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    US Cracks Down on Chinese Companies for Security Concerns

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    The Biden administration placed severe restrictions on trade with dozens of Chinese entities, its latest step in a campaign to curtail access to technology with military applications.WASHINGTON — The Biden administration on Thursday stepped up its efforts to impede China’s development of advanced semiconductors, restricting another 36 companies and organizations from getting access to American technology.The action, announced by the Commerce Department, is the latest step in the administration’s campaign to clamp down on China’s access to technologies that could be used for military purposes and underscored how limiting the flow of technology to global rivals has become a prominent element of United States foreign policy.Administration officials say that China has increasingly blurred the lines between its military and civilian industries, prompting the United States to place restrictions on doing business with Chinese companies that may feed into Beijing’s military ambitions at a time of heightened geopolitical tensions, especially over Taiwan.In October, the administration announced sweeping limits on semiconductor exports to China, both from companies within the United States and in other countries that use American technology to make those products. It has also placed strict limits on technology exports to Russia in response to Moscow’s invasion of Ukraine.“Today we are building on the actions we took in October to protect U.S. national security by severely restricting the PRC’s ability to leverage artificial intelligence, advanced computing, and other powerful, commercially available technologies for military modernization and human rights abuses,” Alan Estevez, the under secretary of commerce for industry and security, said in a statement, referring to the People’s Republic of China.Among the most notable companies added to the list is Yangtze Memory Technologies Corporation, a company that was said to be in talks with Apple to potentially supply components for the iPhone 14.Congress has been preparing legislation that would prevent the U.S. government from purchasing or using semiconductors made by Y.M.T.C. and two other Chinese chip makers, Semiconductor Manufacturing International Corporation and ChangXin Memory Technologies, because of their reported links to Chinese state security and intelligence organizations.The Biden PresidencyHere’s where the president stands after the midterm elections.A New Primary Calendar: President Biden’s push to reorder the early presidential nominating states is likely to reward candidates who connect with the party’s most loyal voters.A Defining Issue: The shape of Russia’s war in Ukraine, and its effects on global markets, in the months and years to come could determine Mr. Biden’s political fate.Beating the Odds: Mr. Biden had the best midterms of any president in 20 years, but he still faces the sobering reality of a Republican-controlled House for the next two years.2024 Questions: Mr. Biden feels buoyant after the better-than-expected midterms, but as he turns 80, he confronts a decision on whether to run again that has some Democrats uncomfortable.The U.S. government added the companies to a so-called entity list that will severely restrict their access to certain products, software and technologies. The targeted companies are producers and sellers of technologies that could pose a significant security risk to the United States, like advanced chips that are used to power artificial intelligence and hypersonic weapons, and components for Iranian drones and ballistic missiles, the Commerce Department said.In an emailed statement, Liu Pengyu, the spokesman for the Chinese embassy in Washington, said that the United States “has been stretching the concept of national security, abusing export control measures, engaging in discriminatory and unfair treatment against enterprises of other countries, and politicizing and weaponizing economic and sci-tech issues. This is blatant economic coercion and bullying in the field of technology.”“China will resolutely safeguard the lawful rights and interests of Chinese companies and institutions,” he added.On Monday, China filed a formal challenge to the Biden administration’s chip controls at the World Trade Organization, criticizing the restrictions as a form of “trade protectionism.”The administration said that some companies, including Y.M.T.C. and its Japanese subsidiary, were added to the list because they posed a significant risk of transferring sensitive items to other companies sanctioned by the U.S. government, including Huawei Technologies and Hikvision.The Commerce Department said that another entity, Tianjin Tiandi Weiye Technologies, was added for its role in aiding China’s campaign of repression and surveillance of Uyghurs and other Muslim minority groups in the Xinjiang region of China, as well as providing U.S. products to Iran’s Islamic Revolutionary Guards Corps. U.S.-based firms will now be forbidden from shipping products to these companies without first obtaining a special license.Twenty-three of the entities — in particular, those supplying advanced chips used for artificial intelligence with close ties to the Chinese military and defense industry, and two Chinese companies that were found to be supporting the Russian military — were hit with even tougher restrictions.The companies will be subject to what is known as the foreign direct product rule, which will cut them off from buying products made anywhere in the world with the use of American technology or software, which would encompass most global technology companies.The administration also said it would lift restrictions on some companies that had successfully undergone U.S. government checks that ensured their products weren’t being used for purposes that the government deemed harmful to national security.As part of the restrictions unveiled in October, the Biden administration placed dozens of Chinese firms on a watch list that required them to work with the U.S. government to verify that their products were not being used for activities that would pose a security risk to the United States.A total of 25 entities completed those checks, in cooperation with the Chinese government, and thus have been removed from the list. Nine Russian parties that were unable to clear those checks were added to the entity list, the department said.A spokesperson for the Commerce Department said that the actions demonstrated that the United States would defend its national security but also stood ready to work in cooperation with companies and host governments to ensure compliance with U.S. export controls.In a separate announcement Thursday morning, a government board that oversees the audits of companies listed on stock exchanges to protect the interests of investors said that it had gained complete access for the first time in its history to inspect accounting firms headquartered in mainland China and Hong Kong.The agency, called the Public Company Accounting Oversight Board, said this was just an initial step in ensuring that Chinese companies are safe for U.S. investors. But the development marked a step toward a potential resolution of a yearslong standoff between the United States and China over financial checks into public companies. It also appeared to decrease the likelihood that major Chinese companies will be automatically delisted from U.S. exchanges in the years to come.Congress passed a law in 2020 that would have required Chinese companies to delist from U.S. stock exchanges if U.S. regulators were not able to inspect their audit reports for three consecutive years.Erica Y. Williams, the chair of the board, said the announcement should not be misconstrued as a “clean bill of health” for firms in China. Her staff had identified numerous potential deficiencies with the firms they inspected, she said, though that was not an unexpected outcome in a jurisdiction being examined for the first time.“I want to be clear: this is the beginning of our work to inspect and investigate firms in China, not the end,” Ms. Williams said. More

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    Global Car Supply Chains Entangled With Abuses in Xinjiang, Report Says

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    A new report on the auto industry cites extensive links to Xinjiang, where the U.S. government now presumes goods are made with forced labor.The global auto industry remains heavily exposed to the Xinjiang region of China for raw materials, components and other supplies, a new report has found, despite a recent U.S. law intended to restrict purchases from the area, where the Chinese government has committed human rights abuses against mostly Muslim minorities.The report, from a team of researchers led by Laura T. Murphy, a professor of human rights and contemporary slavery at Britain’s Sheffield Hallam University, details the links between Chinese companies with deep ties to Xinjiang and the automakers that use their supplies, such as metals, batteries, wiring and wheels.The report identifies major Chinese companies that the researchers determined have participated in coercive labor programs in Xinjiang, or have recently sourced their materials and products from the region, where China has engaged in mass internment of Uyghurs and other minorities. Those Chinese firms are major participants in the global supply chain for auto parts, the report says, raising the likelihood that automakers like Volkswagen, Honda, Ford Motor, General Motors, Mercedes-Benz Group, Toyota and Tesla have sold cars containing raw materials or components that have at some point touched Xinjiang.“There was no part of the car we researched that was untainted by Uyghur forced labor,” Dr. Murphy said. “It’s an industrywide problem.”Such links could pose serious problems for the international auto brands. The Biden administration, like the Trump administration before it, has taken an increasingly aggressive posture toward Chinese trade violations and imports of goods made with forced labor, which the United Nations estimates affects 28 million people worldwide.Under the Uyghur Forced Labor Prevention Act, products made wholly or partly in Xinjiang are now assumed to have been produced with forced labor, making them vulnerable to seizure by the federal government if they are brought into the United States. Customs officials say that since the law went into effect in June, they have stopped roughly 2,200 shipments — valued at more than $728 million — that were suspected of having Xinjiang content. More than 300 of those products were ultimately released into the United States.Federal officials did not disclose what kinds of products have been seized. But the new rules have been particularly disruptive for companies making clothing and solar panels, which source raw materials like cotton and polysilicon from Xinjiang.The New York Times has not independently verified the entire contents of the new report, which names roughly 200 companies, both Chinese and international, with potential direct or indirect links to Xinjiang. Many of the Chinese industrial giants named in the report have multiple production sites, meaning they could be supplying international automakers with metal, electronics or wheels made from their factories outside Xinjiang.The global supply chain for auto parts is vast and complex. According to estimates by McKinsey and Company, the average automotive manufacturer may have links to as many as 18,000 suppliers in its full supply chain, from raw materials to components.Many of those suppliers run through China, which has become increasingly vital to the global auto industry and the United States, the destination for about a quarter of the auto parts that China exports annually. Xinjiang is home to a variety of industries, but its ample coal reserves and lax environmental regulations have made it a prominent location for energy-intensive materials processing, like smelting metal, the report says.Chinese supply chains are complicated and opaque, which can make it difficult to trace certain individual products from Xinjiang to the United States. Over the past three years, Xinjiang and other parts of China have been intermittently locked down to keep the coronavirus at bay. Even before the pandemic, the Chinese government tightly controlled access to Xinjiang, especially for human rights groups and media outlets.Determining the extent of coercion that any individual Uyghur worker may face in Xinjiang’s mines or factories is also difficult given the region’s restrictions. But the overarching environment of repression in Xinjiang has prompted the U.S. government to presume that any products that have touched the region in their production are made with forced labor unless companies can prove otherwise.Workers in the region “don’t have a chance to say no,” said Yalkun Uluyol, a Xinjiang native and one of the report’s authors. Goods coming from Xinjiang “are a product of the exploitation of the land, of the resources and of the people,” he said.The report’s researchers identified numerous documents — including Chinese-language corporate filings, government announcements and ocean import records — indicating that international brands, at the very least, have multiple potential exposures to programs in Xinjiang that the U.S. government now defines as forced labor.Dr. Murphy said her team had identified nearly 100 Chinese companies mining, processing or manufacturing materials for the automotive industry operating in the Uyghur region, at least 38 of which had publicized their engagement in repressive state-sponsored labor programs through their social media accounts, corporate reports or other channels.International automakers contacted by The Times did not contradict the report but said they were committed to policing their supply chains against human rights abuses and forced labor.G.M., Volkswagen and Mercedes said their supplier codes of conduct prohibited forced labor. Honda said its suppliers were required to follow global sustainability guidelines. Ford said it maintained processes to ensure that its global operations, including in China, complied with all relevant laws and regulations.Toyota, in a statement, said, “We expect our business partners and suppliers to follow our lead to respect and not infringe upon human rights.”Tesla did not respond to repeated requests for comment.The Chinese government has insisted that there are no human rights violations in Xinjiang, and has called accusations of forced labor in Xinjiang “the lie of the century.”“‘Forced labor’ in Xinjiang is a lie deliberately made up and spread by the U.S. to shut China out of the global supply and industrial chains,” Liu Pengyu, the spokesman at the Chinese Embassy in Washington, said in a statement.Some of the Chinese companies named in the report are enormous industry suppliers that have proudly advertised their role in carrying out the Chinese government’s policies toward Uyghurs in social media postings, or in glossy annual reports.They include China Baowu Steel Group, the world’s largest steel maker, which has a subsidiary in Xinjiang that accounts for at least 9 percent of its total steel production, according to the report. Baowu and its subsidiaries make springs for car suspension systems, axles and body panels, as well as various kinds of steel that feed the supply chains of most international carmakers.In its 2020 corporate social responsibility report, which pledges adherence to China’s leader and the Communist Party, Baowu Group said that its subsidiary had “fully implemented the party’s ethnic policy” and that 364 laborers from poor families from villages in southern Xinjiang had “been arranged with employment.” Human rights advocates say the terms are euphemisms for organized mass transfers of Uyghur laborers into factories.According to the report, Baowu Group subsidiaries have participated in other transfers of workers from poor regions of Xinjiang, and in so-called poverty alleviation programs, which the United States now recognizes as a guise for forced labor. Under the new law, companies that participate in such programs can be added to a blacklist that blocks the products they make anywhere — even outside Xinjiang — from coming to the United States.The new report also builds on a June investigation published by The Times into Xinjiang’s role in producing electric vehicle battery minerals like lithium and nickel, as well as previous research by a firm called Horizon Advisory into the aluminum industry in Xinjiang. The report identifies recent transfers of Uyghur laborers at some of the world’s biggest aluminum companies, and traces these products to major auto industry suppliers, some of whom made shipments to the United States, Canada or Europe as recently as November, shipping records show.It also documents ties to Xinjiang and transfers of Uyghur workers for dozens of other significant auto industry suppliers, such as Double Coin, a tire maker that sells widely in the United States, including online at Walmart and Amazon.And it documents a recent investment by CATL — a Chinese firm that produces roughly a third of the world’s electric vehicle batteries and supplies Tesla, Ford, G.M., Volkswagen and other brands — in a major new lithium processing company in Xinjiang.Zhang Yizhi, a spokesman for CATL, said the company was a minority shareholder in the Xinjiang company and was not involved in its operations or management. CATL is committed to building a responsible supply chain and strictly opposes and prohibits any form of forced labor in its suppliers, he said.Baowu Group, Double Coin and its parent, Shanghai Huayi Group, did not respond to repeated requests for comment. Amazon declined to comment about its sale of Double Coin tires, while Walmart did not respond.The research suggests that the United States still has far to go in stopping the flow of goods linked to Xinjiang. Customs officials say they are working to enforce a ban on such products, but they are still hiring aggressively and working to build out the department’s capacity to identify and stop these goods.“We’re still in an upward trajectory,” said AnnMarie R. Highsmith, the executive assistant commissioner of the Office of Trade at Customs and Border Protection, in an interview in October.“Unfortunately,” she added, “the situation globally is such that we are going to have full employment for a while.” More

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    Chinese Unrest Over Lockdown Upends Global Economic Outlook

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    Growing protests in the world’s biggest manufacturing nation add a new element of uncertainty atop the Ukraine war, an energy crisis and inflation.The swelling protests against severe pandemic restrictions in China — the world’s second-largest economy — are injecting a new element of uncertainty and instability into the global economy when nations are already struggling to manage the fallout from a war in Ukraine, an energy crisis and painful inflation.For years, China has served as the world’s factory and a vital engine of global growth, and turmoil there cannot help but ripple elsewhere. Analysts warn that more unrest could further slow the production and distribution of integrated circuits, machine parts, household appliances and more. It may also encourage companies in the United States and Europe to disengage from China and more quickly diversify their supply chains.Millions of China’s citizens have chafed under a tight lockdown for months as the Communist Party seeks to overcome the spread of the Covid-19 virus, three years after its emergence. Anger turned to widespread protest after an apartment fire last week killed 10 people and comments on social media questioned whether the lockdown had prevented their escape.It is unclear whether the demonstrations flaring across the country will be quickly snuffed out or erupt into broader resistance to the iron rule of its top leader, Xi Jinping, but so far the most significant economic damage stems from the lockdown.“The biggest economic hit is coming from the zero-Covid policies,” said Carl Weinberg, chief economist at High Frequency Economics, a research firm. “I don’t see the protests themselves being a game changer.”“The world will still turn to China for what it makes best and cheapest,” he added.Police officers during a protest in Beijing on Sunday.Kevin Frayer/Getty ImagesAsked how the Biden administration assessed the economic fallout from the latest unrest, John Kirby, coordinator for strategic communications at the National Security Council, said Monday, “We don’t see any particular impact right now to the supply chain.”Concerns about the economic impact of the spreading unrest in China, nonetheless, appeared to be partly responsible for a decline in world markets. The S&P 500 index closed 1.5 percent lower, while the dollar, often a haven in turbulent times, moved higher. Oil prices began the day with a sharp drop before rebounding.The sheer magnitude of China’s economy and resources makes it a critical player in world commerce. “It’s extremely central to the global economy,” said Kerry Brown, an associate fellow in the Asia-Pacific program at Chatham House, an international affairs institute in London. That uncertainty “will have a massive impact on the rest on the world.”China now surpasses all countries as the biggest importer of petroleum. It manufactured nearly 30 percent of the world’s goods in 2021. “There is simply no alternative to what China offers in terms of scale and capacities,” Mr. Brown said.Delays and shortages related to the pandemic prompted many industries to re-evaluate the resilience of their supply chains and consider additional sources of raw materials and workers. Apple, which recently announced that it expected sales to decline because of stoppages at its Chinese plants, is one of several tech companies that have shifted a small portion of their production to other countries, like Vietnam or India.The tilt by some companies away from China predates the pandemic, reaching back to former President Donald J. Trump’s determination to start a trade war with China, a move that resulted in a spiral of punishing tariffs.Yet even if business and political leaders want to be less reliant on China, Mr. Brown said, “the brute reality is that’s not going to happen soon, if at all.”“We shouldn’t kid ourselves that we can quickly decouple,” he added.China’s size is a lure for American, European and other companies looking not only to make products quickly and cheaply, but also to sell them in great numbers. There is simply no other market as big.Tesla, John Deere and Volkswagen are among the companies that have bet on China for future growth, but they are likely to suffer some setbacks at least in the short run. Volkswagen announced last week that its sales in China had stagnated this year, running 14 percent below expectations.A Volkswagen stand at the Auto Shanghai trade show last year. Volkswagen is one of the companies counting on the Chinese market for sales growth.Alex Plavevski/EPA, via ShutterstockThe protests highlight the political risks associated with investing in China, but analysts say the recent wave doesn’t reveal anything that investors didn’t already know.“Many investors will be looking ahead and positioning their portfolios now for the reopening,” said Nigel Green, chief executive of deVere Group, a financial advisory firm. They will be “seeking to take advantage of the country’s transition from an export economy to a consumption one,” he added.Luxury brands continue to stake their future on growth in China.As interconnected as the global economy is, one way in which China’s slowdown may be helping other nations is by keeping down the price of energy. Over the last 20 years, the growth of the Chinese economy has been a primary driver of global demand for oil and hydrocarbons in general.Energy experts say rising numbers of Covid infections and growing doubts that China will ease restrictions in major cities are a major reason that oil prices have dropped over the last three weeks to levels last seen before the Russian invasion of Ukraine in late February.“Chinese demand is the largest single factor in world oil demand,” said David Goldwyn, a senior energy diplomat in the Obama administration. “China is the swing demander.”As the Chinese economy has softened in the grip of the Covid lockdown, fewer oil tankers have sailed into Chinese ports in recent weeks, forcing the major Middle Eastern and Russian oil producers to lower their prices. Now spreading protests create another uncertainty about future demand.Chinese oil demand is expected to average 15.1 million barrels a day this quarter, down from 15.8 million a year ago, according to Kpler, an analytics firm.Barriers at a security checkpoint in Guangzhou, a southern Chinese manufacturing hub, this month.Associated PressAs for supply chain disruptions, Neil Shearing, chief economist at Capital Economics, a research firm, said he thought excessive blame had been heaped on China. “Everything has been framed around supply shortages,” he said, but in China, industrial production increased during the pandemic. The problem was that global demand surged more.For now, the biggest economic impact will be within China, rather than on the global economy. Sectors that depend on face-to-face contact — retail, hospitality, entertainment — will take the biggest hit. Over the past three days, measures of people’s movements have drastically fallen, Mr. Shearing said.He added that more people were quarantined now than at the height of the Omicron epidemic last winter. The wave of infections and the government’s response to it — not the protests — are what’s having “the biggest impact on China’s economy,” he said.Clifford Krauss More

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    Price of Diesel, Which Powers the Economy, Is Still Climbing

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    Russia’s invasion of Ukraine is one reason that the fuel is scarce. Another is a series of yearslong, intertwined events that cover the globe.HOUSTON — Gasoline prices have dropped as much as a dollar a gallon since early summer, easing a financial strain on many people. But the price of diesel, the fuel that moves trucks, trains, barges, tractors and construction equipment, has remained stubbornly high, helping to prop up the prices of many goods and services.On Wednesday, a gallon of diesel fuel in the United States cost $5.357 on average, according to AAA. That was down from a record of $5.816 in June but well above the $3.642 it cost a year ago. (A gallon of regular gasoline now averages $3.805.)The surge in diesel costs has not garnered the attention from politicians and the public that the jump in gasoline prices did, because most of the cars in the United States run on gas. But diesel prices are a critical source of pain for the economy because they affect the cost of practically every product.“The economic impact is insidious because everything moves across the country powered by diesel,” said Tom Kloza, the global head of energy analysis at the Oil Price Information Service. “It’s an inflation accelerant, and the consumer ultimately has to pay for it.”Sherri Garner Brumbaugh, the president of Garner Trucking in Findlay, Ohio, said the weekly cost of fueling one of her heavy-duty trucks in September was $1,300, more than double the $600 she paid two years earlier. “A good portion gets passed onto my customers with a fuel surcharge,” she said.Both gasoline and diesel prices are tied to the price of oil, which is set on the global market. The price of each fuel immediately shot up after Russia invaded Ukraine in February. But their paths have diverged sharply. Over the last year, the cost of diesel has ballooned by over 40 percent, compared with 11 percent for gasoline.Diesel prices are high because the fuel is scarce worldwide, including in the United States, which in recent years became a net exporter of oil and petroleum products. Oil analysts said there were simply not enough refineries to meet the demand for diesel, especially after Russia’s energy exports fell when the United States, Britain and some other countries stopped buying them.Diesel inventories are always a bit low in the spring and fall, during agricultural planting and harvesting seasons, but this fall supplies are at their lowest level since 1982, when the government began reporting data on the fuel.The tightest market is in the Northeast, where oil refineries have closed in recent years and where the diesel crunch is complicated by winter demand for heating oil. The two fuels are virtually the same but are taxed differently. An especially cold winter could make the situation worse by increasing the demand for heating oil.In Massachusetts, for example, diesel is selling for more than $5.90 a gallon (about $2.33 more than it did a year earlier). In Texas, it costs $4.73 a gallon.Trucks, trains, barges, tractors and construction equipment all use diesel, and its price affects the cost of practically every product.Jim Watson/Agence France-Presse — Getty ImagesWhile Russia’s war in Ukraine sent diesel prices soaring, the current situation is partly the result of an interconnected, slow-building series of events that extends across the globe. Some analysts trace the roots of the U.S. diesel shortage to a fire at Philadelphia Energy Solutions in 2019, which forced the refinery to shut down, taking out one of the Northeast’s important diesel producers.But refineries have been closing elsewhere. Over the last several years, 5 percent of U.S. refinery capacity, and 6 percent of European refinery capacity, has been shut down. A few refineries closed or scaled back because of the collapse in energy demand in the early months of the coronavirus pandemic. Some older refineries were shut down because they were inefficient and their profits weren’t large enough for Wall Street investors. Other refineries were closed so that their owners could convert them to produce biofuels, which are made from plants, waste and other organic material.“Because we shut those refineries down, we don’t have enough capacity,” said Sarah Emerson, the president of ESAI Energy, a consulting firm.As much of the global economy recovered in 2021 and 2022, demand for diesel climbed quickly. But then, after Russia invaded Ukraine, the Biden administration banned Russian oil and petroleum imports, which amounted to 700,000 barrels of diesel and other fuels a day, much of it intended for the Northeast.Diesel prices have also soared so much higher than the cost of gasoline in part because of a decision by the International Maritime Organization several years ago to require most oceangoing ships to replace their high-sulfur bunker fuel with less polluting fuels starting in 2020. That has slowly increased demand for diesel over the last two years.“A substantial amount of diesel is needed in the new bunker blends, and that is a hidden demand for diesel molecules,” said Richard Joswick, the head of global oil analysis for S&P Global Platts. He estimated that the global shipping fleet was now consuming half a million barrels of diesel a day, or roughly 2 percent of the world’s supplies.At the same time, while American refiners are now making tidy profits, 30 percent of their production is being exported. Latin America has become a particularly profitable market, as American diesel replaces fuel from Venezuela, where the state-controlled oil sector has been hobbled by corruption, mismanagement and U.S. sanctions. Some American diesel also goes to Europe.The impact of exports on domestic prices has led some analysts to speculate that the Biden administration could eventually restrict exports to boost supplies at home. But energy experts said that might not have the desired effect because diesel had become a globally traded commodity. Denying Latin America fuel could also backfire because many countries in the region sell crude oil to the United States.“We have a symbiotic relationship with Latin America on diesel and crude,” said Ms. Emerson of ESAI Energy. “We can disrupt that, but it doesn’t immediately fix the problem.”The global diesel shortage was also exacerbated by labor strikes at French refineries this fall. And utilities in Europe have been stockpiling diesel in case they cannot find enough natural gas to fuel their power plants.Russian diesel has continued to flow to Europe since the war began, but stricter sanctions that the European Union plans to impose on Russia in February could potentially cause havoc to the diesel business of traders, banks, insurance companies and shippers.Still, some energy experts said prices could soon begin to ease.Help may be on the way from an unlikely source: China. In recent months, China has been loosening export controls on diesel. Its exports rose from 200,000 barrels a day in August to 430,000 barrels a day in September, and the country has the capacity to sell even more, according to estimates by ESAI Energy.Nearly a third of Chinese diesel exports went to the Netherlands in recent months, taking some pressure off the European market. And oil refineries being built in Kuwait and China could come online as early as next year, further increasing supply.Demand for diesel and its price could also fall if much of the world slides into a recession next year, as some economists and policymakers are expecting.“A deep recession would certainly cut into diesel demand,” said Mr. Joswick of S&P Global Platts. “We don’t forecast a recession, but that is certainly a possibility.” More

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    How Finnair’s Huge Bet on Faster Flights to Asia Suddenly Came Undone

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    Nestled near Europe’s rooftop, Finland spent decades leveraging its location to become a popular gateway for Asian travelers. Its flagship airline, Finnair, offered flights from Tokyo, Seoul and Shanghai to Helsinki that, by crossing over Russia, were hours shorter than flights to any other European capital. Airport chiefs invested nearly $1 billion in a new terminal with streamlined transfers. There were signs in Japanese, Korean and Chinese, and hot water dispensers for the instant noodle packets favored by Chinese tourists.Then Russia sent troops across Ukraine’s border on Feb. 24, and overnight the carefully constructed game table was overturned.Russia closed its airspace to most European carriers in response to bans on Russian planes. What was once a nine-hour flight to Helsinki when routed over Russia’s 3,000-mile expanse would now take 13 hours and as much as 40 percent more fuel because it had to swoop around borders.Finnair’s competitive advantage as the fastest connection from Asia and a travel hub for Europe vanished in a wisp.The sudden disintegration of Finnair’s business model is part of the wide-ranging economic upheaval that the war in Ukraine is causing for businesses around the globe.Companies that invested or traded heavily with Russia were immediately affected, and more than 1,000 have withdrawn operations from Russia, according to a database compiled by the Yale School of Management.Juho Kuva for The New York TimesNearly $1 billion was spent to build a terminal in the Helsinki, Finland, airport to streamline transfers for passengers from outside Europe.When Russia closed its airspace, Finnair could no longer pitch itself as the fastest connection from Asia.“The Asia strategy had been 20 years in the making,” Topi Manner, Finnair’s chief executive, said.High energy prices have blitzed a wider range. The Hungarian Opera House’s Erkel Theater will temporarily close because it cannot pay its energy bill. Hakle, one of the largest manufacturers of toilet paper in Germany, declared insolvency because of soaring energy costs, while ceramic, glass, chemical, fertilizer and other factories across Europe have been forced to scale back or shut down.The snack food industry, unable to get sufficient supplies of sunflower oil from Ukraine, has had to scramble for substitutes like palm oil, forcing manufacturers to rejigger supply chains, production and labeling, since they could no longer boast that their products were “nonallergenic” and “non-G.M.O.”The closed airspace caused Japan Airlines and ANA to cancel flights to Europe. And this month Virgin Atlantic said it was ceasing all traffic to and from Hong Kong because of Russia’s ban. For Finnair, though, the fallout has been extreme.“The Asia strategy had been 20 years in the making,” Topi Manner, Finnair’s chief executive, said from the company’s headquarters, next to the Helsinki terminal in Vantaa. Services were tailored to meet the tastes of its Asian customers. Half of its in-flight movies are dubbed or subtitled in Japanese, Korean and Chinese. Meal offerings include crispy chicken in Chinese garlic and oyster sauce and Korean-style stir-fried pork in spicy sauce with bok choy and steamed rice. The airline’s ground staff in Helsinki are fluent in the region’s native languages.Market Square in central Helsinki.Before the coronavirus pandemic, half of the airline’s revenue was generated by travelers from Asia. Passengers that used Helsinki as a hub to transfer to other destinations accounted for 60 percent of the revenue.But with “no end in sight” to the war, Mr. Manner said, the airline’s management quickly concluded “that Russian airspace will remain closed to European carriers for a long time and we need to adapt to that reality.”This summer, Finnair operated 76 flights between Helsinki and Asia, compared to 198 in the summer of 2019. Overall, the airline is going at 68 percent of its capacity. Operating losses in the first half of this year amounted to 217 million euros.“We really have to regroup,” Mr. Manner said.In some respects, Finnair has been regrouping ever since the pandemic hit in early 2020 and virtually halted world travel. China’s “zero Covid” policy, which continued to lock down Shanghai and other major cities this year, sharply reduced East-West traffic, hampering Finnair’s recovery compared with airlines that have large domestic markets or operate in other regions. Finnair, half of which is owned by the government, fought to survive by furloughing employees, cutting costs and raising 3 billion euros in new financing.Juho Kuva for The New York TimesThe new terminal was expected to draw 30 million passengers by 2030, a projection that has been thrown out by the uncertainty now facing Finnair’s Asia strategy.The project aimed to improve services for the connecting passengers from Asia who would never leave the airport.A 2017 publicity campaign by the state-owned company that runs Finland’s terminals primarily targeted customers from China.“We created a path through the pandemic,” Mr. Manner said, but it always was intended to lead “back to the Asia strategy.”No longer. Last month, the company officially announced an about-face.“We started to pivot our network toward the West,” Mr. Manner said, expanding its partnership with American Airlines, British Airways and other carriers. In the spring, it launched four new weekly flights from Dallas-Fort Worth and three from Seattle. New routes from Helsinki to Stockholm, Copenhagen, Mumbai, India, and Doha, Qatar, have also been unveiled. As jet fuel prices skyrocket, the airline is also renting out planes and crews to other airlines, and it plans to shrink the size of its fleet and staff, and to slash costs.Finnair, which has lost 1.3 billion euros over the past three years, said it hoped to return to profitability in 2024.“It will take some time before the company gets to see if this is the right decision,” said Jaakko Tyrväinen, an airline analyst with SEB, a Nordic financial services group.For the new Helsinki terminal — which opened in June — a strategy shift was also needed.Central Helsinki.An estimated 30 million passengers were expected by 2030, up from the nearly 22 million that the existing terminals handled in 2019. Those projections are now irrelevant, and airport officials say the situation is too uncertain to make any meaningful update to that figure. Next year, 15 million travelers are expected to pass through.Perhaps more pointedly, the project, begun nearly a decade ago, was designed to improve services for transfer passengers from Asia — a majority of whom would never leave the airport.A multimedia publicity campaign that Finavia, the state-owned company that runs the country’s airline terminals, rolled out in 2017 for Helsinki airport — code letters HEL — primarily targeted customers from China. With a nod to the 2004 film “The Terminal,” the campaign, “Life in HEL,” featured Ryan Jhu, a popular Chinese actor and social media influencer, living for a month in the terminal.Now, Helsinki has an expansive new terminal dedicated to non-European transfer traffic but very few travelers.Juho Kuva for The New York TimesThe project to build the new terminal was begun nearly a decade ago.The spacious aukio, or meeting plaza, includes a wraparound video installation depicting Finnish landscapes.The upshot to the changes forced upon Finnair is vastly fewer connecting passengers in a terminal designed for them.On a recent weekday afternoon, the long, snaking lanes created to handle crowds at passport control were deserted. The spacious aukio, or meeting plaza, where passengers could sit and watch a wraparound video installation depicting Finnish landscapes, hosted a lone woman with a backpack. Moomin Shop, which sells merchandise related to the Finnish cartoon characters — particularly popular with Japanese visitors — had no customers. The Moomin cafe, farther down the main hallway, was mostly deserted.“Mornings are normally slow,” said Liccely Del Carpio, who works at the Moomin store, adding that business often picks up later in the afternoon. “All in all, it’s been OK.”The European terminal was bustling, but most of the shops and cafes that stretched along this terminal’s long hall were empty. Several other spaces were unleased or shuttered.Sami Kiiskinen, the vice president of airport development at Finavia, said that the hundreds of millions of euros in loans used to construct the airport would ultimately be repaid, but that “the schedule of paybacks must be reconsidered.” Negotiations are happening, he said.Yet, despite the likelihood that the war in Ukraine will drag on and Russian airspace will remain closed to European traffic, Mr. Kiiskinen is optimistic.“We still believe in our strategy,” he said. Major infrastructure developments like airports are designed on a 50-year horizon, he said. “Putin is not going to be there forever.”Juho Kuva for The New York TimesOn a recent weekday afternoon, a cafe branded for Moomin merchandise, cartoon characters popular with Japanese visitors, was mostly deserted.Sami Kiiskinen of Finavia, which runs the terminal, acknowledged the problems facing the project’s finances but remained optimistic over the long run: “Putin is not going to be there forever.”The new terminal at the Helsinki airport is just one of numerous commercial ventures across Europe that have been affected by Russia’s invasion of Ukraine. More

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    China’s GDP Data Delay Points to Murky Economic Picture

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    The delay in announcing routine growth data this week was only the latest example of how hard it has become to peer into China’s economy, the world’s second largest.For the past quarter-century, China was run by a well-oiled government bureaucracy that predictably focused on the economy as its top priority.That may no longer be the case.Xi Jinping, China’s top leader, made clear on Sunday at the opening of the Communist Party’s national congress, a twice-a-decade gathering of the country’s ruling elite, that politics and national security were paramount. That point was reinforced the next day when Beijing made the unusual move of delaying what should have been a routine, closely stage-managed release of data on how the economy fared in the past three months.“It does show the primacy of politics in influencing the very competent, institutional technocracy that China has,” said Victor Shih, a specialist in Chinese elite politics and finance at the University of California, San Diego.“The very likely reason the numbers were delayed was the State Council leaders were afraid the numbers would detract from the triumphant tone of the party congress,” he added. The State Council is China’s cabinet.It is extremely rare for any large economy to delay the release of such an important economic report. The data included not just China’s economic growth from July through September but also the country’s factory production, retail sales, fixed-asset investment and property prices for September.Mr. Xi, who is expected to claim a third term in power, has sought to project confidence in China’s outlook. On Monday, a Chinese economic planning official reiterated the Communist Party’s talking points about how well China’s economy was faring, saying it improved in the last quarter.Xi Jinping, China’s leader, speaking during the opening ceremony of the 20th National Congress of the Communist Party of China in Beijing.Kevin Frayer/Getty ImagesBut that optimistic message was quickly undercut by news of the delayed release of gross domestic product data, and how the delay was handled. Reporters who called government employees on Friday and Monday about the release were told they had no information.Contacted again late Monday afternoon, the workers said only that the release had been postponed indefinitely. The National Bureau of Statistics still has not explained the delay or announced a rescheduled date. On Friday, the government also failed to release data on exports and imports for September, and has not said when it would do so.China’s refusal to provide statistics, combined with the haphazard way the postponements were communicated, suggested either that part of the bureaucracy was in disarray or that China’s economy was in worse shape than most people had realized. It also raised questions about the reliability of the data.“It’s a horrible blunder,” said Taisu Zhang, a Yale University law professor who specializes in comparative legal and economic history. “I don’t know if they are massaging the numbers — even if they need to massage the figures, the better thing to do would be to massage them within the usual time frame.”Beijing set a target in March that growth would be “about 5.5 percent” this year. Yet Western economists have estimated that China’s economy grew only a little more than 3 percent in the third quarter.That still would have been better than growth of 0.4 percent logged in the second quarter, when Shanghai was locked down for two months to stamp out a Covid-19 outbreak.Mr. Xi has put a premium on social stability and national security, often with actions that have had a side effect of slowing economic growth and employment. Regulators have clamped down on the tech sector, contributing to widespread layoffs among young employees. Dozens of the country’s private property developers have defaulted on debts this year after Beijing discouraged real estate speculation. Tycoons have been fleeing the country. Municipal lockdowns to stop outbreaks of Covid-19 have taken a heavy toll.A commercial and office complex in Beijing. China’s refusal to provide data on its economy suggests that it could be in worse shape than most people had realized.Gilles Sabrié for The New York TimesQuestions have long been raised about whether China’s economic growth statistics may be inflated somewhat or smoothed from one year to the next. But until recently China had also released more granular data that made it possible to draw conclusions about the economy’s overall health.One such measure is the rising value of new office complexes, rail lines and other investment projects. But last year, China stopped releasing data on inflation in construction costs.That has made it hard to calculate the true value of the new investments, said Diana Choyleva, chief economist at Enodo Economics, a London consulting firm. So while the total money invested is still available, it is no longer clear what that money is buying.Underlying data had been available for China’s international trade, its main engine of growth. But growing inconsistencies started to become apparent over the summer.China’s General Administration of Customs reported sharp increases through August in exports to the United States and Europe. But the number of containers leaving Chinese ports for these destinations was flat.Average prices charged by factories in China to wholesalers have been little changed. Few economists think that China is earning more money from exports through inflation. The plateau in containers even as export statistics are rising is consistent with previous periods of economic weakness in China, as exporters exaggerate the value of their shipments to customs officials as part of complex strategies to move money out of China.There are other signs that actual exports of goods are now in trouble. Taiwan has very similar trade patterns to mainland China, and on Oct. 7, Taiwan reported a sharp, unexpected drop in its imports and exports during September.The cost of shipping each container from China to the United States or Europe has also fallen steeply over the past year. It dropped much further in September. The cost of loading a container onto a ship in eastern China for delivery to Los Angeles has plunged by more than half this year, according to Container xChange, an online container logistics platform. This suggests few factories are bidding for space aboard ships.Cargo ships loading containers at the port on the Beijing-Hangzhou Canal. The cost of shipping from China to the United States or Europe has fallen steeply over the past year. Alex Plavevski/EPA, via Shutterstock“The retailers and the bigger buyers or shippers are more cautious about the outlook on demand and are ordering less,” said Christian Roeloffs, the chief executive and co-founder of Container xChange.Another problem is that even when China releases data, it sometimes provides less explanation now of how the data is calculated. Derek Scissors, a senior fellow specializing in China and India at the American Enterprise Institute in Washington, said he used to be able to get answers from Chinese officials on how certain investment statistics were calculated. But in the past couple of years, they are no longer willing to discuss their data.Monday’s postponement of the release of economic data had little discernible effect on Chinese financial markets on Tuesday. Share prices rose sharply in Hong Kong as a change in British tax policy preceded a global rally in stock markets. The Shanghai and Shenzhen stock markets, more insulated from international events and also heavily managed by the Chinese authorities, were little changed.But delays can have a corrosive effect on China’s image in financial markets.“If delays start to become a regular occurrence,” said Julian Evans-Pritchard, the senior China economist at Capital Economics, “then that could reduce confidence in the official economic data and the professionalism of China’s bureaucracy.” More