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    Yellen’s China Visit Aims to Ease Tensions Amid Deep Divisions

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    Mutual skepticism between the United States and China over a wide range of economic and security issues has festered in recent years.The last time a U.S. Treasury secretary visited China, Washington and Beijing were locked in a trade war, the Trump administration was preparing to label China a currency manipulator, and fraying relations between the two countries were roiling global markets.Four years later, as Treasury Secretary Janet L. Yellen prepares to arrive in Beijing, many of the economic policy concerns that have been festering between the United States and China remain — or have even intensified — despite the Biden administration’s less antagonistic tone.The tariffs that President Donald J. Trump imposed on Chinese goods are still in effect. President Biden has been working to restrict China’s access to critical technology such as semiconductors. And new restrictions curbing American investment in China are looming.Treasury Department officials have downplayed expectations for major breakthroughs on Ms. Yellen’s four-day trip, which begins when she arrives in Beijing on Thursday. They suggest instead that her meetings with senior Chinese officials are intended to improve communication between the world’s two largest economies. But tensions between United States and China remain high, and conversations between Ms. Yellen and her counterparts are likely to be difficult. She met in Washington with Xie Feng, China’s ambassador, on Monday, and the two officials had a “frank and productive discussion,” according to the Treasury.Here are some of the most contentious issues that have sown divisions between the United States and China.Technology and trade controlsChinese officials are still smarting at the Biden administration’s 2022 decision to place significant limitations on the kinds of advanced semiconductors and chip-making machinery that can be sent to China. Those limits have hampered China’s efforts to develop artificial intelligence and other kinds of advanced computing that are expected to help power each country’s economy and military going forward.The government of the Netherlands, which is home to semiconductor machinery maker ASML, on Friday announced new restrictions on machinery exports to China. On Monday, China placed restrictions on exports of germanium and gallium, two metals used to make chips.The Biden administration is mulling further controls on advanced chips and on American investment into cutting-edge Chinese technology.Semiconductors have always been one of the biggest and most valuable categories of U.S. exports to China, and while the Chinese government is investing heavily in its domestic capacity, it remains many years behind the United States.The Biden administration’s subsidy program to strengthen the U.S. semiconductor industry has also rankled Chinese officials, especially since it includes restrictions on investing in China. Companies that accept U.S. government money to build new chip facilities in the United States are forbidden to make new, high-tech investments in China. And while Chinese officials — and some American manufacturers — were hopeful that the Biden administration would lift tariffs on hundreds of billions of dollars of Chinese imports, that does not seem to be in the offing. While Ms. Yellen has questioned the efficacy of tariffs, other top officials within the administration see the levies as helpful for encouraging supply chains to move out of China.The administration is employing both carrots and sticks to carry out a policy of “de-risking” or “friend-shoring” — that is, enticing supply chains for crucial products like electric vehicle batteries, semiconductors and solar panels out of China.President Biden during a visit to a Taiwan Semiconductor Manufacturing Company plant under construction in Phoenix. The Biden administration’s efforts to assist the U.S. semiconductor industry has rankled Chinese officials.T.J. Kirkpatrick for The New York TimesDeteriorating business environmentsCompanies doing business in China are increasingly worried about attracting negative attention from the government. The most recent target was Micron Technology, a U.S. memory chip maker that failed a Chinese security review in May. The move could cut Micron off from selling to Chinese companies that operate key infrastructure, putting roughly an eighth of the company’s global revenue at risk. In recent months, consulting and advisory firms in China with foreign ties have faced a crackdown.American officials are growing more concerned with the Chinese government’s use of economic coercion against countries like Lithuania and Australia, and they are working with European officials and other governments to coordinate their responses.Businesses are also alarmed by China’s ever-tightening national security laws, which include a stringent counterespionage law that took effect on Saturday. Foreign businesses in China are reassessing their activities and the market information they gather because the law is vague about what is prohibited. “We think this is very ill advised, and we’ve made that point to several members of the government here,” said R. Nicholas Burns, the U.S. ambassador to China, in an interview in Beijing.In the United States, companies with ties to China, like the social media app TikTok, the shopping app Temu and the clothing retailer Shein, are facing increasing scrutiny over their labor practices, their use of American customer data and the ways they import products into the United States.CurrencyChina’s currency, the renminbi, has often been a source of concern for American officials, who have at times accused Beijing of artificially weakening its currency to make its products cheaper to sell abroad.The renminbi’s recent weakness may pose the most difficult issue for Ms. Yellen. The currency is down more than 7 percent against the dollar in the past 12 months and down nearly 13 percent against the euro. That decline makes China’s exports more competitive in the United States. China’s trade surplus in manufactured goods already represents a tenth of the entire economy’s output.The renminbi is not alone in falling against the dollar lately — the Japanese yen has tumbled for various reasons, including rising interest rates in the United States as the Federal Reserve tries to tamp down inflation.Chinese economists have blamed that factor for the renminbi’s weakness as well. Zhan Yubo, a senior economist at the Shanghai Academy of Social Sciences, said the decline in the renminbi was the direct result of the Fed’s recent increases in interest rates.At the same time, China has been cutting interest rates to help its flagging economy. The interest rate that banks charge one another for overnight loans — a benchmark that tends to influence all other interest rates — is now a little over 5 percent in New York and barely 1 percent in Shanghai. That reverses a longstanding pattern in which interest rates were usually higher in China.The Fed’s rate increases have made it more attractive for companies and households to send money out of China and invest it in the United States, in defiance of Beijing’s stringent limits on overseas money movements.China pledged as part of the Phase 1 trade agreement with the United States three years ago not to seek an advantage in trade by pushing down the value of its currency. But the Biden administration’s options may be limited if China lets its currency weaken anyway.Global debtChina has provided more than $500 billion to developing countries through its lending program, making it one of the world’s largest creditors. Many of those borrowers, including several African nations, have struggled economically since the pandemic and face the possibility of defaulting on their debt payments.The United States, along with other Western nations, has been pressing China to allow some of those countries to restructure their debt and reduce the amount that they owe. But for more than two years, China has insisted that other creditors and multilateral lenders absorb financial losses as part of any restructuring, bogging down the loan relief process and threatening to push millions of people in developing countries deeper into poverty.In June, international creditors including China agreed to a debt relief plan with Zambia that would provide a grace period on its interest payments and extend the dates when its loans are due. The arrangement did not require that the World Bank or International Monetary Fund write off any debts, offering global policymakers like Ms. Yellen hope for similar debt restructuring in poorer countries.Human rights and national security issuesTensions over national security and human rights have created an atmosphere of mutual distrust and spilled over into economic relations. The flight of a Chinese surveillance balloon across the United States this year deeply unsettled the American public, and members of Congress have been pressing the administration to reveal more of what it knows about the balloon. Mr. Biden’s recent labeling of China’s leader, Xi Jinping, as a “dictator” also rankled Chinese officials and state-run media.American officials continue to be concerned about China’s human rights violations, including the suppression of the democracy movement in Hong Kong and the detention of mainly Muslim ethnic minorities in the Xinjiang region of northwestern China. A senior Treasury Department official, speaking on the condition of anonymity before Ms. Yellen’s trip, said the United States had no intention of shying away from its views on human rights during the meetings in China.Chinese officials continue to protest the various sanctions that the United States has issued against Chinese companies, organizations and individuals for national security threats and human rights violations — including sanctions against Li Shangfu, China’s defense minister. The Chinese government has cited those sanctions as a reason for its rejection of high-level military dialogues. More

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    China’s Economic Rebound Hits a Wall, With ‘No Quick Fix’ to Revive It

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    Policymakers and investors expected China’s economy to rev up again after Beijing abruptly dropped Covid precautions, but recent data shows alarming signs of a slowdown.When China suddenly dismantled its lockdowns and other Covid precautions last December, officials in Beijing and many investors expected the economy to spring back to life.It has not worked out that way.Investment in China has stagnated this spring after a flurry of activity in late winter. Exports are shrinking. Fewer and fewer new housing projects are being started. Prices are falling. More than one in five young people is unemployed.China has tried many fixes over the last few years when its economy had flagged, like heavy borrowing to pay for roads and rail lines. And it spent huge sums on testing and quarantines during the pandemic. Extra stimulus spending now with borrowed money would spur a burst of activity but pose a difficult choice for policymakers already worried about the accumulated debt.“Authorities risk being behind the curve in stimulating the economy, but there’s no quick fix,” said Louise Loo, an economist specializing in China in the Singapore office of Oxford Economics.China needs to right its economy after closing itself off to the world for almost three years to battle Covid, a decision that prompted many companies to begin shifting their supply chains elsewhere. Xi Jinping, China’s leader, met on Monday with the secretary of state of the United States, Antony J. Blinken, in an attempt by the two nations to lower diplomatic tensions and clear the way for high-level economic talks in the weeks ahead. Such discussions could slow the recent proliferation of sanctions and counter measures.China’s halting economic recovery has seen only a few categories of spending grow robustly, like travel and restaurant meals. And those have increased in comparison with extremely low levels in spring 2022, when a two-month lockdown in Shanghai disrupted economic activity across large areas of central China.Fewer and fewer new housing projects are being started in China.Qilai Shen for The New York TimesThe economy has been particularly weak in recent weeks.“From April to May to now, the economy has experienced significant unexpected changes, to the point where some people believe that the initial judgments may have been overly optimistic,” Yin Yanlin, a former deputy director of the Chinese Communist Party’s top economic policymaking commission, said in a speech at an academic conference on Saturday.Chinese government officials have been dropping hints that an economic stimulus plan may be imminent.“In response to the changes in the economic situation, more forceful measures must be taken to enhance the momentum of development, optimize the economic structure, and promote the continuous recovery of the economy,” the country’s State Council, or cabinet, said after a meeting on Friday led by Li Qiang, the country’s new premier.China’s economic weakness holds benefits and dangers for the global economy. Consumer and producer prices have fallen for the past four months in China, putting a brake on inflation in the West by pushing down the cost of imports from China.Travel is one of only a few categories of spending that are growing this year.Qilai Shen for The New York TimesBut weak demand in China may exacerbate a global slowdown. Europe already dipped into a mild recession early this year. Rapid interest rate increases in the United States have prompted some investors to bet on a recession late this year there as well.Beijing has already taken some steps to revitalize economic growth. Tax breaks are being introduced for small businesses. Interest rates on bank deposits have been reduced to encourage households to spend more of their money instead of saving it. The latest government measure is expected on Tuesday, when the state-controlled banking system is likely to reduce slightly its benchmark interest rates for corporate loans and home mortgages.But many economists, inside and outside China, worry about the effectiveness of the new measures. Consumers are hoarding cash and investors are wary of putting money into China’s companies. Private investment has actually declined so far this year compared with 2022. Housing remains in crisis, with developers borrowing more to pay existing debts and to complete existing projects, even as China already suffers from an oversupply of homes.Consumers have remained wary in part because the housing market, a source of wealth, is in a precarious state.Qilai Shen for The New York TimesChina’s housing market stands at the heart of its troubles. Construction has accounted for as much as a quarter of China’s economic output. But would-be homeowners have been put off as developers have defaulted on their debts and failed to finish apartments buyers had paid for in advance.Housing construction has fallen nearly 23 percent in the first five months of the year, compared with the same months last year. That suggests the real estate sector has further to fall in the coming months.Chen Leiqian, a 27-year-old marketer in Beijing, started looking for an apartment with her boyfriend in 2021 after five years of dating. But they then decided to stay put in a rental apartment when they married.“Housing prices across the country are falling, and the economy is very bad — there are just too many unstable elements,” Ms. Chen said.Two-thirds of Ms. Chen’s co-workers in her department at an online tutoring company were laid off after China cracked down on the for-profit, private education industry in 2021. She also had a friend who could no longer pay a mortgage after losing a job in the tech sector, and lost the home in foreclosure.The caution of middle-class families like Ms. Chen’s may pose the biggest dilemma for policymakers as they search for an effective formula for another round of economic stimulus.“You can throw money on people but if they are not confident, they will not spend,” said Alicia Garcia-Herrero, the chief economist for Asia-Pacific at Natixis, a French bank.As households struggle to pay their debts and refrain from big-ticket purchases, spending on restaurant meals is growing.Qilai Shen for The New York TimesHouseholds are not alone in struggling to pay their debts — so are local governments, which has limited their ability to step up infrastructure spending.The government is wary of starting another credit binge of the sort seen in 2009, during the global financial collapse, and in 2016, after China’s stock market plunged the preceding year.Although the sagging real estate sector has hurt demand inside China, exports have been flat this year and actually declined in May. The weakness of China’s normally powerful exports is particularly noteworthy because Beijing has allowed its currency, the renminbi, to lose about 7 percent of its value against the dollar since mid-January. A weaker renminbi makes Chinese exports more competitive in foreign markets.More exports help create jobs and could compensate for the otherwise slack domestic economy. But it’s not clear how much China will be able to count on exports to help as some of China’s biggest trading partners have moved some purchases to other countries in Asia.In the United States, the Trump administration imposed tariffs on a wide range of Chinese industrial goods, making it more expensive for American companies to buy from China. Then President Biden persuaded Congress last year to authorize broad subsidies for American production in categories like electric cars and solar panels. China’s exports to the United States were down 18.2 percent last month compared with May last year.The United States has enacted subsidies for American production of electric cars, trying to counter China’s exports. Qilai Shen for The New York TimesNow as China considers how to reinforce the economy, it must contend with a loss of confidence among consumers.Charles Wang runs a small travel company with eight employees in Zhangjiakou, in northern China. His business has almost fully rebounded after the pandemic but he has no plans to invest in expansion.“Our economy is actually going down, and everyone doesn’t have so much time and willingness to spend,” Mr. Wang said. “It’s because people just don’t want to spend money — everyone is afraid again, even the rich.”Li You More

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    As U.S. and Chinese Officials Meet, Businesses Temper Their Hopes

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    Chief executives in the U.S. have long pushed for closer ties between the two countries. Now they just hope a rocky situation won’t get worse.In a meeting in Beijing on Friday, China’s leader, Xi Jinping, traded warm smiles with Bill Gates and praised Mr. Gates as “the first American friend” he had met this year.The encounters in Beijing between Secretary of State Antony J. Blinken and his Chinese counterparts, starting on Sunday, are likely to feel noticeably chillier.The high-level meetings are aimed at getting the U.S.-China relationship back on track, and many American business leaders have been pushing the Biden administration to try to restore some stability in one of the world’s most important bilateral relationships.But for business leaders, and for officials on both sides, expectations for the meetings appear modest, with two main goals for the talks. One is to restore communication between the governments, which broke down this year after a Chinese surveillance balloon flew into U.S. airspace and Mr. Blinken canceled a visit scheduled for February. The other is to halt any further decline in the countries’ relationship.There is already evidence of the impact of the fraying ties. Foreign direct investment in China has fallen to an 18-year low. A 2023 survey by the American Chamber of Commerce in China showed that companies still see the Chinese market as a priority, but that their willingness to invest there is declining.“The economic relationship has become so dismal that any sign of progress is welcome, though expectations are low for any sort of a breakthrough,” said Jake Colvin, the president of the National Foreign Trade Council, which represents multinational businesses.“The hope is that high-level dialogues like this can start to inject some certainty for business into an increasingly fraught and unpredictable trade relationship,” he said.Still, as one of the world’s largest consumer markets and home to many factories that supply global businesses, China exerts a powerful pull. This year, as it eased its travel restrictions after three years of pandemic lockdowns, a parade of chief executives made trips to China, including Mary Barra of General Motors, Jamie Dimon of JPMorgan Chase and Stephen Schwarzman of Blackstone.On a visit to China this month, Elon Musk, the chief executive of Tesla and owner of Twitter, described the American and Chinese economies as “conjoined twins” and said he opposed to efforts to split them. Apple’s chief executive, Tim Cook, traveled to China in March and lauded the company’s “symbiotic” relationship with the nation.Sam Altman, the leader of OpenAI, which makes the ChatGPT chatbot, appeared virtually at a conference in Beijing this month, saying American and Chinese researchers should continue to work together to counter the risks of artificial intelligence.The tech industry, which has forged lucrative relationships with Chinese manufacturers and consumers, has warily watched Washington’s aggressive approach to China. While industry groups acknowledge the importance of moves to safeguard national security, they have urged the Biden administration to carefully calibrate its actions.Wendy Cutler, a former diplomat and trade negotiator who is now vice president at the Asia Society Policy Institute, said the United States and China might announce some small steps forward at the end of the meetings. The governments might agree, she said, to increase the paltry number of flights between their countries or the visas they are issuing to foreign visitors.But both sides will have plenty of grievances to air, Ms. Cutler said. Chinese officials are likely to complain about U.S. tariffs on goods made in China and restrictions on U.S. firms selling coveted chip technology to China. American officials may highlight China’s deteriorating business environment and its recent move to bar companies that handle critical information from buying microchips made by the U.S. company Micron.“I’m not expecting any breakthroughs, particularly on the economic front,” Ms. Cutler said, adding, “Neither side will want to be smiling.”American officials hope Mr. Blinken’s visit paves the way for more cooperation, including on issues like climate change and the restructuring the debt loads of developing countries. Other officials, including Treasury Secretary Janet L. Yellen, are considering visits to China this year, and Mr. Xi and President Biden may meet directly at either the Group of 20 meetings in Delhi in September or an Asia-Pacific economic meeting in San Francisco in November.In recent months, Biden officials have tried to mend the rift between the countries by arguing for a more “constructive” relationship. They have echoed European officials in saying their desire is for “de-risking and diversifying” their economic relationships with China, not “decoupling.”But trust between the governments has eroded, and Chinese officials appear to be skeptical of how much the Biden administration can do to restore ties.The extensive U.S. restrictions on the semiconductor technology that can be shared with China, which were issued in October, continue to rankle officials in Beijing. The United States has added dozens of Chinese companies to sanctions lists for aiding the Chinese military and surveillance state, or circumventing U.S. restrictions against trading with Iran and Russia.Biden administration officials are weighing further restrictions on China, including a long-delayed order covering certain U.S. venture capital investments. And the White House faces intense pressure from Congress to do more to crack down on national security threats emanating from Beijing.Not all companies are pushing for improved ties. Some with less exposure to China have tried to reap political benefits in Washington from the growing competition with the country. Meta, the parent company of Facebook and Instagram, has repeatedly raised concerns about TikTok, the Chinese-owned video app that has proved a formidable competitor to Instagram.“It’s really a dispute over the degree,” said James Lewis, a senior vice president at the Center for Strategic and International Studies. “How accommodating are you? How confrontational are you?”How aggressively companies are resisting the tensions with China, Mr. Lewis said, is linked to their exposure to the country’s market.“I think a lot of this has to do with your presence in China,” he said. More

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    TikTok, Shein and Other Companies Distance Themselves From China

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    Companies are moving headquarters and factories outside the country and cleaving off their Chinese businesses. It’s not clear the strategy will work.As it expanded internationally, Shein, the rapidly growing fast fashion app, progressively cut ties to its home country, China. It moved its headquarters to Singapore and de-registered its original company in Nanjing. It set up operations in Ireland and Indiana, and hired Washington lobbyists to highlight its U.S. expansion plans as it prepares for a potential initial public offering this year.Yet the clothing retailer can’t shake the focus on its ties with China. Along with other brands like the viral social app TikTok and shopping app Temu, Shein has become a target of American lawmakers in both parties. Politicians are accusing the company of making its clothes with fabric made with forced labor and calling it a tool of the Chinese Communist Party — claims that Shein denies.“No one should be fooled by Shein’s efforts to cover its tracks,” Senator Marco Rubio, Republican of Florida, wrote in a letter to other lawmakers this month.As relations between the United States and China turn increasingly rocky, some of China’s most entrepreneurial brands have taken steps to distance themselves from their home country. They have set up new factories and headquarters outside China to serve the United States and other foreign markets, emphasized their foreign ties and scrubbed any mention of “China” from their corporate websites.TikTok has set up headquarters in Los Angeles and Singapore, and invested in new U.S. operations that it says will wall off its American user data from its parent company, ByteDance. Temu has established a headquarters in Boston, and its parent company, PDD Holdings, has moved its headquarters from China to Ireland.Chinese solar companies have set up factories outside China to avoid U.S. tariffs on solar panels from China and limit their exposure to Xinjiang, a region that the United States now bars imports from because of its use of forced labor.JinkoSolar, a behemoth that produces one in 10 solar modules installed globally, has set up a supply chain entirely outside China to make goods for the United States.Other companies, including those that are foreign-owned, are building walls between their Chinese operations and their global businesses, judging that this is the best way to avoid running afoul of new restrictions or risks to their reputation.Sequoia Capital, the venture capital firm, said last week that it would split its global business into three independent partnerships, spinning off unique entities for China and India.Shein said in a statement that it was “a multinational company with diversified operations around the world and customers in 150 markets, and we make all business decisions with that in mind.” The company said it had zero tolerance for forced labor, did not source cotton from Xinjiang and fully complied with all U.S. tax and trade laws.A spokesperson for TikTok said that the Chinese Communist Party had neither direct nor indirect control of ByteDance or TikTok, and that ByteDance was a private, global company with offices around the world.“Roughly 60 percent of ByteDance is owned by global institutional investors such as BlackRock and General Atlantic, and its C.E.O. resides in Singapore,” said Brooke Oberwetter, a spokesperson.Temu did not respond to requests for comment.Analysts said companies were being driven out of China by a variety of motivations, including better access to foreign customers and an escape from the risk of a crackdown by the Chinese authorities.Some companies have more practical concerns, like reducing their costs for labor and shipping, lowering their tax bills or shedding the shoddy reputation that American buyers continue to associate with goods made in China, said Shay Luo, a principal at the consulting firm Kearney who studies supply chains.But a wave of tougher restrictions in the United States on doing business with China appears to be having an effect, too.Research by Altana, a supply chain technology company, shows that since 2016, new regulations, customs enforcement actions and trade policies that hurt Chinese exports to the United States were followed by “adaptive behavior,” like setting up new subsidiaries outside China, said Evan Smith, the company’s chief executive.For Chinese companies, going global is not a new phenomenon. The Chinese government initiated a “go out” policy at the turn of the century to encourage state-owned enterprises to invest abroad to gain overseas markets, natural resources and technology.Private companies like the electronics firm Lenovo, the appliance maker Haier and the e-commerce giant Alibaba soon followed, seeking investment targets and new customers.As tensions between the United States and China have risen in recent years, investment flows between the countries have slowed. U.S. tariffs on Chinese goods put in place by President Donald J. Trump and maintained by President Biden encouraged companies to move manufacturing from China to countries like Vietnam, Cambodia and Mexico. The pandemic, which halted factories in China and raised costs for moving goods across the ocean, accelerated the trend.International companies are now increasingly adopting a “China plus one” model of securing an additional source of goods in another country in case of supply interruptions in China. Chinese companies, too, are following this practice, Ms. Luo said.In the 12 months that ended in April, the share of imports to the United States from China reached its lowest level since 2006.“It is definitely a rational strategy for these companies to offshore, to move manufacturing or their headquarters to a third country,” said Roselyn Hsueh, an associate professor of political science at Temple University.In addition to tariffs and the ban on products from the Xinjiang region, the United States has imposed new restrictions on trade in technology and tougher security reviews for Chinese investments.The Chinese government, too, is clamping down on the transfer of data and currency outside the country, and it has squashed some Chinese companies’ efforts to list their stocks on American exchanges because of such concerns.Beijing has detained and harassed top tech executives, and foreign consulting firms. And its draconian lockdowns during the pandemic made clear to businesses that they operate in China at the mercy of the government.“Companies like Shein and TikTok move overseas both to reduce their U.S. regulatory and reputational risk, but also to reduce the likelihood that their founders and staff get intimidated or arrested by Chinese officials,” said Isaac Stone Fish, the chief executive of Strategy Risks, a consultant on corporate exposure to China.But companies like Shein and Temu still source nearly all of their products from China, and it’s not clear that the changes the Chinese companies are making to their businesses have done much to lower the heat.The opposition to these companies in Washington is being fueled by an incendiary combination of legitimate concerns over national security and forced labor, and the political appeal of appearing tough on China. It also appears to be driven by the opposition of certain competitors to these services, which are now some of the most downloaded apps in the United States.Shou Chew, the chief executive of TikTok, was questioned at a House hearing in March over whether the social app would make U.S. user data available to the Chinese government.Haiyun Jiang/The New York TimesIn March, a group called Shut Down Shein sprang up to pressure Congress to crack down on the retailer. The group, which has hired five lobbyists with the firm Actum, declined to disclose who is funding its campaign.In a five-hour hearing in March, lawmakers grilled TikTok’s chief executive over whether it would make U.S. user data available to the Chinese government, or censor the information broadcast to young Americans. Legislation is being considered that could permanently ban the app.Some lawmakers are arguing that JinkoSolar’s U.S.-made panels should not be eligible for government tax credits, and, for reasons that have not yet been disclosed, the company’s Florida factory was raided by customs officials last month.State governments, which have often been more welcoming to Chinese investment, are also growing more hostile. In January, Glenn Youngkin, the Republican governor of Virginia, blocked a deal for Ford Motor to set up a factory using technology from a Chinese battery maker, Contemporary Amperex Technology, calling it a “Trojan-horse relationship.”A House committee set up to examine economic and security competition with China is investigating the ties that Temu and Shein have with forced labor in China, and lawmakers are calling for Shein to be audited before its I.P.O.“The message of our investigation of Shein, Temu, Adidas and Nike is clear: Either ensure your supply chains are clean — no matter how difficult it is — or get out of countries like China implicated in forced labor,” Representative Mike Gallagher, the Republican chair of the committee, said in a statement.An investigation by Bloomberg in November found that some of Shein’s clothes were made with cotton grown in Xinjiang. In a statement, Shein said it had “built a four-step approach to ensure compliance” with the law, including a “code of conduct, independent audits, robust tracing technology and third-party testing.Jordyn Holman More

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    New World Bank President Ajay Banga Leads at a Pivotal Moment

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    The incoming president will be under pressure to juggle the global institution’s ambitions to combat climate change and fight poverty.Ajay Banga officially became the 14th president of the World Bank on Friday and urged staff to join him in developing a “new playbook” for a global institution whose relevance has come into question in recent years.The ascension of Mr. Banga to be the next leader of the bank comes at a pivotal moment in its 77-year history. The global pandemic reversed decades of progress in poverty reduction, Russia’s war in Ukraine continues to be a threat to economic stability and the World Bank is under new pressure to become a more ambitious player in the fight against climate change.“Making good on our ambition will require us to evolve to maximize resources and write a new playbook, to think creatively, take informed risks and forge new partnerships with civil society and multilateral institutions,” Mr. Banga wrote in a note to staff that was viewed by The New York Times.Mr. Banga was nominated by President Biden in February after the resignation of David Malpass, the outgoing World Bank president who had been selected by former President Donald J. Trump. The World Bank’s executive board approved Mr. Banga in May following an extensive listening tour that included visits to eight countries and dozens of meetings with government officials around the world.In his message to staff, Mr. Banga defined the bank’s mission as aspiring to “create a world free from poverty on a livable planet.”It is the second part of that mission by which Mr. Banga will be likely be judged.Mr. Malpass left the job a year early after failing to sufficiently demonstrate his commitment to combating global warming amid a renewed emphasis from the Biden administration broadening the bank’s focus on the environment.However, Mr. Banga, a former chief executive of Mastercard, does not bring extensive climate credentials to the job and will be under pressure to demonstrate progress on the bank’s environmental agenda. He has described the tasks of dealing with climate change and poverty as intertwined.“The World Bank’s challenge is clear: It must pursue both climate adaptation and mitigation; it must reach out to lower-income countries without turning its back on middle-income countries; it must think globally but recognize national and regional needs; it must embrace risk but do so prudently,” Mr. Banga wrote in a statement to World Bank’s executive board that accompanied his memo to staff.Activists protest during meetings of the International Monetary Fund and World Bank in April.Yuri Gripas for The New York TimesClimate activists plan to appear outside the World Bank on Friday and attempt to hand postcards to staff with demands that they want Mr. Banga to heed during his first 100 days on the job. They continue to be frustrated that the World Bank finances coal, oil and gas projects despite its pledges to prioritize clean energy projects.Mr. Banga is expected to use his expertise to amplify the resources of the World Bank and build new partnerships between the private and public sectors. The former finance executive added in his memo that accomplishing the World Bank’s many goals will require an annual global investment of trillions of dollars.Mr. Banga will also face a difficult diplomatic task as he seeks to satisfy the climate ambitions of the United States and Europe while facing skepticism from some developing countries. He will also confront the delicate task of urging China, a major World Bank shareholder and creditor, to allow poor countries that have borrowed huge sums from Beijing to restructure their debts.The World Bank president is traditionally chosen by the United States; the managing director of the International Monetary Fund is selected by the European Union.Mr. Banga met on Thursday with Treasury Secretary Janet L. Yellen. They discussed ways to refine how the bank operates and make it more agile and responsive, according to a summary of their conversation released by the Treasury Department. More

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    U.S. Solar Makers Criticize Biden’s Tax Credits as Too Lax on China

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    U.S.-based manufacturers of solar products say rules issued by the Biden administration on Friday will “cement China’s dominance” over the solar industryBiden administration rules released on Friday that will determine which companies and manufacturers can benefit from new solar industry tax credits are being criticized by U.S.-based makers of solar products, who say the guidelines do not go far enough to try to lure manufacturing back from China.The rules stem from President Biden’s sweeping clean energy bill, which offers a mix of tax credits and other incentives to try and spur the construction of more solar factories in the United States and reduce the country’s reliance on China for clean energy goods needed to mitigate climate change.The Treasury Department, in guidance issued on Friday, said it would offer a 10 percent additional tax credit for facilities assembling solar panels in the United States, even if they import the silicon wafers used to make those panels from foreign countries. Under the Biden administration’s new climate legislation, solar and wind farms can apply for a 30 percent tax credit on the costs of their facilities.Senior administration officials told reporters on Thursday that they were trying to take a balanced approach, one that leaned toward forcing supply chains to return to the United States. But China’s dominance of the global solar industry has created a tricky calculus for the Biden administration, which wants to promote U.S. manufacturing of solar products but also ensure a plentiful supply of low-cost solar panels to reduce carbon emissions.The officials said that the Biden administration would have the leeway to change the rules when American supply chains become stronger.“The domestic content bonus under the Inflation Reduction Act will boost American manufacturing, including in iron and steel, so America’s workers and companies continue to benefit from President Biden’s Investing in America agenda,” Treasury Secretary Janet L. Yellen said in a statement. “These tax credits are key to driving investment and ensuring all Americans share in the growth of the clean energy economy.”Critics said the new rules would not go far enough to give companies incentives to move the solar supply chain out of China.Mike Carr, the executive director of the Solar Energy Manufacturers for America Coalition, which includes solar companies with U.S. operations like Hemlock Semiconductor, Wacker Chemie, Qcells and First Solar, called the move “a missed opportunity to build a domestic solar manufacturing supply chain.”“The simple fact is today’s announcement will likely result in the scaling back of planned investments in the critical areas of solar wafer, ingot, and polysilicon production,” he said in a statement. “China is producing 97 percent of the world’s solar wafers — giving them substantial control over both polysilicon and cell production. We fear that this guidance will cement their dominance over these critical pieces of the solar supply chain.”A four-acre solar rooftop in Los Angeles. The Biden administration wants 100 percent of the nation’s electricity to come from carbon-free energy sources by 2035.Mario Tama/Getty ImagesThe Biden administration has set an ambitious goal of generating 100 percent of the nation’s electricity from carbon-free energy sources by 2035, a goal that may require more than doubling the annual pace of solar installations.The United States still relies heavily on Chinese manufacturers for low-cost solar modules, although many Chinese-owned factories now make these goods in Vietnam, Malaysia and Thailand.China also supplies many of the key components in solar panels, including more than 80 percent of the world’s polysilicon, which most solar panels use to absorb energy from sunlight. And a significant portion of Chinese polysilicon comes from the Xinjiang region, where the U.S. government has banned imports because of concerns over forced labor.Other companies in the solar supply chain, which rely on imported components, were more positive about the Treasury Department’s guidance.Abigail Ross Hopper, the chief executive of the Solar Energy Industries Association, said the guidance was an important step forward that would “spark a flood of investment in American-made clean energy equipment and components.”“The U.S. solar and storage industry strongly supports onshoring a domestic clean energy supply chain, and today’s guidance will supplement the manufacturing renaissance that began when the historic Inflation Reduction Act passed last summer,” she said.Congressional Republicans have already targeted the Biden administration’s climate legislation, saying that it fails to set tough guidelines against manufacturing in China and that it may funnel federal dollars to Chinese-owned companies that have set up in the United States.The Biden administration is also dispensing funding to build up the semiconductor and electric vehicle battery industries. Guidelines for that money include limits on access to so-called foreign entities of concern, like Chinese-owned companies. But the Inflation Reduction Act does not contain guardrails against federal dollars going to the U.S. operations of Chinese solar companies.In a congressional hearing on April 25, Representative Jason Smith, chairman of the House Ways and Means Committee, pointed to the Florida facilities of JinkoSolar, a Chinese-owned manufacturer, as being eligible for federal tax credits.“Work at the plant involves robots placing strings of solar cells — which are largely sourced from China — onto a solar panel base,” a fact sheet released by Mr. Smith said.Mr. Biden has also clashed with domestic solar manufacturers over a separate trade case that would see tariffs imposed on solar products imported from Chinese companies based in Southeast Asia.Mr. Biden’s decision to waive the tariffs for two years angered Republicans and some Democrats in Congress, who said U.S.-based manufacturers deserved more protection. In recent weeks, the House and Senate approved a measure to reverse the president’s decision, which Mr. Biden is expected to veto. More

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    Pressure Mounts on China to Offer Debt Relief to Poor Countries Facing Default

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    There was optimism at the spring meetings of the I.M.F. and World Bank that China will make concessions over restructuring its loans.WASHINGTON — China, under growing pressure from top international policymakers, appeared to indicate this week that it is ready to make concessions that would unlock a global effort to restructure hundreds of billions of dollars of debt owed by poor countries.China has lent more than $500 billion to developing countries through its lending program, making it one of the world’s largest creditors. Many of those countries, including several in Africa, have struggled economically in the wake of the pandemic and face the possibility of defaulting on their debt payments. Their problems have been compounded by rising interest rates and disruptions to supplies of food and energy as a result of Russia’s war in Ukraine.The United States, along with other Western nations, has been pressing China to allow some of those countries to restructure their debt and reduce the amount that they owe. But for more than two years, China has insisted that other creditors and multilateral lenders absorb financial losses as part of any restructuring, bogging down a critical loan relief process and threatening to push millions of people in developing countries deeper into poverty.A breakthrough would offer an economic lifeline to vulnerable nations at a time of sluggish growth and uncertain financial stability, and it would signal a renewed interest from China in economic diplomacy.Economists and development experts are watching carefully to determine if China is serious about easing the loan forgiveness logjam and if its talk will be followed by action. By some calculations, the world’s poor countries owe around $200 billion to wealthy nations, multilateral development banks and private creditors. Leaders of the world’s advanced economies have been grappling in recent months with how to avert financial crises in teetering markets such as Zambia, Sri Lanka and Ghana.Africa’s private and public external debt has increased more than fivefold over the last two decades to about $700 billion and Chinese lenders account for 12 percent of that total, according to Chatham House, the London policy institute. Researchers for the Debt Relief for Green and Inclusive Recovery Project estimated in a recent report that 61 emerging market and developing economies were facing debt distress, and that more than $800 billion in debt must be restructured.Leaders of the world’s advanced economies have been grappling in recent months with how to avert financial crises in teetering markets such as Sri Lanka.Dinuka Liyanawatte/Reuters“China is facing increasing pressure from every quarter, including from other emerging market economies, to play a more constructive role in the negotiations over debt restructuring,” said Eswar Prasad, a former head of the International Monetary Fund’s China division, who said China’s intransigence had left it “increasingly isolated.”There were indications this week that China was prepared to end that isolation as top economic officials from around the world convened at the spring meetings of the I.M.F. and World Bank. Participants expressed optimism that representatives from Beijing appeared to be ready to back off its insistence that multilateral lenders such as the World Bank, which provides low-interest loans and grants to poor countries, accept losses in the debt restructuring.“My sense from the current context is we’re moving on to new steps,” David Malpass, the departing World Bank president, said at a news conference on Thursday, pointing to “progress on equal burden sharing.”Kristalina Georgieva, the I.M.F.’s managing director, said she was “very encouraged” that a “common understanding” had been reached that could accelerate relief for countries such as Zambia, Ghana, Ethiopia and Sri Lanka.“I always say the proof of the pudding is in the eating,” Ms. Georgieva said.To restructure a country’s debt, creditors generally must agree to a combination of lowering the interest rate on the loan, extending the duration of the loan or writing off some of what is owed. China, which has faced an array of domestic economic challenges over the last three years, has been reluctant to take losses on debt and has pushed for other lenders, such as the World Bank, to incur losses.The urgency for a resolution was palpable among countries that are most in need of relief. Zambia defaulted in 2020 and has been trying to restructure $8.4 billion that it owes through a program established by the Group of 20 nations. It owes about $6 billion to Chinese lenders, and its total debt to foreign lenders is approaching $20 billion.On Friday, Ghana’s finance minister, Ken Ofori-Atta, lamented that 33 African nations were saddled with interest payments that approached or exceeded what their governments spent on health and education.Yuri Gripas for The New York Times“Zambia urgently needs debt relief,” Situmbeko Musokotwane, Zambia’s finance minister, told The New York Times. “Delay on debt restructuring puts our currency under pressure, excludes Zambia from capital markets and makes it difficult to attract much-needed foreign direct investment.”Ghana appealed to the Group of 20 nations this year for debt relief through a fledgling program known as the Common Framework after securing preliminary approval for a $3 billion loan from the I.M.F. That money is contingent on Ghana’s receiving assurances that it can restructure the approximately $30 billion that it owes to foreign lenders. Officials from Ghana have been meeting with their Chinese counterparts about restructuring the $2 billion that it owes China.On Friday, Ghana’s finance minister, Ken Ofori-Atta, lamented that 33 African nations were saddled with interest payments that approached or exceeded what their governments spent on health and education and expressed disappointment that advanced economies had been slow to act.“Honestly, it is disheartening to watch Africa struggle in this way, especially considering the potential loss of productivity over the next decade should African economies buckle under the weight of suffocating debts,” Mr. Ofori-Atta said at an Atlantic Council event on Friday.But it remains uncertain how far China is willing to go.Brad Setser, a senior fellow at the Council on Foreign Relations, said that it was not clear what financial terms Beijing would accept when restructuring debt but that it appeared to be taking a “positive step” that would remove “a financially unwarranted roadblock to any progress.”Treasury Secretary Janet Yellen at a farm in Zambia in January. She said this week that she would continue to press her Chinese counterparts to make the restructuring process work better.Fatima Hussein/Associated PressBut given the grinding pace of the talks, big investors in emerging markets are not counting on quick resolutions.“We are starting to see tokens of flexibility from China on their stance in sovereign debt restructuring, but complexities abound,” said Yacov Arnopolin, emerging markets portfolio manager at PIMCO. “Near term, we don’t expect a clear-cut solution on China’s willingness to take losses.”China’s reluctance has been another source of tension with the United States, which has expressed concern that Beijing’s onerous lending terms and refusal to renegotiate have amplified the financial problems that developing countries are facing. Treasury Secretary Janet L. Yellen said this week that she would continue to press her Chinese counterparts to improve the restructuring process but that she was encouraged that China had recently expressed a willingness to help Sri Lanka restructure its debt.People familiar with Chinese economic policymaking said domestic politics had made it hard for China to make difficult decisions last autumn and over the winter about accepting possible losses on its loans.In October, the Communist Party held its once-in-five-years national congress and chose a new team of senior party officials to work with Xi Jinping, the country’s top leader. Maneuvering then began to reshuffle the government’s senior ranks, which had been expected during the annual session of the National People’s Congress in early March, although some changes of financial policymakers were unexpectedly delayed.China is now ready to focus on addressing a wide range of economic issues, including international debt, the people said. However, Beijing still faces other challenges that may limit its willingness to bargain, including a commercial banking system that faces very heavy losses on loans to real estate developers and does not want to accept large losses on loans to developing countries at the same time.Chinese officials offered support for the debt relief initiatives in broad terms this week.Wang Wenbin, a spokesman for the Chinese Foreign Ministry, said on Friday that China had put forward a three-point proposal that included calling for the I.M.F. to more quickly share its debt sustainability assessments for countries that need relief, and for creditors to detail how they will carry out the restructurings on “comparable terms.”After a meeting in Washington between Yi Gang, China’s central bank governor, and Mr. Musokotwane of Zambia, the Chinese central bank released a brief statement.“They exchanged views on issues of common concern including bilateral financial cooperation,” it said.Keith Bradsher More

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    ‘The World’s Largest Construction Site’: The Race Is On to Rebuild Ukraine

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    Latvian roofing companies and South Korean trade specialists. Fuel cell manufacturers from Denmark and timber producers from Austria. Private equity titans from New York and concrete plant operators from Germany. Thousands of businesses around the globe are positioning themselves for a possible multibillion-dollar gold rush: the reconstruction of Ukraine once the war is over.Russia is stepping up its offensive heading into the second year of the war, but already the staggering rebuilding task is evident. Hundreds of thousands of homes, schools, hospitals and factories have been obliterated along with critical energy facilities and miles of roads, rail tracks and seaports.The profound human tragedy is unavoidably also a huge economic opportunity that Ukraine’s president, Volodymyr Zelensky, has likened to the Marshall Plan, the U.S. program that provided aid to Western Europe after World War II. Early cost estimates of rebuilding the physical infrastructure range from $138 billion to $750 billion.The prospect of that trove is inspiring altruistic impulses and entrepreneurial vision, savvy business strategizing and rank opportunism for what the Ukrainian chamber of commerce is trumpeting as “the world’s largest construction site!”Mr. Zelensky and his allies want to use the rebuilding to stitch Ukraine’s infrastructure seamlessly into the rest of Europe.Yet whether all the gold in the much-anticipated gold rush will materialize is far from certain. Ukraine, whose economy shrank 30 percent last year, desperately needs funds just to keep going and to make emergency repairs. Long-term reconstruction aid will depend not only on the outcome of the war, but on how much money the European Union, the United States and other allies put up.And though private investors are being courted, few are willing to risk committing money now, as the conflict is entrenched.Ukraine and several European nations are pushing hard to confiscate frozen Russian assets held abroad, but several skeptics, including officials in the Biden administration, have questioned the legality of such a move.Ukraine desperately needs funds just to keep going and to make emergency repairs.Maciek Nabrdalik for The New York TimesThe war, a profound human tragedy, is unavoidably also a big economic opportunity that Ukraine’s president, Volodymyr Zelensky, has likened to the Marshall Plan.Maciek Nabrdalik for The New York TimesNonetheless, “a lot of companies are starting to position themselves to be ready and have some track record for this time when the reconstruction funding will be coming in,” said Tymofiy Mylovanov, a former economy minister who is president of the Kyiv School of Economics. “There will be a lot of funding from all over the world,” he said, and business are saying that “we want to be a part of it.”The State of the WarVuhledar: A disastrous Russian assault on the Ukrainian city, viewed as an opening move in an expected spring offensive, has renewed doubts about Moscow’s ability to sustain a large-scale ground assault.Bakhmut: With Russian forces closing in, Ukraine is barring aid workers and civilians from entering the besieged city, in what could be a prelude to a Ukrainian withdrawal.Arms Supply: Ukraine and its Western allies are trying to solve a fundamental weakness in its war effort: Kyiv’s forces are firing artillery shells much faster than they are being produced.Prisoners of War: Poorly trained Russian soldiers captured by Ukraine describe being used as cannon fodder by commanders throwing waves of bodies into an assault.More than 300 companies from 22 countries signed up for a Rebuild Ukraine trade exhibition and conference this week in Warsaw. The gathering is just the latest in a dizzying series of in-person and virtual meetings. Last month, at the World Economic Forum in Davos, Switzerland, a standing-room-only crowd packed Ukraine House to discuss investment opportunities.More than 700 French companies swarmed to a conference organized in December by President Emmanuel Macron. And on Wednesday, the Finnish Confederation of Industries sponsored an all-day webinar with Ukrainian officials so companies could show off their wastewater treatment plants, transformers, threshers and prefabricated housing.“There’s so many initiatives, it’s hard to know who’s doing what,” said Sergiy Tsivkach, the executive director of UkraineInvest, the government office dedicated to attracting foreign investment.Mr. Tsivkach sipped a beer a couple of blocks from Lviv’s central square. He is glad for the interest but emphasized a crucial point.“They all say, ‘We want to help in rebuilding Ukraine,’” he said. “But do you want to invest your own money, or do you want to sell services or goods? These are two different things.”Most are interested in selling something, he said.Long-term reconstruction aid will depend on how much money the European Union, the United States and other allies put up.Maciek Nabrdalik for The New York Times“There’s so many initiatives, it’s hard to know who’s doing what,” said Sergiy Tsivkach, the executive director of UkraineInvest, the government office dedicated to attracting foreign investment. Maciek Nabrdalik for The New York TimesFor businesses, a crucial issue is who will control the money. This is a question that Europe, the United States and global institutions like the World Bank — the biggest donors and lenders — are vigorously debating.“Who will pay for what?” Domenico Campogrande, director general of the European Construction Industry Federation, said while moderating a panel at the Warsaw conference.Representatives from both Ukrainian and foreign companies were more pointed: Who will decide on the contracts, and how do they apply?“Hundreds of companies have been asking me this,” said Tomas Kopecny, the Czech government’s envoy for Ukraine.Ukraine has made clear there will be rewards for early investors when it comes to postwar reconstruction. But that opportunity carries risk.Danfoss, a Danish industrial company that sells heat-efficiency devices and hydraulic power units for apartment and other buildings, has been doing business in Ukraine since 1997. When the war started last February, Russian shelling destroyed its Kyiv warehouse.Danfoss has since focused on helping with immediate needs in war-torn regions and in western Ukraine, where millions of people displaced from their homes have been forced to settle in temporary shelters.“For now, all efforts are going toward maintaining a survival mode,” said Andriy Berestyan, the company’s managing director in Ukraine. “Right now, nobody is really looking for major reconstruction.”Things had been going better for the company since last summer as Ukraine pushed back Russian advances. By October, new orders for Danfoss’s products were rolling in, and Mr. Berestyan restored Danfoss’s distribution center in Kyiv. Then Russia started dropping bombs en masse. Power and water were widely cut off, forcing Ukraine — and businesses — to swing back to dealing with emergencies.Even so, he said, Danfoss is keeping its eye on the long term. “Definitely there will be rebuilding opportunities,” he said, “and we see a huge, huge opportunity for ourselves and for similar companies.”Andriy Berestyan, the managing director of Danfoss in Ukraine. The Danish company sells heat-efficiency devices and hydraulic power units for buildings. Its Kyiv warehouse was destroyed last year.Diego Ibarra Sanchez for The New York TimesThe question of who will control the money invested in Ukraine is one that Europe, the United States and global institutions like the World Bank are debating.Maciek Nabrdalik for The New York TimesThat groundwork is being laid in places like Mykolaiv, one of the hardest-hit regions, where numerous Danish companies have been working. Drones operated by Danish companies have mapped every bombed-out structure, with an eye toward using the data to help decide what reconstruction contracts should be issued.The information would help companies like Danfoss evaluate the potential for business, and eventually bid on contracts.Other governments that are expected to contribute to Ukraine’s reconstruction are also offering financial support for domestic firms.Germany announced the creation of a fund to guarantee investments. The plan will be overseen by the global auditing giant PwC and would compensate investors for potential financial losses if businesses were expropriated or projects were disrupted.France will also offer state guarantees to companies doing future work in Ukraine. Bruno Le Maire, the finance minister, said contracts worth a total of 100 million euros, or $107 million, had been awarded to three French companies for projects in Ukraine: Matière will build 30 floating bridges, and Mas Seeds and Lidea are providing seeds for farmers.Private equity firms, too, have an eye on business opportunities. President Zelensky sealed a deal late last year with Laurence D. Fink, the chief executive of BlackRock, to “coordinate investment efforts to rebuild the war-torn nation.” BlackRock, the world’s largest asset manager, will advise Kyiv on “how to structure the country’s reconstruction funds.” The work will be done on a pro bono basis, but promises to give BlackRock insights into investors’ interests.Mr. Fink was brought into the effort by Andrew Forrest, a gregarious Australian mining magnate who is the chief executive of Fortescue Metals Group. Mr. Forrest announced a $500 million initial investment in November, from his own private equity fund, into a new pot of money created for rebuilding projects in Ukraine. The fund would be run with BlackRock and aims to raise at least $25 billion from sovereign wealth funds controlled by national governments and private investors from around the world for clean energy investments in war-torn areas.Andrew Forrest, the chief executive of Fortescue Metals Group, in 2021. Mr. Forrest announced a $500 million initial investment in a pot of money for rebuilding projects in Ukraine. David Dare Parker for The New York TimesMr. Zelensky and his allies want to use the rebuilding to stitch Ukraine’s infrastructure seamlessly into the rest of Europe.Maciek Nabrdalik for The New York TimesMr. Forrest has courted Mr. Zelensky, wearing a Ukrainian flag pin in his lapel and presenting the Ukraine president with an Australian bullwhip during a visit to Kyiv last year. But in a sign of how cautious investors remain, Mr. Forrest said capital would be made available “the instant that the Russian forces have been removed from the homelands of Ukraine” — but not before.Eshe Nelson More