U.S. senior administration official said the Chinese were already taking action on nearly 24 companies that make precursors for fentanyl — an addictive drug that’s led to overdoses and deaths in the U.S.
Biden said at the post-meeting presser that the two leaders agreed that fentanyl production needs to be “curbed substantially.”
On artificial intelligence, however, the official said it was too early for a joint declaration by the two leaders, and noted the need to prevent the incorrect use of AI in military or nuclear operations.

Trade and sanctions

The Biden administration has announced export controls and sanctions on Chinese companies in an effort to limit U.S. companies’ contribution to technology that supports China’s military.
Xi noted the export controls, investment reviews and sanctions in the meeting, and called for the U.S. to lift the sanctions and provide a non-discriminatory environment for Chinese companies, Chinese state media said.
Biden also brought up difficulties around travel harassment of Americans in China, and a business environment that wasn’t as welcoming as it was in the past, the U.S. senior administration official said.
But overall the official described the meeting as more personal than the last time the two leaders met.
In a post on X, formerly known as Twitter, Biden called his day of meetings with Xi “some of the most constructive and productive discussions we’ve had.”
“We built on groundwork laid over the past several months of diplomacy between our countries and made important progress.”
— CNBC’s Christina Wilkie and Clement Tan contributed to this report. More

President Joe Biden and President Xi Jinping of China met outside San Francisco at the Asia-Pacific Economic Cooperation event.
The meeting came amid efforts between the United States and China to increase high-level communication.
Biden and Xi were expected to discuss curbing fentanyl flows into the U.S., safe use of artificial intelligence, and American restrictions on Chinese access to high-end tech.

BEIJING — U.S. President Joe Biden and Chinese President Xi Jinping met Wednesday outside of San Francisco in their first face-to-face encounter in a year.
The summit, on the sidelines of the Asia-Pacific Economic Cooperation conference, followed efforts between the U.S. and China to increase high-level communication amid continued tensions.

“We have to ensure that competition does not veer into conflict,” Biden said at the start of the summit. “Critical global challenges we face, from climate change to counternarcotics to artificial intelligence, demand our joint efforts.”
Biden and Xi were widely expected to discuss issues such as curbing fentanyl flows into the U.S., safe use of artificial intelligence, and U.S. restrictions on Chinese access to high-end tech.
“For two large countries like China and the United States, turning their back on each other is not an option,” Xi said in his opening remarks. “Planet Earth is big enough for the two countries to succeed.”

U.S. President Joe Biden meets with Chinese President Xi Jinping at Filoli estate on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit, in Woodside, California, U.S., November 15, 2023. 
Kevin Lamarque | Reuters

Signals of goodwill between the countries have picked up in recent days.
In the hours before the planned summit, the U.S. and China reaffirmed their commitment to cooperate on climate issues.

More direct flights between the U.S. and China are resuming from a low base.
Last month, Chinese commodity importers signed the first agreements since 2017 to buy U.S. agricultural products in bulk, according to a news release from the American embassy in Beijing.
China’s Ministry of Commerce last week announced it was gathering information in an effort to address unequal treatment of foreign businesses in China compared with treatment of domestic firms — which has been a longstanding business complaint.
The Chinese government may also use the summit as an opportunity to announce a commitment to resuming purchases of Boeing’s 737 Max aircraft, Bloomberg News reported, citing sources.
Boeing declined to comment.

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Xi arrived in the U.S. on Tuesday local time. It is his first trip to the United States since 2017, when he visited then-President Donald Trump at his Mar-a-Lago club in Florida.
The last time that Xi met Biden in person was in the Indonesian island resort of Bali in November 2022. That was Biden’s first meeting with the Chinese leader as American president.
Biden is running for reelection next year.
Xi cemented his power in March by formally gaining an unprecedented third term as president.
— CNBC’s Rebecca Picciotto contributed reporting More

At the annual Asia-Pacific Economic Co-operation summit in San Francisco, all eyes are on the meeting between Xi Jinping and Joe Biden. But when it comes to competition between the two great powers in Asia, the most consequential decisions will be made—or rather not be made—behind the scenes.Trade negotiators had hoped the summit would yield an announcement on the Indo-Pacific Economic Framework (ipef), America’s offering on trade to 13 regional economies, intended as its main weapon in the battle for economic influence in Asia. Instead, a decision by the Biden administration to halt discussions on digital trade has frozen an important part of an already limited agreement. There will be no announcement on the trade portion of ipef, one of the deal’s four pillars. With American elections now just a year away, further progress will be difficult.Digital trade is a large and growing category, covering online services, cross-border flows of data and e-commerce. In 2017, when Donald Trump withdrew from the Trans-Pacific Partnership (tpp)—a more comprehensive agreement than ipef—Asian countries had little hope of greater access to American markets. Support for opening up digital commerce was one of America’s last claims to international openness. Indeed, the usmca agreement with Canada and Mexico, signed by Mr Trump in 2018, prohibited both customs on digital products and data localisation (the practice of forcing companies to store data in the country where it is collected).But concerns about the sway of America’s tech giants have made Democrats, including Elizabeth Warren, a left-wing senator, sceptical about looser digital-trade rules. Those on both sides of the aisle want to ensure they are not restricted when regulating artificial intelligence (ai), says Sam Lowe of Flint Global, a consultancy. Mr Biden’s change of heart reflects these shifts.For liberal economies in the region, this is only the latest disappointment. In 2020 Chile, New Zealand and Singapore signed a pact covering issues from paperless trade certification to co-operation on future areas of interest, such as ai and fintech. Just as the tpp grew out of a deal between New Zealand and Singapore in 2000, participants hoped to tempt America into deeper agreements by getting the ball rolling themselves. That now looks unlikely.In the wake of America’s retreat, data localisation may follow. India and Indonesia recently passed privacy laws without strict localisation requirements. That was in no small part due to American advocacy, says Nigel Cory of the Information Technology and Innovation Foundation, a think-tank. Without such pressure, countries will be more likely to take a nationalistic path.American policy in Asia is now focused on limited bilateral deals that support Mr Biden’s industrial policy, which seeks to boost domestic manufacturing. The visit by Joko Widodo, Indonesia’s president, to Washington this week is an early step in negotiations over minerals for batteries (Indonesia accounts for almost half the nickel that was mined globally last year). And the government of the Philippines is pushing for a similar agreement.At the same time as America is withdrawing from multilateral deals, China is throwing its hat into the ring. The Asian superpower has little chance of joining the Comprehensive and Progressive Trans-Pacific Partnership, which succeeded the tpp. But the Regional Comprehensive Economic Partnership, a 14-member trade deal that came into effect last year, will bind Asian economies more tightly to it.In the contest between America and China for influence over Asian trade, only one side is making progress. Few Asian governments started out with high hopes for the ipef, which even its most ardent supporters conceded was no equivalent to the formal trade deals once pursued by American negotiators. Yet the agreement, whenever it comes, will now fall short of even that low bar. ■ More

Citigroup will soon begin layoffs in CEO Jane Fraser’s corporate overhaul, CNBC has learned.
Employees affected by the cuts will be informed starting Wednesday, with new dismissals announced daily through early next week, according to people with knowledge of the situation.

Jane Fraser, CEO of Citigroup Inc., during an interview for an episode of “The David Rubenstein Show: Peer-to-Peer Conversations” at the Economic Club of Washington in Washington, D.C., March 22, 2023.
Valerie Plesch | Bloomberg | Getty Images

Citigroup will soon begin layoffs in CEO Jane Fraser’s corporate overhaul, CNBC has learned.
Employees affected by the cuts will be informed starting Wednesday, with new dismissals announced daily through early next week, according to people with knowledge of the situation.

The move tracks with a timeline set by Fraser in a Sept. 13 memo. She announced five new divisions whose heads report directly to her, resulting in the departure of a handful of senior executives. The next phase of disruption will be “communicated and implemented by the end of November,” and “final changes” will be done by the end of March 2024, Fraser said at the time.
Fraser is under pressure to improve Citigroup, which has been mired in a stock slump as headcount and expenses have ballooned in recent years. The CEO, who took over in March 2021, is at a pivotal moment as she faces deep investor skepticism that the bank can hit performance targets she outlined last year.
Employees who have lost their roles may be able to apply for other positions, and Citigroup will offer severance pay where eligible, the bank’s human resources chief told workers last month.  
The full extent of job cuts are still being determined, but managers and consultants working on the project — known internally by its code name, “Project Bora Bora” — have discussed dismissals of at least 10% of workers in several businesses, CNBC reported last week.
Workers have flocked to internal chat platforms with questions about the impending cuts, according to the people, who declined to be identified speaking about personnel matters.

A Citigroup spokeswoman declined to comment Wednesday beyond the statement it offered to CNBC previously:
“We’ve acknowledged the actions we’re taking to reorganize the firm involve some difficult, consequential decisions, but they’re the right steps to align our structure to our strategy and deliver the plan we shared at our 2022 Investor Day.”
This story is developing. Please check back for updates. More