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The Federal Reserve raised interest rates by half a percentage point on Wednesday and projected at least an additional 75 basis points of increases in borrowing costs by the end of 2023 as well as a rise in unemployment and a near stalling of economic growth. 

The U.S. central bank’s projection of the target federal funds rate rising to 5.1% in 2023 is slightly higher than investors expected heading into this week’s two-day policy meeting and appeared biased if anything to move higher. 

Only two of 19 Fed officials saw the benchmark overnight interest rate staying below 5% next year, a signal they still feel the need to lean into their battle against inflation that has been running at 40-year highs. 

“The (Federal Open Market) Committee is highly attentive to inflation risks … Ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time,” the Fed said in a statement nearly identical to the one it issued at its November meeting. 

The new statement, approved unanimously, was released after a meeting at which officials scaled back from the three-quarters-of-a-percentage-point rate increases that were delivered at the last four gatherings. The Fed’s policy rate, which began the year at the near-zero level, is now in a target range of 4.25% to 4.50%, the highest since late 2007. 

Fed Chair Jerome Powell is scheduled to hold a news conference at 2:30 p.m. EST (1930 GMT) to provide further details on the policy meeting, which was the last of 2022. 

The new rate outlook, a rough estimate of where officials feel they can pause their current rate-hike cycle, was issued along with economic projections showing an extended battle with inflation still to come, and with near recessionary conditions developing over the year. 

Inflation, based on the Fed’s preferred measure, is seen remaining above the central bank’s 2% target at least until the end of 2025, and will still be above 3% by the end of next year. 

The median projected unemployment rate is seen rising to 4.6% over the next year from the current 3.7%, an increase that exceeds the level historically associated with a recession. 

Gross domestic product is seen growing by just 0.5% next year, the same as estimated for 2022, before rising to 1.6% in 2024 and 1.8% in 2025, a level considered to be the economy’s long-run potential. 

 
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India’s economy is posting the fastest growth among major economies putting it on track to become the world’s third largest before the end of the decade, according to financial forecasts.

As companies record strong growth and hand out pay hikes, there is a wave of optimism among professionals.

“There are good projections for the Indian economy. Plus, even in our friends’ circle, a lot of people are changing jobs, moving to better pastures. For us also, my wife, has switched recently to a new job,” said Jaideep Manchanda, a marketing professional in New Delhi who recently bought a new car.

Consumers like Manchanda and his wife, Tanya Tandon, are driving domestic demand as India emerges strongly from the COVID-19 pandemic — the automobile industry for example recorded its highest-ever sales in November. New investment is flowing into the country, helping it withstand the trend of slowing growth in most countries.

India is expected to grow by nearly 7% this year despite the economic turbulence created by Russia’s war in Ukraine. That momentum is likely to continue, helping it overtake Japan and Germany to become the world’s third-largest economy, according to a recent forecast by New York-based investment firm Morgan Stanley and S&P Global.

The International Monetary Fund projects India to reach that position by 2028. The United States and China are the world’s biggest economies.

The World Bank’s latest report on the Indian economy released in December also said that India is relatively well positioned to weather global headwinds compared to most other emerging markets.

“India’s economy has been remarkably resilient to the deteriorating external environment,” Auguste Tano Kouame, World Bank’s country director, said releasing the report “Navigating the Storm” earlier this month.

India’s economy is relatively insulated partly because it has a large domestic market and is relatively less exposed to international trade, according to the World Bank.

Growth is expected to dip in the coming year as, like many other countries, India grapples with inflation following a surge in global food and fuel prices. A potential global recession also poses a risk to its economic momentum.

However, that is not dampening optimism. “Even if the economy grows consistently at around five and a half or 6% will be remarkable,” according to Abhijit Mukhopadhyay, an economist at the Observer Research Foundation in New Delhi. “A lot of changes are happening across the world, and we hope that some of them will be beneficial for the Indian economy.”

New opportunities are opening for India as trade and geopolitical tensions between China and the United States deepen, analysists say.

For decades, global investors flocked to China to set up factories while India’s manufacturing sector lagged, holding back the economy. Efforts by Prime Minister Narendra Modi to promote a “Make in India” campaign since he took office eight years ago had met with a tepid response, but that could be changing.

On a visit to New Delhi last month United States Treasury Secretary Janet Yellen spoke of building closer economic ties with India.

“The United States is pursuing an approach called friend-shoring to diversify away from countries that present geopolitical and security risks to our supply chain. To do so we are proactively deepening economic integration with trusted trading partners like India,” Yellen said addressing technology leaders at a Microsoft facility.

Analysts say that many companies are looking at India as they consider adding production capacity in a second nation besides China.

The U.S.-based tech company Apple is expected to move some iPhone manufacturing to India and scale it up over the next three years. Taiwanese electronic company Foxconn and local conglomerate Vedanta have announced a $19.5 billion investment to make semiconductors in the western Indian state of Gujarat.

“Now, after China, India is probably being seen as the next place where growth will come. This is the expectation, and the initial signs are already there,” points out economist Mukhopadhyay. “That is why a lot of global investment, direct investment and a lot of global financial capital are now betting on India.”

Modi’s government is making efforts to lure companies by offering incentives for producing in India and investing billions of dollars in improving the country’s creaky infrastructure that has long deterred investors.

The mood is upbeat among Indian professionals, who often looked overseas for career opportunities. Now many feel they are better off at home, especially after the tens of thousands of layoffs by leading technology companies in the United States that have impacted many Indians.

“India has great potential across the sectors, across geographies, and across small and bigger cities,” said Tanya Tandon, a marketing professional.

Maintaining high growth will be vital for India, a country of 1.4 billion people, which still needs to lift millions out of poverty and also faces a massive challenge in creating jobs for its huge, young population.
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Yiwu, a city in China’s Zhejiang province, produces more than half the world’s Christmas ornaments purchased by the billions of people who celebrate the holiday.

China’s “zero-COVID” policy, coupled with global pandemic fears, dulled the local export-fueled year-round glitterfest. Christmas orders fell by 50% in 2020, according to the official Global Times with raw material costs and labor shortages hindering a recovery in 2021, which saw only a 10% to 20% increase in sales over the previous year.

Then, faster than elves could hitch those nine reindeer to Santa’s sleigh, a day after Beijing began lifting zero-COVID restrictions on December 3, a Zhejiang trade delegation departed for Germany and France to launch the “Thousand Missions and Ten Thousand Enterprises to Expand the Market and Grab Orders Action.” The goal: Sell enough stuff to help spark China’s economy back to pre-pandemic growth.

They hit a snag. “It seems like the Europeans’ and Americans’ purchasing power is so weak now. If the markets there are weak, China’s economy is definitely suffering too,” said Steven Gao, a businessman in Zhejiang province who exports Christmas ornaments and other trinkets to Europe and the U.S.

Beyond pandemic aftereffects such as not-yet-normal supply chains, Gao blames the bleak economic prospect on President Xi Jinping’s recent policies, particularly his focus on “common prosperity” during the 20th party congress, which met in October in Beijing and gave him a third term. The phrase refers to an official effort to address income inequality, a push often linked to personal wealth accumulated by founders and executives in sectors such as tech.

“Many of my rich friends are thinking about moving to other countries,” said Gao, 45, who asked to use a pseudonym to avoid attracting official attention when he spoke with VOA Mandarin on Tuesday. “They are afraid their wealth will be seized. This lack of faith, combined with pandemic control, led to the slide of economic growth.”

According to a CNBC report on December 4, U.S. manufacturing orders in China are down 40%, according to the latest CNBC Supply Chain Heat Map data, and Chinese factories are expected to shut down two weeks earlier than usual for the Lunar New Year that falls on January 22, 2023.

When Xi presided over a December 6 meeting of the Politburo of the Communist Party, China’s second-highest decision-making body, he emphasized the need to stabilize the economy and to attract foreign investment.

After the gathering, the official Securities Times reported on December 7 that the Suzhou Bureau of Commerce planned to charter flights to France and Germany after a “successful trip” to Japan returned with guaranteed orders worth more than 1 billion yuan, or $142 million.

A similar flight organized by the Suzhou province government took off for Europe on December 9. “Racing against time, grabbing more orders and opportunities … these are the most crucial tasks the Chinese companies took on when boarding the plane,” editorialized the official Global Times news outlet which pointed out “Yiwu… has been the starting point of numerous international trade channels linking the entire world.”

Alibaba, China’s biggest e-commerce platform, recently launched a special operation code-named “Digital Hybrid Trade Show” to start at least 100 overseas exhibitions in the near future, Securities Times reported on December 12. The exhibitions cover more than 10 important foreign trade target markets, including the United States, Germany, Britain, Japan, Singapore and Australia.

Some analysts, however, believe that China’s response to the pandemic may have made it less attractive to foreign businesses for manufacturing and investing.

The state news agency Xinhua reported that those in the December 6 meeting stressed that stability is Beijing’s top priority in an international economic environment marked by “high winds and waves.”

Zhao Chunshan, chief adviser of the Asia-Pacific Peace Research Foundation, a private think tank in Taiwan, told VOA Mandarin that “Capitalists are running away. No one dares to invest, causing economic instability. If there is a problem in the economy there is no way to stabilize.”

Zhao says that local governments with high debt loads must look outside China rather than to the central government for stability.

“China’s central government has no way to solve local debts,” he said. “The central government’s allocation alone is not enough. They have to attract foreign investment and business on their own. To some extent, the central government also gives localities such authority.”

In an interview with VOA Mandarin, Lai Rongwei, an assistant professor at the Center for Liberal Studies at Taiwan’s Longhua University of Science and Technology, said the fact that provinces and cities are scrambling to form groups to go abroad reflects the fears of local officials.

“China’s measures to seal off cities have led to a severe shortage of supplies, including medicine,” Lai said. “The debt of local governments is already huge, and the lack of revenue in the past years has made the situation even worse. People actively going abroad shows a great deal of panic, fearing that the economic downturn can’t be alleviated, and the risks are becoming bigger.”

But Lai said that after the pandemic lockdowns, China is no longer as attractive to foreign investors as it used to be.

“Foreign investors must take into account the cost of investment,” Lai said. “Cities could be shut down and power cut off any time when there’s an order from higher authorities. … Private enterprises find it hard to survive, and now the governments are looking for solutions from foreign investors.”

Bo Gu contributed to this report.
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The increase in U.S. consumer prices eased again in November, rising at their slowest pace since last December, the Labor Department reported Tuesday.

The consumer price index climbed 7.1% in November from a year ago, down sharply from the 7.7% figure recorded in October and continuing a trend of slower-paced inflation since the 9.1% peak in June.

While gasoline prices at service station pumps have dropped markedly in recent months, food prices remain much higher than normal in the world’s biggest economy. But overall, the inflation rate has dropped from the four-decade high in mid-2022, while remaining well above the 2.1% average rate in the three years before the coronavirus pandemic significantly affected the American economy starting in March 2020.

On a month-to-month basis, consumer prices also eased, increasing a tenth of a percentage point in November over October, down from the 0.3% figure in October and 0.6% increases in both August and September.

Gasoline, utility, medical care and used-car prices all fell in November.

The latest consumer price report likely leaves policymakers at the country’s central bank, the Federal Reserve, on track Wednesday to increase its benchmark interest rate by a half percentage point, after it had imposed 0.75% increases at four straight meetings to curb the rampant inflation rate.

The benchmark rate was near zero earlier this year, and now with Wednesday’s expected increase, would reach 4.25 to 4.5%.

The benchmark rate ripples throughout the U.S. economy, pushing borrowing costs higher for businesses buying supplies and raw products and for consumers getting loans to buy cars, furniture and other consumer goods.

U.S. President Joe Biden took note of the slowing pace of inflation and said he hopes prices will be back to normal by the end of next year.

“I want to be clear, it’s going to take time to get inflation back to normal levels,” he said at the White House. “As we make the transition to a more stable growth, we could see setbacks along the way, as well. We shouldn’t take anything for granted.”

Biden said his goal was to get price increases under control without stunting economic growth. Even with millions of families struggling to make ends meet, the U.S. continues to add hundreds of thousands of new jobs to corporate payrolls every month, and the U.S. jobless rate remains near a five-decade low.
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Law enforcement officials and financial services regulators have filed a raft of criminal and civil charges against Sam Bankman-Fried, the founder of the bankrupt cryptocurrency exchange company FTX, alleging wide-ranging fraud that eventually brought down the company, which was valued at $32 billion earlier this year.

The Department of Justice on Tuesday morning unsealed an indictment charging Bankman-Fried with eight criminal counts, including conspiracy to commit wire fraud, actual wire fraud, money laundering, and violation of laws governing donations to politicians and political parties.

At the request of U.S. prosecutors, Bankman-Fried, 30, was arrested on Monday evening at his home in the Bahamas, where the headquarters of FTX is located. The U.S. and the Bahamas have an extradition treaty, and Bankman-Fried is expected to be transferred to U.S. custody in the near future.

‘House of cards’

Earlier Tuesday, the Securities and Exchange Commission issued its own set of civil charges, also accusing Bankman-Fried of “years-long fraud” that included hiding information from investors, diverting customer funds to a hedge fund he owned, using other customer funds to make political donations, and to purchase hundreds of millions of dollars in real estate.

“We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” said SEC Chair Gary Gensler. “The alleged fraud committed by Mr. Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws.”

Also on Tuesday, the Commodity Futures Trading Commission filed a lawsuit against Bankman-Fried.

Rapid rise, rapid fall

In the short time since its founding in 2019, FTX grew to be one of the largest cryptocurrency exchanges in the world, and Sam Bankman-Fried — often referred to as “SBF” — became one of the industry’s most recognizable figures. He was a regular speaker at business conferences, gave testimony before Congress, and was seen by many as a model cryptocurrency executive.

The list of investors who plowed billions of dollars into FTX is long and distinguished, including Sequoia Capital, SoftBank Group, Tiger Global Management, and Third Point Ventures.

Earlier this year, Bankman-Fried positioned his company as a savior for the broader crypto industry when a broad selloff of cryptocurrencies left many firms in the space reeling. FTX extended lines of credit to crypto lender BlockFi and crypto broker Voyager Digital in an effort to help them weather the storm. Both BlockFi and Voyager eventually filed for bankruptcy protection.

Signs of trouble

In September, news reports began raising questions about the relationship between FTX and Alameda Research, a hedge fund owned by Bankman-Fried which was supposed to be a completely separate corporate entity from FTX.

However, it gradually became clear that the two companies were actually closely connected. Media reports began to reveal that a large share of Alameda’s assets was tied up in an illiquid crypto token called FTT, which was issued by FTX. Over several days in early November, customers rushed to pull their money from accounts with FTX, sending the company into a massive liquidity crisis and forcing it to stop processing customer withdrawals.

After several days of attempts to arrange a rescue package, including a briefly considered sale of FTX to Binance, its largest competitor, FTX, Alameda, and more than 100 affiliated companies filed for bankruptcy.

On Tuesday, the Justice Department and the SEC alleged that Alameda actually had “virtually unlimited” access to funds held by FTX on behalf of its customers.

The charges against Bankman-Fried claim that Alameda illegally used those funds to invest in highly illiquid cryptocurrency tokens, as well as to make “undisclosed venture investments, lavish real estate purchases, and large political donations.”

Before its collapse, cryptocurrency investors around the world had placed billions of dollars in their accounts with FTX. In large part because of transfers to Alameda, FTX is facing an estimated shortfall of $8 billion.

‘I made a lot of mistakes’

Against the advice of his attorneys, Bankman-Fried has given a number of interviews to news organizations since his company declared bankruptcy. His contention has been that, while he may have made mistakes, he never intended to defraud anyone.

In early December, Bankman-Fried told The Wall Street Journal that he could not account for money that FTX customers transferred to Alameda Research.

In an appearance at a conference sponsored by The New York Times, he said, “Clearly I made a lot of mistakes. There are things I would give anything to be able to do over again. I did not ever try to commit fraud on anyone. I was excited about the prospects of FTX a month ago. I saw it as a thriving, growing business. I was shocked by what happened [in November.]”

His claims contradict the allegations leveled by prosecutors in the indictment unsealed Tuesday, which accuse Bankman-Fried of “willfully and knowingly” defrauding investors and customers.

‘Utter failure’ of controls

Last month, control of FTX and its constituent companies was turned over to John Ray III, an attorney and corporate insolvency specialist who has been brought on to manage multiple companies facing bankruptcy, including the failed energy giant Enron in the early 2000s. His primary task will be to assemble all the remaining assets of FTX in an effort to recover some of the money its customers lost in the exchange’s collapse.

Ray appeared at a hearing held by the House Financial Services Committee on Tuesday, during which he described a company that lacked even the most basic corporate governance structures and was run by a small cabal ill-equipped for the job of running a multi-billion dollar corporation.

In prepared testimony, Ray said, “[N]ever in my career have I seen such an utter failure of corporate controls at every level of an organization, from the lack of financial statements to a complete failure of any internal controls or governance whatsoever.”

In the broadest sense, Ray said, the company’s failure was the result of the “absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people’s money or assets.”

Under questioning, Ray said that the asset recovery process will take months to complete, and will not make FTX customers whole. “At the end of the day, we’re not going to be able to recover all the losses here,” he said.

The committee had also expected to hear from Bankman-Fried on Tuesday, but the FTX founder’s arrest on Monday made that impossible.

Lawmakers angry

The allegations of fraud and mismanagement at FTX have raised calls in Washington for action by Congress to rein in the cryptocurrency industry, which operates under a poorly defined set of regulatory rules.

House Financial Services Committee Chair Maxine Waters on Tuesday said that she was “deeply troubled” by the revelations coming out about FTX. At the same hearing, U.S. Representative Patrick McHenry, who will take over the chairmanship when Republicans assume control of the House next month, criticized Bankman-Fried but said that he still sees “promise” in digital assets.

Others were less tolerant of the industry, with Representative Brad Sherman, a Democrat, calling the entire industry “a garden of snakes.”

Industry representatives urged lawmakers to tread carefully when it comes to establishing new rules for cryptocurrencies.

“Following the failure of FTX International, it’s understandable that lawmakers want to do something, but they should be wary of passing legislation in haste that would do more harm than good,” Kristin Smith, executive director of the Blockchain Association, wrote on Monday. “Instead, Congress should take its time to investigate the issues we’ve seen and work closely with the crypto industry to find solutions that benefit everyone.”
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The U.S. Securities and Exchange Commission has charged the former CEO of failed cryptocurrency firm FTX with orchestrating a scheme to defraud investors.

An SEC complaint filed Tuesday alleges that Sam Bankman-Fried raised more than $1.8 billion from equity investors since May 2019 by promoting FTX as a safe, responsible platform for trading crypto assets.

The civil complaint says Bankman-Fried diverted customer funds to Alameda Research LLC, his privately-held crypto fund, without telling them. The complaint also says Bankman-Fried commingled FTX customers’ funds at Alameda to make undisclosed venture investments, lavish real estate purchases, and large political donations.

“Bankman-Fried placed billions of dollars of FTX customer funds into Alameda. He then used Alameda as his personal piggy bank to buy luxury condominiums, support political campaigns, and make private investments, among other uses,” the complaint reads. “None of this was disclosed to FTX equity investors or to the platform’s trading customers.”

Alameda did not segregate FTX investor funds and Alameda investments, the SEC said, using that money to “indiscriminately fund its trading operations,” as well as other ventures of Bankman-Fried.

“We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” said SEC Chair Gary Gensler. “The alleged fraud committed by Mr. Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws.”

Bankman-Fried was arrested Monday in the Bahamas at the request of the U.S. government, U.S. and Bahamian authorities said.

The arrest was made after the U.S. filed criminal charges that are expected to be unsealed Tuesday, according to U.S. Attorney Damian Williams. Bankman-Fried had been under criminal investigation by U.S. and Bahamian authorities following the collapse last month of FTX, which filed for bankruptcy on Nov. 11, when it ran out of money after the cryptocurrency equivalent of a bank run.

The SEC charges are separate from the criminal charges expected to be unsealed later Tuesday.

A spokesman for Bankman-Fried had no comment Monday evening. Bankman-Fried has a right to contest his extradition, which could delay but not likely stop his transfer to the U.S.

Bankman-Fried’s arrest comes just a day before he was due to testify in front of the House Financial Services Committee. Rep. Maxine Waters, D-Calif., chairwoman of the committee, said she was “disappointed” that the American public, and FTX’s customers, would not get to see Bankman-Fried testify under oath.

That hearing, however, will be held Tuesday despite the arrest of Bankman-Fried.

Bankman-Fried was one of the world’s wealthiest people on paper, with an estimated net worth of $32 billion. He was a prominent personality in Washington, donating millions of dollars toward mostly left-leaning political causes and Democratic political campaigns. FTX grew to become the second-largest cryptocurrency exchange in the world.

That all unraveled quickly last month, when reports called into question the strength of FTX’s balance sheet. Customers moved to withdraw billions of dollars, but FTX could not meet all the requests because it apparently used its customers deposits to cover bad bets at Bankman-Fried’s investment arm, Alameda Research.

Bankman-Fried said recently that he did not “knowingly” misuse customers’ funds, and said he believes his millions of angry customers will eventually be made whole.

The SEC challenged that assertion Tuesday in its complaint.

“FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by, among other things, touting its best-in-class controls, including a proprietary ‘risk engine,’ and FTX’s adherence to specific investor protection principles and detailed terms of service. But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent,” said Gurbir Grewal, director of the SEC’s Division of Enforcement. “FTX’s collapse highlights the very real risks that unregistered crypto asset trading platforms can pose for investors and customers alike.”
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Large private Norwegian firms must have boards that comprise at least 40% of women or they will be shut down, the government proposed in a bill on Monday, in a further push to break the glass ceiling preventing women from reaching top positions.

The Nordic country was the first in the world to introduce a 40% gender quota on the boards of listed companies, in 2005, kickstarting an international push to force companies to have more women on boards.

Last month, the European Parliament passed a law forcing large listed companies in the European Union to have a minimum 40% of non-executive board members as women from mid-2026. EU states have already approved the law.

Now the center-left government in Oslo is recommending that large private companies, not just listed ones, should have a 40% gender quota.

“Companies are not good enough in using the skills of both genders. It is high time this changes,” Industry Minister Jan Christian Vestre said in a statement.

The proportion of women on boards in private firms is currently 20%, the government said, up from 15% two decades ago.

“It has taken 20 years to increase the share by 5 percentage points. If we continue at this tempo, we will never reach our goal [of having gender balance],” Equality Minister Anette Trettebergstuen said.

The bill would not apply to smaller private companies in order to be “appropriate and not [be] more extensive than necessary”, the statement said. The bill, if voted in its current state, would affect 3-7% of private companies.

The Cabinet rules in a minority in order to pass laws. It is likely this bill could pass with the support of a leftwing party in parliament, the Socialist Left, which supports the Cabinet.
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U.S. Treasury Secretary Janet Yellen on Sunday forecast a substantial reduction in U.S. inflation in 2023, barring an unexpected shock.

“I believe by the end of next year you will see much lower inflation if there’s not … an unanticipated shock,” she told CBS’ ’60 Minutes’ in an interview released Sunday.

Asked about the likelihood of recession, the former Federal Reserve chair said, “There’s a risk of a recession. But … it certainly isn’t, in my view, something that is necessary to bring inflation down.”

Yellen’s comment came days before the Fed is expected to slow the aggressive pace of interest rate increases it has pursued this year. Fed Chair Jerome Powell has telegraphed a smaller, half-of-a-percentage point increase in the policy rate, to a range of 4.25%-4.5%, after four 75-basis point hikes this year.

Yellen told CBS that economic growth was slowing substantially, inflation was easing and she remained hopeful that the labor market would remain healthy.

She said she hoped the spike in inflation seen this year would be short-lived and said the U.S. government had learned “a lotta lessons” about the need to curtail inflation after high prices seen in the 1970s.

Shipping costs had come down and long delivery lags had eased, while gasoline prices at the pump were “way down.”

“I think we’ll see a substantial reduction in inflation in the year ahead,” she said.
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Saudi energy minister Prince Abdulaziz bin Salman said Sunday the impact of European sanctions on Russian crude oil and price cap measures “did not bring clear results yet” and its implementation was still unclear.

The Group of 7 price cap on Russian seaborne oil came into effect Monday as the West tries to limit Moscow’s ability to finance its war in the Ukraine.

Russia has said it would not abide by the measure even if it must cut its production.

“What is happening now in terms of sanctions and price caps imposed and all of it really did not bring clear results, including measures implemented on Dec. 5, we see a state of uncertainty in implementation,” Prince Abdulaziz told a forum held following the country’s 2023 budget announcements in Riyadh.

Prince Abdulaziz said Russia’s reaction and what actions it would take in response to these tools was another aspect that needed to be taken into consideration when looking at the state of play in global markets.

“These tools were created for political purposes and it is not clear yet whether they can achieve these political purposes,” he said, referring to the price cap.

Other factors affecting the market going into 2023 include China’s COVID-19 policies. The impact on China’s economy from easing Covid restrictions still “needs time,” he said.

Central banks’ actions to tame inflation were also still a factor.

“Central banks are still preoccupied with managing inflation, no matter the cost of these measures and their possible negative impact on global economic growth.”

The OPEC+ alliance decision to cut production by 2 million barrels per day on Oct. 5 was proven to be the correct one when recent developments are taken into consideration, he said.

The alliance, which groups together members of The Organization of Petroleum Exporting Countries and allies including Russia, last met on Dec. 4 and decided to keep output unchanged amid a weakening economy and uncertainty over how the Russian price cap would affect the market.

Prince Abdulaziz said the alliance would continue to focus on market stability in the year ahead.

He also said he insisted that every OPEC+ alliance member take part in decision-making.

“Group action requires agreement and therefore I continue to insist that every OPEC+ member, whether a big or small producer…be a part of decision-making,” Prince Abdulaziz told the forum.

“Consensus has positive implications on the market.”
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The Wall Street Journal reports U.S. smartphone giant Apple Inc. is accelerating plans to move some China-based production lines to other southeastern Asian countries such as India and Vietnam.

That, analysts said, would represent a significant shift in the so-called de-Sinification of global supply chains after manufacturers become aware of risks of concentrating production in China.

China’s zero-COVID policy, which paralyzed some of its supply chains, and its deteriorating business environment would be the major trigger behind the shift, they added.

India: the world’s next factory?

“China’s anti-virus measures have forced many multinationals, including Apple, to hedge against the risk of disrupted supply chains. Though China is set to ease COVID restrictions, uncertainty remains because these multinationals have had experienced much sudden change of policy there – reasons behind Apple’s accelerated relocation of its production lines outward,” Darson Chiu, a research fellow of the economic forecasting center under the Institute of Economic Research (TIER) in Taipei, told VOA over the phone.

He said that many companies, including Apple, have seen the potential in India in competing with China to be “the world’s next factory,” adding that cost of labor and land is “at one-fifth of the level in China.”

“This highlights an evolving trend, where many companies, not just Apple, are concerned about the environment in China, and not just because of COVID. When we look at theft of intellectual property, that’s of technology, cyber-attacks on companies inside China, the onerous restrictions that apply from Chinese government to data flows, there are a number of factors that are making China a much less attractive environment for manufacturers to be,” Stephen Ezell, director of global innovation policy at the Information Technology and Innovation Foundation (ITIF) in Washington told VOA by video.

“And I think it’s possible that Apple represents the tip of the spear for a much greater share of global high-tech production moving outside of China,” he added.

A domino effect?

Ezell said more multinationals might follow suit if Apple succeeds in shipping products from India, as it had produced a small percentage of iPhone 14s there.

Citing people involved in the discussion, The Wall Street Journal reported on December 6 that Apple had asked its suppliers to plan more actively for assembling its products elsewhere in Asia, “particularly India and Vietnam,” to reduce dependence on China-based assemblers, led by Taiwan-headquartered Foxconn’s Zhengzhou plant. 

Turmoil over anti-virus measures and wage disputes last month among the plant’s 300,000 workers have made Apple uncomfortable having so much business tied up in the plant, which made about 85% of the iPhone’s pro series, according to the report.

It added that Apple’s long-term goal is to ship 40% to 45% of iPhones from India, compared with a current single-digit percentage, citing Ming-chi Kuo, an analyst at TF International Securities in Hong Kong.

When asked by VOA, Foxconn refused to comment. But the company Thursday announced on its WeChat account that it has lifted closed-loop Covid restrictions at its Zhengzhou plant.

Paul Triolo, senior vice president for China, and technology policy lead at Albright Stonebridge Group in Washington, told VOA that Apple has already done some manufacturing with Foxconn in India, which plans to add 50,000 workers to total at 70,000 there over the next two years.

He warned, though, that it will be hard for Foxconn to duplicate its highly optimized China supply chain in India, where skilled workers and infrastructure including airports, ports and high-speed rail, as well as an ecosystem of component suppliers at a low cost, are lacking.

Painful transition

“India has some advantages … it does tend to crank out a lot of engineers but you’re talking about a sort of different cultural issues and expectations and labor practices, and all these things. So it’s not as easy as just picking up something and dropping it into another country. You have to learn the local situation. You have to work with local governments. That can be painful,” Triolo told VOA by video.

He added that, even though companies like Foxconn are good at managing production, the cost structures will be different in India.

Hence, he noted that some of Apple’s diversification of supply chains may happen inside China, as Foxconn is reportedly looking to expand at its Taiyuan plant in China’s northern Shanxi province.

The biggest challenge of all lies in India’s ability to strengthen its depth of supplier base for Apple at an optimal cost, Ezell said.

“The production ecosystem, that’s what’s the key driver in decreasing the cost, not just low labor costs. So, the challenge for India is going to be several folds. One, building a localized base of suppliers that can support production at lower cost. And then more broadly, ensuring that India does have the highly skilled trained workforce and individuals that had experience and building what are truly very complex electronics with iPads or phones,” Ezell said.

Negative impact on China’s jobless rate

Arthur Guo, a senior analyst at the market intelligence firm International Data Corp in Beijing, said he would not be surprised to see Apple diversify the production of its iPhone 15 next year after the lockdown at Foxconn’s Zhengzhou plant has seriously affected the supply of the iPhone 14.

That will hurr China’s economic growth and unemployment rate, Guo said in a written reply to VOA.

“However, this relocating process will last for a period and will not be implemented immediately. In the future, we believe China still will be an important production country for Apple and will find a better solution to this problem,” Guo added.

Earlier estimates by TF’s Kuo showed that the total shipment of iPhone 14 pro and pro max in the fourth quarter would be 15 million to 20 million units less than expected due to labor protests at the Zhengzhou plant.
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The United Arab Emirates and Ukraine on Monday announced their intention to start negotiations on a bilateral trade deal, expected to conclude by the middle of next year, the UAE economy ministry said.

The UAE state has tried to remain neutral in the Russia-Ukraine war despite Western pressure on Gulf oil producers to help isolate Moscow, a fellow OPEC+ member.

The UAE’s minister of state for foreign trade, Thani Al Zeyoudi, and Ukraine’s economy minister, Yulia Svyrydenko, signed a joint statement on negotiations towards a Comprehensive Economic Partnership Agreement (CEPA), the ministry said.

It would be the UAE’s first such deal with a European country, following more than $3 billion in trade and investment pledges made during Ukrainian President Volodymyr Zelensky’s visit to the Gulf state in February 2021.

“For us, Ukraine is a key trade partner. The growth and investment potential was high before the whole geopolitical situation; we think it’s time to push things forward,” Thani Al Zeyoudi, UAE minister of state for foreign trade, told Reuters.

UAE-Ukraine non-oil trade amounted to just over $900 million in 2021, up nearly 29% over the previous year, and 12% more than in 2019, according to the UAE ministry.

Talks will likely center on opportunities to expand trade in the services sector, and on food security where the UAE, a trade hub, is making a push. Ukraine is a major supplier of grain to the Middle East.

The ministry statement said a CEPA with Ukraine would open up access to new markets in Asia, Africa and the Middle East for Ukraine’s agricultural and industrial output.

“This is not only going to bring added value to the UAE but also to Ukraine as well,” Al Zeyoudi told Reuters.

The UAE has signed free trade deals with India, Israel and Indonesia this year, aiming to build its position as a global trade and logistics hub at a time of rising competition from Saudi Arabia.
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Sales of arms and military services grew in 2021, researchers said Monday, but were limited by worldwide supply issues related to the pandemic, with the war in Ukraine increasing demand while worsening supply difficulties.   

The top 100 arms companies sold weapons and related services totaling $592 billion in 2021, 1.9% more than the year before, said the latest report from the Stockholm International Peace Research Institute (SIPRI). 

However, the growth was severely impacted by widespread supply chain issues.   

“The lasting impact of the pandemic is really starting to show in arms companies,” Nan Tian, a senior researcher at SIPRI, told AFP.   

Disruptions from both labor shortages and difficulties in sourcing raw materials were “slowing down the companies’ ability to produce weapons systems and deliver them on time,” Tian said. “So what we see really is a potentially slower increase to what many would have expected in arms sales in 2021.”   

Russia’s invasion of Ukraine is also expected to worsen supply chain issues, in part “because Russia is a major supplier of raw materials used in arms production”, said the report’s authors.   

But the war has at the same time increased demand.   

“Definitely demand will increase in the coming years,” Tian said.   

By how much was at the same time harder to gauge, Tian said pointing to two factors that would impact demand. 

Firstly, countries that have sent weapons to Ukraine to the tune of hundreds of millions of dollars will be looking to replenish stockpiles.   

Secondly, the worsening security environment means “countries are looking to procure more weapons.”   

With the supply crunch expected to worsen, it could hamper these efforts, the authors noted. 

Companies in the U.S. continue to dominate global arms production, accounting for over half, $299 billion, of global sales and 40 of the top companies.   

At the same time, the region was the only one to see a drop in sales: 0.9 percent down on the 2020 figures.   

Among the top five companies — Lockheed Martin, Raytheon Technologies, Boeing, Northrop Grumman and General Dynamics — only Raytheon recorded an increase in sales.   

Meanwhile, sales from the eight largest Chinese arms companies rose 6.3% to $109 billion in 2021.   

European companies took 27 of the spots on the top 100, with combined sales of $123 billion, up 4.2% compared to 2020.   

The report also noted a trend of private equity firms buying up arms companies, something the authors said had become increasingly apparent over the last three or four years.   

This trend threatens to make the arms industry more opaque and therefore harder to track, Tian said, “because private equity firms will buy these companies and then essentially not produce any more financial records.” 
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EU chief Ursula von der Leyen said Sunday the bloc must act to address “distortions” created by Washington’s $430-billion plan to spur climate-friendly technologies in the United States.

The European Union must “take action to rebalance the playing field where the IRA [Inflation Reduction Act] or other measures create distortions,” von der Leyen said in a speech at the College of Europe in the Belgian city of Bruges.

EU countries have poured criticism on Washington’s landmark Inflation Reduction Act, seeing it as anti-competitive and a threat to European jobs, especially in the energy and auto sectors.

The act, designed to accelerate the U.S. transition to a low-carbon economy, contains around $370 billion in subsidies for green energy as well as tax cuts for U.S.-made electric cars and batteries.

Von der Leyen said the EU had to work with the U.S. “to address some of the most concerning aspects of the law.”

She said that Brussels must also “adjust” its own rules to facilitate public investment in the environmental transition and “reassess the need for further European funding of the transition.”

French President Emmanuel Macron seized an opportunity on a state visit to Washington for talks with U.S. President Joe Biden last week to air deep grievances over U.S.-EU trade.

The White House touts the IRA as a groundbreaking effort to reignite US manufacturing and promote renewable technologies.
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OPEC+ agreed to stick to its oil output targets at a meeting on Sunday, two OPEC+ sources told Reuters.

The decision comes two days after the Group of Seven (G-7) nations agreed a price cap on Russian oil.

OPEC+, which comprises the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, angered the United States and other Western nations in October when it agreed to cut output by 2 million barrels per day, about 2% of world demand, from November until the end of 2023.

Washington accused the group and one of its leaders, Saudi Arabia, of siding with Russia despite Moscow’s war in Ukraine.

OPEC+ argued it had cut output because of a weaker economic outlook. Oil prices have declined since October due to slower Chinese and global growth and higher interest rates.

On Friday, G-7 nations and Australia agreed a $60 per barrel price cap on Russian seaborne crude oil in a move to deprive President Vladimir Putin of revenue while keeping Russian oil flowing to global markets.

Moscow said it would not sell its oil under the cap and was analyzing how to respond.
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President Joe Biden signed legislation Friday to block a national U.S. railroad strike that could have devastated the American economy.

The U.S. Senate voted 80 to 15 on Thursday to impose a tentative contract deal reached in September on a dozen unions representing 115,000 workers, who could have gone on strike on December 9. But the Senate failed to approve a measure that would have provided paid sick days to railroad workers.

Eight of 12 unions had ratified the deal. But some labor leaders have criticized Biden, a self-described friend of labor, for asking Congress to impose a contract that workers in four unions have rejected over its lack of paid sick leave.

Railroads have slashed labor and other costs to bolster profits in recent years, and they have been fiercely opposed to adding paid sick time that would require them to hire more staff.

A rail strike could have frozen almost 30% of U.S. cargo shipments by weight, stoked already surging inflation, cost the American economy as much as $2 billion a day, and stranded millions of rail passengers.

There are no paid short-term sick days under the tentative deal after unions asked for 15 and railroads settled on one personal day.

Teamsters President Sean O’Brien harshly criticized the Senate vote on sick leave. “Rail carriers make record profits. Rail workers get zero paid sick days. Is this OK? Paid sick leave is a basic human right. This system is failing,” O’Brien wrote on Twitter.

Congress invoked its sweeping powers to block strikes involving transportation – authority it does not have in other labor disputes.

The contract that will take effect with Biden’s signature includes a 24% compounded pay increase over five years and five annual $1,000 lump-sum payments.

American Association of Railroads CEO Ian Jefferies said that “none of the parties achieved everything they advocated for” but added, “without a doubt, there is more to be done to further address our employees’ work-life balance concerns.”

Without the legislation, rail workers could have gone out next week, but the impacts would be felt as soon as this weekend as railroads stopped accepting hazardous materials shipments and commuter railroads began canceling passenger service.

The contracts cover workers at carriers including Union Pacific, Berkshire Hathaway Inc’s BNSF, CSX , Norfolk Southern Corp and Kansas City Southern.
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U.S. employers hired more workers than expected in November and raised wages despite mounting worries of a recession, which could complicate the Federal Reserve’s intention to start slowing the pace of its interest rate hikes this month.

Nonfarm payrolls increased by 263,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for October was revised higher to show payrolls rising 284,000 instead of 261,000 as previously reported.

Economists polled by Reuters had forecast payrolls increasing 200,000. Estimates ranged from 133,000 to 270,000.

Hiring remains strong despite technology companies, including Twitter, Amazon AMZN.O and Meta META.O, the parent of Facebook, announcing thousands of jobs cuts.

Economists said these companies were right-sizing after over-hiring during the COVID-19 pandemic. They noted that small firms remained desperate for workers.

There were 10.3 million job openings at the end of October, many of them in the leisure and hospitality as well as healthcare and social assistance industries.

The unemployment rate was unchanged at 3.7%.

Average hourly earnings increased 0.6% after advancing 0.5% in October. That raised the annual increase in wages to 5.1% from 4.9% in October. Wages peaked at 5.6% in March.

The report followed on the heels of news on Thursday of a slowdown in inflation in October. But the labor market remains tight, with 1.7 job openings for every unemployed person in October, keeping the Fed on its monetary tightening path at least through the first half of 2023.

Fed Chair Jerome Powell said on Wednesday the U.S. central bank could scale back the pace of its rate increases “as soon as December.” Fed officials meet on Dec. 13 and 14. The Fed has raised its policy rate by 375 basis points this year from near zero to a 3.75%-4.00% range in the fastest rate-hiking cycle since the 1980s as it battles high inflation.

Labor market strength is also one of the reasons economists believe an anticipated recession next year would be short and shallow, with data on Thursday showing a surge in consumer spending in October. Business spending is also holding up, though sentiment has weakened.
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The U.S. central bank could scale back the pace of its interest rate hikes “as soon as December,” Federal Reserve Chair Jerome Powell said on Wednesday, while warning that the fight against inflation was far from over and key questions remain unanswered, including how high rates will ultimately need to rise and for how long.

“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting,” Powell said in a speech to the Brookings Institution think tank in Washington.

But, in remarks emphasizing the work left to be done in controlling inflation, Powell said that issue was “far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level.”

While the Fed chief did not indicate his estimated “terminal rate,” Powell said it is likely to be “somewhat higher” than the 4.6% indicated by policymakers in their September projections. He said curing inflation “will require holding policy at a restrictive level for some time,” a comment that appeared to lean against market expectations the U.S. central bank could begin cutting rates next year as the economy slows.

“We will stay the course until the job is done,” Powell said, noting that even though some data points to inflation slowing next year, “we have a long way to go in restoring price stability … Despite the tighter policy and slower growth over the past year, we have not seen clear progress on slowing inflation.”

The Fed’s response to the fastest outbreak of U.S. inflation in 40 years has been a similarly abrupt increase in interest rates. With a half-percentage-point increase expected at its Dec. 13-14 meeting, the central bank will have lifted its overnight policy rate from near zero as of March to the 4.25%-4.50% range, the swiftest change in rates since former Fed Chair Paul Volcker was battling an even worse rise in prices decades ago.

That has made home mortgages and other forms of credit more expensive for consumers and businesses.

It has not, however, caused any appreciable impact on the U.S. job market, where the current 3.7% unemployment rate has led some policymakers to argue they are free to tighten rates further without much risk.

But it has also had no convincing impact yet on inflation, a fact that has left open just how much further the Fed may need to raise rates into what it refers to as “restrictive” territory designed to slow the economy.

Powell said Fed estimates of inflation in October showed its preferred measure still rising at about triple the central bank’s 2% target.

‘Long way to go’

Powell’s remarks ignited a robust rally in equity and bond markets, which have taken a pounding this year on the back of the Fed’s aggressive rate hikes.

The benchmark S&P 500 index .SPX shot into positive territory and was last up by about 1.5% on the day, and bond yields, which move in the opposite direction to their prices, all tumbled. The yield on the 2-year Treasury note US2YT=RR, the maturity most sensitive to Fed rate expectations, dropped to about 4.47% from 4.52%. The dollar .DXY weakened against a basket of major trading partners’ currencies.

In rate futures markets, traders added to the prevailing bets that the Fed would slow its pace of rate hikes at its meeting in two weeks.

“You can’t keep raising rates as quickly as they were doing it,” said Rick Meckler at Cherry Lane Investments in New Vernon, New Jersey. “That said, investors always like the comfort of hearing it directly from the (Fed) chair.” 

Powell noted that the cost of housing is likely to continue to rise into next year, while key price measures for services remain high and the labor market is tight.

“Despite some promising developments, we have a long way to go in restoring price stability,” he said.
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