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When world leaders, diplomats, campaigners and scientists descend on Sharm el-Sheikh in Egypt for talks on tackling climate change, don’t expect them to part the Red Sea or other miracles that would make huge steps in curbing global warming.

Each year there are high hopes for the two-week United Nations climate gathering and, almost inevitably, disappointment when it doesn’t deliver another landmark pact like the one agreed 2015 in Paris.

But those were different days, marked by a spirit of cooperation between the world’s two biggest polluters — the United States and China — as well as a global realization that failure to reach an agreement would put humanity on a self-chosen track to oblivion.

This November the geopolitical tiles have shifted: a devastating war in Ukraine, skyrocketing energy and food prices, and growing enmity between the West on the one hand and Russia and China on the other make for difficult conditions at a gathering that requires cooperation and consensus.

“There’s a lot of high and low expectations around this Egypt COP, a lot of mix of ambition and fatalism,” said Avinash Persaud, special envoy for the Barbados prime minister.

Here’s what to look out for during the 27th Conference of the Parties, or COP27, from Nov. 6-18 and why it might still end up being a success.

Science warnings

Scientists are more concerned about global warming than three decades ago, when governments first came together to discuss the problem because the pace of warming in the past decade is 33% faster than in the 1990s.

Greenhouse gas emissions are still rising, while tangible impacts from climate change are already being felt around the world.

But there is some progress. Before Paris, the world was heading for 4.5 degrees Celsius of warming by the end of the century compared to pre-industrial times.

Recent forecasts have that down to 2.6 C, thanks to measures taken or firm commitments governments have already made. That’s far above the 1.5 C limit countries agreed to seven years ago, however, and the time for keeping that target is fast running out.

Researchers say the world has already warmed by 1.2 C and capping temperatures at 1.5 C would require emissions to drop by 43% by the end of the decade, a highly ambitious goal. To get to the less ambitious 2 C goal emissions have to fall 27%.

“The 1.5 degrees is in intensive care and the machines are shaking. So, it is in high danger. But it is still possible,” United Nations Secretary-General Antonio Guterres said. “My objective in Egypt is to make sure that we gather enough political will to make this possibility really moving forward, to make the machines work … We’re getting close to moments where tipping points might, at a certain moment, make it irreversibly impossible to achieve. Let’s avoid it at all costs.”

Energy scramble

Prices for oil, coal and natural gas have jumped since Russia’s invasion of Ukraine. Some countries have responded by trying to tap new sources of fossil fuel.

This has raised concerns about governments backsliding on their commitments to cut emissions, including the agreement at last year’s climate talks to “phase down” the use of coal and sharply reduce the amount of methane — a powerful greenhouse gas — released into the atmosphere.

At the same time, rising fossil fuel prices have made renewable energy more competitive. Building solar and wind power plants remains more expensive for developing countries though. To help them cut their emissions quickly, rich nations are negotiating aid projects known as ‘just transition energy partnerships’, or JET-Ps, with several major emerging economies including Indonesia and India that could be finalized during or shortly after COP27.

Climate finance

One of the big sticking points in past negotiations concerned the financial support poor countries receive from rich nations to cope with climate change.

A deadline to provide $100 billion annually by 2020 was missed and now looks set to be achieved only next year. Future funding needs are likely to be in the trillions, not billions, said Mohamed Nasr, Egypt’s lead negotiator.

“The gap on finance is huge,” he said, noting that half the population of Africa doesn’t yet have access to electricity, much less clean energy.

Developed countries including the United States have also yet to make good on a pledge to double the amount they provide for adaptation, and make that half of the overall funding.

Discussions on climate finance also include the highly contentious issue of countries being compensated for the irreparable harm they’ve suffered as a result of global warming. Big polluters have strongly opposed demands for ‘loss and damage’ payments in the past, but observers say they’ve seen a softening of positions recently, including by the United States.

“I think that people are not expecting miracles in terms of a huge fund just miraculously appearing, but they are expecting a credible, meaningful pathway,” said Inger Andersen, head of the U.N. Environment Programme.

This would give countries that have done very little to cause the climate crisis but are on the front line of dealing with it “something to hold on to,” she said.

Activist voices

Swedish climate activist Greta Thunberg is not coming to this year’s gathering and recently called the U.N. process a “scam.”

Other activists have also voiced frustration at the slow pace of negotiations, given the scale of the threat posed by climate change. But Harjeet Singh of Climate Action Network International said there is no other space where all countries are equal.

“Tuvalu theoretically is as powerful as the U.S. and Malawi as powerful as the European Union,” he said of the talks. “For us as civil society it’s also a place to call out these countries, to call their bluff, to put a spotlight on those polluters and raise our voices.”

University of Maryland social scientist Dana Fisher, who studies the environmental movement, said given Egypt’s authoritarian government and an escalation of in-your-face tactics by frustrated protestors, especially youth, she would not be surprised if there are clashes.

“There’s going to be a vanguard of them who are going to be willing to break the law and engage in probably what will start out as civil disobedience, peaceful civil disobedience,” Fisher said. “And they’re probably going to get beaten up. And it’s going to be very good for mobilizing sympathizers.”

Egypt has insisted that campaigners will have “full opportunity of participation, of activism, of demonstration, of voicing that opinion.”

Eye on Africa

The gathering in Egypt will be the first time since 2016 that U.N. climate talks have taken place in Africa. Experts say it is important the continent gets more attention, given how heavily it is affected by rising temperatures.

“If we look at the 50 countries that are most vulnerable to climate change impacts and who have the least resilience, these are low income countries and most of them are in Africa,” said Preety Bhandari of the World Resources Institute. “So it is fortuitous that we are having this particular COP in Africa to highlight what the vulnerable countries are asking from the climate regime.”

Campaigners say that recognizing the challenges Africa faces and prioritizing the needs of vulnerable countries is essential for a successful outcome this year.
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In South Africa, a country where ‘braai’ all-day barbecuing is a national pastime, plant-based substitutes are making surprising inroads despite a deep cultural love of meat and hostility from the regulator.

That could be heartening for climate scientists, who say shifting diets from emissions-heavy meat and dairy towards more plant-based foods is vital to the fight against climate change.

Plant-based meat substitutes are growing by 6.5% a year and sales are expected to reach $561 million by 2023, according to Research and Markets – more than half Africa’s share of a global market forecast to hit $162 billion by 2030.

That is still pretty niche – South Africans spent $15 billion on meat products in 2018 and is now the world’s 9th biggest per capita consumer of beef.

But the popularity of veggie alternatives would have been unthinkable even a decade ago and the market is outstripping forecast growth for meat. The shift has so unnerved South Africa’s processed meat industry that in June it lobbed for – and got – a government ban on plant-based products using words like ‘nugget’, ‘sausage’ or ‘burger’ on packaging.

The agriculture department at the time said the move was aimed at preventing consumer confusion. A spokesperson did not respond to repeated requests for comment.

Food producers remain undeterred.

At meat processor Feinschmecker, staff pour powdered soy and pea protein into vats and rehydrate them to make its plant-based ‘deli slice’ – called so in anticipation of a ban on labeling it ‘ham’.

“A lot of it’s driven by flexitarianism. People who want to make a bit of an effort to eat less meat,” Alistair Hayward, Feinschmecker managing director, told Reuters.

Top food producer Tiger Brands TBSJ.J bought a stake in meat-substitute start-up Herbivoire in March, while supermarkets like Woolworths WHLJ.J have introduced their own ranges.

Clearly, ethical food choices are a luxury of the relatively well-to-do – a quarter of South Africans struggle to put any food on the table.

Consumer climate

Evidence is accumulating that curbing consumption of meat and dairy – which the latest estimates put at around a fifth of all emissions – is key to meeting U.N. climate goals.

A paper in Science in February said ending animal agriculture could stabilize greenhouse gas levels for 30 years and offset 68% of CO2 emissions this century; another in 2018 showed switching the world to a purely plant-based diet could slash food-related emissions – which are about 30% of the total – by nearly half.

Yet forgoing cheeseburgers is not something governments, many of which dole out billions of dollars to livestock farmers, are likely to propose at this month’s climate talks in Egypt.

Lowering animal consumption, then, may boil down to consumers – like Angie Raphalalani, 57. She gave up meat over climate concerns and her diabetes.

“My immediate family … were shocked,” she said, after lunching at plant-based restaurant Lexi’s Healthy Eatery in Johannesburg. “But probably they’ll follow me. I’m quite influential in their lives.”
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International and regional business leaders from more than 100 financial institutions ended a three-day summit in Hong Kong Thursday that was widely seen as a signal that the territory is back in business after recently lifting some of the world’s toughest COVID-19 restrictions. 

Hosted by the city’s de facto central bank, the Hong Kong Monetary Authority, the gathering of more than 200 financial heavyweights was the largest the city has seen in almost three years.

Consistently ranked as the world’s third-leading financial center behind New York and London, Hong Kong has taken a beating from social unrest, its self-imposed COVID-19 isolation and reputational damage due to a crackdown on dissent. Now, it is hoping to make a comeback.

“We were, we are, and we will remain one of the world’s leading financial centers. And you can take that to the bank,” Hong Kong Chief Executive John Lee told the Global Financial Leaders’ Investment Summit this week.

Controversy

Some U.S. lawmakers, among them Representatives Chris Smith, a senior member of the House Foreign Affairs Committee, Blaine Luetkemeyer, and Lance Gooden, asked executives of major banks to reconsider attending the conference, saying their presence would legitimize China’s clampdown on the city.

Four top executives did not show up for the summit. Capital Group Co.’s Chief Executive Officer Timothy Armour cited health reasons. Blackstone Inc. President Jonathan Gray and Citigroup Inc. CEO Jane Fraser tested positive for COVID, and Barclays Plc. Chief Executive C.S. Venkatakrishnan canceled citing a scheduling conflict.

Most of the other participants, including the chairmen of Goldman Sachs, Morgan Stanley and UBS Group, came, with some expressing confidence in Hong Kong.

China passed the National Security Law in 2020 in response to 2019’s widespread, often disruptive and sometimes violent protests in Hong Kong against a bill aimed at extraditing economic criminals to the mainland. Since the law’s passage, media outlets supportive of the protesters have shut down, and some of their staff, as well as protesters and others, have been arrested on charges of secession, subversion, terrorism or collusion with foreign forces.

The arrests have raised concerns the city is being controlled by Beijing, but Lee and the government have insisted that the One Country, Two Systems formula under which the former British colony is supposed to be governed since it returned to Chinese rule in 1997, is still adhered to.

Lee said in his speech that “the worst is behind us.” He said Hong Kong has restored stability and touted the city’s uniqueness: its proximity and seamless connection with the mainland “that affords Hong Kong advantages available to no other economy.”

Lee also pointed to government policies aimed at boosting Hong Kong’s competitiveness, including a plan to use fiscal reserves to steer economic development, a $3.8 billion fund to attract businesses by co-investing in them, and a plan to lure talent, including by giving visas to graduates from the world’s top 100 universities.

On the comeback trail?

Experts say it must do more or risk being eclipsed by Singapore.

They say that first, the government should drop all COVID-19 restrictions, including the current 0+3 policy, which no longer requires hotel quarantine but still expects visitors to avoid restaurants for the first three days after arriving. If they test positive, they must be quarantined for seven days.

“When I talk to key financial markets, Singapore, the U.K., the U.S., they’ve already gotten rid of all these requirements. Hong Kong is sort of an outlier,” said Sally Wong, chief executive officer of the Hong Kong Investment Funds Association.

“While we are claiming ourselves to be a super connector, connecting to China and to the rest of the world, we cannot live up to this reputation,” she said.

A survey conducted in July by her association found 35% of its responding member fund management companies have moved some or all of their regional or global posts from Hong Kong to other offices, partly due to the COVID-19 policies.

China also needs to allow Hong Kong residents to enter the mainland without having to quarantine, analysts said.

“Hong Kong cannot come back independent from China; it’s not possible. Its business comes from China,” said Andy Xie, a Shanghai-based independent economist. “The real start is when China exits ‘zero-COVID,’ then we can talk about something else.”

Although there are many cross-border setups aimed at enabling investors in mainland China to invest in overseas markets through Hong Kong, and vice versa, stringent requirements need to be eased to make these services a reality, Wong said.

“Right now, the key investments in the mainland are the stock market and property market; the choice of investments are very limited and domestically oriented. With the growth of the middle class, there’s an increasing need to conduct diversified portfolios,” Wong said. “Hong Kong is definitely a key gateway to tap this potential.”

Despite the departure of about 1.5% of Hong Kong’s population, 98.5% of its people are staying, and the city continues to see mainland Chinese people and young professionals from elsewhere moving to Hong Kong.

Watching TV news reports about the summit, Hong Kong hair stylist Fang Du said holding the conference is a good idea, but the worst might not be over for Hong Kong. The territory saw three consecutive quarters of negative growth this year, with the economy shrinking 4.5% in the third quarter. Like many residents, she’s hoping Hong Kong’s situation will improve soon.

“Everyone wants their country to do better. … I’m confident in Hong Kong’s future,” Du said.

Combining business with entertainment, the Hong Kong Sevens, a annual international rugby tournament, opened this Friday, the first time since COVID hit.

While encouraging the financial executives to enjoy the Sevens, Lee made a final push for the goal post with his message to them. 

“Opportunity and timing, right here, right now in Hong Kong,” Lee said. “This is the moment you have been waiting for. Go for it. Get in front, not behind.”
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America’s employers kept hiring briskly in October, adding a substantial 261,000 positions, a sign that as Election Day nears, the economy remains a picture of solid job growth and painful inflation.

Friday’s government report showed that last month’s hiring remained near the robust pace it has maintained in the two-plus years since the pandemic recession ended. The unemployment rate rose to 3.7% from a five-decade low of 3.5%.

A strong job market is deepening the challenges the Federal Reserve faces as it raises interest rates at the fastest pace since the 1980s to try to bring inflation down from near a 40-hear high. Steady hiring, solid pay growth and a low unemployment rate have been good for workers. But they have also contributed to rising prices.

The October jobs figures were the last major economic report before Election Day, with voters keenly focused on the state of the economy and on their own financial lives.

Chronic inflation is hammering the budgets of many households and has shot to the top of voter concerns in the midterm congressional elections that will end Tuesday. Republican candidates across the country have attacked Democrats over inflation in their drive to regain control of Congress.

All the jobs that employers have added since the recession ended have boosted the ability of consumers to keep spending, even amid high inflation. A labor shortage in many areas of the economy also compelled businesses to pay more to attract and keep workers.

President Joe Biden and congressional Democrats have pointed to the vigorous resurgence in hiring as evidence that their policies have helped get Americans back to work faster than the nation managed to do after previous downturns. But that message has been overtaken in the midterm political campaigns by the crushing surge of inflation, which has soured many Americans on the economy under Democratic leadership in Congress and the White House.

Signs are growing that the economy has begun to flag under the weight of much higher borrowing costs engineered by the Fed’s aggressive interest rate hikes. Especially in industries like housing and technology, hiring has waned. Some tech companies, like the ride-hailing firm Lyft and the payment company Stripe. have announced plans to lay off workers. Amazon said Thursday it would suspend its corporate hiring.

Still, despite such high-profile announcements, the pace of layoffs across the broader economy remains unusually low. And companies in travel, restaurants, manufacturing and health care are still hiring steadily. Southwest Airlines told investors last week that it was on track to hire 10,000 employees this year, including 1,200 pilots. Laboratory Corporation of America said it plans significant hiring.

At a news conference Wednesday, Fed Chair Jerome Powell noted that the strong job market is feeding inflationary pressures as businesses continue to raise pay. In September, average wages rose more than 6% from 12 months earlier, according to the Federal Reserve Bank of Atlanta. That was the fastest such pace in 40 years, though it still trailed inflation.

Wages tend to follow inflation higher as workers seek to keep up with price increases. Those pay raises, in turn, can keep inflation high if companies pass on at least part of their higher labor costs to their customers in the form of higher prices.

Powell spoke after the Fed announced a fourth straight three-quarter-point increase in its benchmark rate. It was the latest in a series of unusually large hikes that have made mortgages and other consumer and business loans increasingly costly and heightened the risk of a recession.

The Fed’s policymakers did open the door to the possibility of a smaller rate hike when they next meet in December. But Powell also said that in order to tame inflation, the Fed would likely have to raise rates high enough to weaken the job market. That could mean that hiring will slow in coming months or even that many employers will cut jobs and increase the unemployment rate.

So far this year, the Fed has raised its key short-term rate six times — from near zero in early March to a range of 3.75% to 4%, the highest level in 14 years.

Housing has, so far, absorbed the worst damage from higher borrowing costs. The Fed’s rate hikes have sent average long-term mortgage rates surging to around 7%, the highest level in two decades. Home sales have cratered as a result, and once-soaring home prices have started to slow.

For now, the economy is still growing. It expanded at a 2.6% annual rate in the July-September quarter after having contracted in the first six months of the year. But much of last quarter’s growth was due to a spike in U.S. exports. By contrast, consumers — the primary driver of the economy — only modestly increased their spending beyond the rate of inflation.

With inflation still painfully high and the Fed making borrowing increasingly expensive for consumers and businesses, most economists expect a recession by early next year.
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Nigeria’s currency, the naira, has dropped to a record low against the U.S. dollar as Nigerians scramble to buy U.S. currency ahead of a redesign of naira notes. Nigerian authorities say replacing the notes will reduce inflation, combat counterfeiting and bring more money into circulation. But security and economic experts warn the move could damage Nigeria’s economy. 

It’s been just over a week since the Central Bank of Nigeria (CBN) announced its plan to redesign the country’s highest paper denominations – the 200-, 500- and 1,000-naira notes.

Tijani Salisu, a black-market dealer of foreign currencies, said the demand for U.S. dollars has jumped since the announcement. On Thursday, the naira traded at 860 to the dollar, nearly double the official bank rate. 

“People are coming with the naira to buy dollars and keep because of this situation,” Salisu said. “And if you go to the bank to withdraw dollars, you can’t find dollars in the bank.”

The new naira notes will begin circulating in mid-December, and the old notes will cease to be legal tender by the end of January, according to the CBN.

The central bank says the move will put more money in circulation. Currently, an estimated 85% of all money in Nigeria is stashed away in homes, outside the banking system.

The CBN also says the new notes will help authorities curb fake currencies in circulation and keep criminals in check.

Experts fault the timing of the decision. Economist and head of the Center for Social Justice, Eze Onyekpere, said with the holiday season and elections set for next year, the decision could harm Nigeria’s economy.

“This intervention is very wrongly timed, and it appears to address a challenge for which it cannot provide a solution,” he said. “We’re discussing 15th December which is very close to the festive season of Christmas and new year and the height of commerce. It’s not a particularly good period where you start asking people to pay in their money. Normally this should take between three to six months; there’s no need to stampede people.”

Last Friday, the International Monetary Fund (IMF) warned authorities to be cautious and not allow the decision to affect the confidence citizens have in the local currency and financial institutions. 

Mike Ejiofor, a former director of the Department of State Services, said the redesigning of the currency can do the country much good, even though there might be initial hurdles to cross.

“For me, I think it’s a welcome development and the timing for me is most appropriate,” he said. “Don’t also forget that some kidnappers have monies stashed in their houses. It will also help the regulatory agencies, security agencies monitor inflow and outflow of cash. If these monies are withdrawn, the tendencies of politicians to go and buy votes will not be there. It will make the naira appreciate.”

Exchanging the old tender for the new will be especially hard for Nigerians in rural areas who do not have easy access to banking services. Experts say that unless the CBN changes its timetable, more than 40% of Nigerians could lose their life savings when the old notes expire early next year.
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The Federal Reserve, which serves as the U.S. central bank, raised its benchmark interest rate Wednesday by three-quarters of a point for a fourth straight time but hinted that it could soon reduce the size of its rate hikes.

The Fed’s move raised its key short-term rate to a range of 3.75% to 4%, its highest level in 15 years. It was the central bank’s sixth rate hike this year — a streak that has made mortgages and other consumer and business loans increasingly expensive and heightened the risk of a recession.

The persistence of inflated prices and higher borrowing costs has undercut the ability of Democrats to campaign on the robust health of the job market as they try to maintain control of Congress. Republican candidates have hammered Democrats on the punishing impact of inflation in the run-up to the midterm elections that will end Tuesday.

The Fed’s statement Wednesday was released after its latest policy meeting. Many economists expect Chair Jerome Powell to signal at a news conference that the Fed’s next expected rate hike in December may be only a half-point rather than three-quarters.

Typically, the Fed raises rates in quarter-point increments. But after having miscalculated in downplaying inflation last year as likely transitory, Powell has led the Fed to raise rates aggressively to try to slow borrowing and spending and ease price pressures.

Wednesday’s latest rate increase coincided with growing concerns that the Fed may tighten credit so much as to derail the economy. The government has reported that the economy grew last quarter, and employers are still hiring at a solid pace. But the housing market has cratered, and consumers are barely increasing their spending.

One reason the Fed’s policymakers might feel they can soon slow the pace of their rate hikes is that some early signs suggest that inflation could start declining in 2023. Consumer spending, squeezed by high prices and costlier loans, is barely growing. Supply chain snarls are easing, which means fewer shortages of goods and parts. Wage growth is plateauing, which, if followed by declines, would reduce inflationary pressures.

Still, the job market remains consistently strong, which could make it harder for the Fed to cool the economy and curb inflation. On Tuesday, the government reported that companies posted more job openings in September than in August. There are now 1.9 available jobs for each unemployed worker, an unusually large supply.

A ratio that high means that employers will likely continue to raise pay to attract and keep workers. Those higher labor costs are often passed on to customers in the form of higher prices, thereby fueling more inflation.
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German Chancellor Olaf Scholz is scheduled to meet with China’s Xi Jinping on Friday. Scholz heads a delegation of business executives as the first EU leader to visit China since the start of the COVID-19 pandemic. The visit comes less than two weeks after China’s leader Xi Jinping secured an unprecedented third term.

VOA’s Mandarin Service interviewed Joerg Wuttke, president of the European Union Chamber of Commerce in China, on October 27. Wuttke, who has spent some 30 years in China, is a respected observer of the world’s second largest economy who says that Xi Jinping clearly is picking a senior counsel of loyalists, and some have substantially less experience going into their positions than their predecessors. Wuttke says that has increased uncertainty over how they will handle their new leadership responsibilities at a challenging time for China’s economy.

This interview has been edited for length and clarity.

VOA Mandarin: Obviously this big moment has passed. The Party’s Congress is now behind us. What was your first impression or first reaction to the members, to the names of the new Politburo Standing Committee and the Politburo?

Joerg Wuttke: It was definitely a surprise. We have greater clarity now; it is obviously Xi Jinping calling the shots to an extent which we didn’t see before. He has aligned a group of people that are totally loyal to him. We have basically left the sphere of achievements and meritocracy. It is all about loyalty. And we have to see where this group of people are leading China.

VOA: The premiership goes to Li Qiang, who is currently the Shanghai party chief. Tell us about your impression of Li Qiang.

Wuttke: Well, I never met Li Qiang, but what actually concerns me more than an individual is the fact that since 1988 we have never seen a prime minister coming into office that did not shadow his predecessor. So, in a way, we have for the first time someone, who is running a city, becoming head of the state council, which of course is a totally different ship to maneuver. So, I guess that’s going to be very difficult. Also, the head for the economy, Mr. Xuexiang Ding, will be someone who is not acquainted with business.

VOA: Other than Li Qiang as the prime minister, there are some other important people to replace current members of Xi Jinping’s economic team. How about those people?

Wuttke: Yeah, we are in a turbulent time here. We have a real estate crisis. We have a severe impact from U.S. sanctions. We have an increase in debt burden in localities as well as the uncertainty about when are we getting out of this COVID lockdown. It would be great to have a stable and good communicative team at the economic front in order to tell the market where we’re heading. And we don’t. We are basically entering a period of uncertainty. But the uncertainty is by design. The president decided to have a group of loyalists with him in the Politburo. So, let’s see at the end of the day and whatever happens or does not happen is under the watch of President Xi.

VOA: I think on another occasion you spoke with other news media, you talked about how the Chinese Communist Party is not monolithic. There are a variety of views. Some are more liberal, more pro-market and others like Xi Jinping himself are more pro-state. After this reshuffle, the change of guard, do you think there will be more liberal voice in the next administration?

Wuttke: Well, there always will be different voices and the fifty shades of grey about where to steer the country. But it’s very clear in (Xi’s) speech (before the party congress) already. (Xi Jinping) mentioned Karl Marx 15 times. He mentioned the market three times, and it was clearly indicating that he expects international tensions. He mentioned struggle 17 times and 12 times in the context of international affairs. So, he’s preparing the country for struggle, and struggle means … uncertainty and difficult times. He’s trying to obviously rally the population behind him. And we have to see what that leads to. We have an engagement with (German) Chancellor Scholtz next week. The German chancellor coming might give an indicator if Xi Jinping wants to engage with foreign countries, with Europe in particular, as he has been off the scale for 1,000 days. (It) will be very interesting to see how this kind of vision of struggle translates into engagement with foreign leaders. Is he trying to accommodate? Is he trying to reconnect with them in positive terms? Or is that going to be all about, you know, struggle and offense in a way?

VOA: Compared to four or five months ago, are you now more pessimistic or you are about the same or more optimistic for the next, say, three or five years?

Wuttke: I think my struggle is I’m trying to be realistic in order to (see) which direction this might go. We have not entered the space where we know where we’re heading. I have been here for about 30 years. I grew up in opening up mode by Deng Xiaoping. My first Party Congress I witnessed personally was in 1982, where Deng Xiaoping was clearly trying to integrate China, opening up and so forth. But maybe at the tail end of my career in China, I have to witness China actually closing up again to some extent. So, in a way, it’s full circle which is, of course, disappointing. But at the same time, it’s their country, their choice.

VOA: Do you see decoupling down the road? How confident are you, as a member of the business community, about this new leadership particularly on the economic side?

Wuttke: Decoupling is hard to achieve because China is the globalization story, meaning that China is deeply embedded in many, many markets. But decoupling is in the cards (and) can only be achieved in small incremental steps. Luckily, because we want to remain coupled up. We want to be connected. So, in a way, we have a situation where, when you talk about struggle, when you talk about self-reliance, that is a strong indicator that China actually actively wants to decouple. That would be very sad. I think it would actually mean lower growth potential and certainly will also have a negative impact on the global economy. Is it going to end up there? I’m not sure, but certainly we will see some baby steps in that direction. Let’s hope that pragmatism and reason prevail because we have too much to lose, frankly, if we do decouple.

VOA: Are foreign businesses, like European businesses as well as American businesses, are we going to see more like a retreat? Are we going to see more people leaving China?

Wuttke: We see more people leaving China, that’s clear. We don’t see people from business leaving in the sense (of) companies leaving. We see more engagement on the top 10, for example, of European companies. That’s primarily German. That’s primarily cars, chemicals, mechanicals, machineries. Because there’s no other China, there’s no other choice. They have to be here, and they have to be there more engaged even.

But then 10 companies don’t necessarily stand for 1,800 members that European Chamber is representing. We have not seen companies moving away and I don’t expect this, but what we have noticed is that new investment, new additional activities from those companies that normally would come up in China has been rerouted to other regions. So, we see more interest into Thailand, into Southeast Asia, into India, but even closer to home, Turkey and Eastern Europe, for the simple fact that executives can fly in and out easily. They have also realized that the World Bank has predicted China to grow this year 2.8 percent and the rest of Asia 5.3 percent. These leaders follow the money and, hence, there will not be an exodus of European business from China. But we will definitely be underachiever given the potential of this economy.

VOA: In your opinion, do you think the Chinese leadership, particularly Xi Jinping himself and his other senior advisers, are aware of the situation that their economy is not in good shape and foreign businesses are leaving, or at least putting (new) investments on hold?

Wuttke: I think they must be aware of this, that they have smart ministries and consultants and advisers. But again, if you have a totally different policy approach, then actually, you know, foreign business doesn’t mean too much to you. Yes, you needed it in order to make sure that you can close the technology gap. But he had made it very clear that his focus is on state-owned enterprises. His primary goal is not necessarily growth. It is about security, stability. It’s about wealth distribution. It’s about common prosperity. In a way, they go more for stability and are willing to pay an economic price for it.

VOA: You said that it’s end of an era for China.

Wuttke: Yes. Clearly, Jiang Zemin, Hu Jintao’s era was the era where it was all about integrating China peacefully. It was all about getting rich first and powerful later. But now basically, as Mao unified China and Deng Xiaoping made it rich, it seems like that Xi Jinping focus is really making China powerful.

Adrianna Zhang contributed to this report.
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Authoritarian regimes are significantly overstating their GDP (gross domestic product) growth, according to new research that uses satellite images of countries at night as a proxy for economic activity.

The report estimates that autocracies exaggerate yearly GDP growth by about 35% relative to democracies.

Rosier picture

The research starts from a central premise: that all leaders, whether in democracies or dictatorships, want to boast of a booming economy.

“Everyone would always want to paint a rosier picture,” report author Luis Martinez of the University of Chicago told VOA. “The crucial difference is that in a democracy you have a whole network of checks and balances that restrains this behavior somewhat.

“For instance, you have the media scrutinizing the numbers. You have the opposition in the legislature also asking questions. Nowadays, in many settings we have freedom of information requests. The underlying hypothesis is that when we start looking at undemocratic regimes, these checks and balances start to become largely absent,” Martinez told VOA.

Night lights

So how to measure economic growth when you can’t trust the government numbers? Research indicates that satellite images showing the intensity of electric lights at night are a close proxy for economic activity.

A common example is the nighttime satellite view of the Korean peninsula. Much of South Korea, a democracy, is lit up brightly. North Korea – whose economy under dictator Kim Jong-un is around 60 times smaller than that of its southern neighbor – is mostly black, the frontier clearly visible by the change in luminosity.

“As an economy develops, things get built, like infrastructure, streetlights, homes, industries,” Martinez said.

Martinez used the “Freedom in the World” index produced by the non-governmental organization Freedom House as a measure of a nation’s democracy. He then compared official GDP figures to the economic growth implied by the satellite images of nighttime luminosity.

“What I find is that, say, you take two countries and in these two countries the nighttime lights grow by the same amount. And it happens that one of them is more democratic than the other. It turns out that that same amount of growth in lights translates into lower reported GDP growth in the more democratic country,” Martinez said.

Economic exaggeration

His study observed GDP figures and satellite data for 184 countries over 20 years, up to 2013.

The research looked at whether the type of economic activity taking place, such as agriculture or hydrocarbon extraction, would impact the intensity of nighttime lights. Martinez also investigated whether poorer data collection and reporting in autocracies could skew the results.

Even controlling for such factors, Martinez said the pattern was clear: Dictatorships overstate their GDP growth.

“When we compare the more stable, credible democracies to the more authoritarian regimes, we’re talking about something in the range of 30% to 35%. What that means for instance, is that if the true growth rate is 1%, the authoritarian regime will report the growth rate of 1.3%,” Martinez told VOA.

Foreign aid

Martinez said foreign aid programs also appear to influence a country’s willingness to overstate its GDP, according to his satellite analysis.

“Many of the poorest countries in the world receive a lot of foreign aid. But once they reach a certain level of income – once they become rich enough – they graduate out of that program, they become ineligible.

“And so of course you can imagine that when you have a lot of money coming in because the country’s relatively poor, you don’t have a strong incentive to overstate growth, and to say that you’re doing really well. So indeed I find that it’s only once poor countries graduate and become ineligible for foreign aid, that these (patterns) start to appear,” Martinez told VOA.

China

China’s authoritarian leader Xi Jinping was sworn in for another five-year term last week. Martinez’s model suggests Beijing may have overstated GDP growth by a third over the past two decades, making its economy far smaller than claimed.

A report published by the Brookings Institution in 2019 suggested that China had been overstating its economic growth by about 2% every year, making its economy 12% smaller than official figures then claimed.

China denies manipulating economic data.

Beijing delayed the release of its 2022 third quarter growth figures without explanation, coinciding with the Communist Party congress. The figures were eventually released in late October, claiming year-on-year quarterly growth of 3.9%, exceeding analysts’ forecasts.
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Several dictators are significantly overstating economic growth, according to research which looks at satellite images of countries at night. As Henry Ridgwell reports, economists have long questioned the reliability of data from autocratic regimes – including China.
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Thousands of demonstrators defied an official ban to march Saturday against the deployment of new water storage infrastructure for agricultural irrigation in western France, some clashing with police.

Clashes between paramilitary gendarmes and demonstrators erupted with Interior Minister Gerald Darmanin reporting that 61 officers had been hurt, 22 seriously.

“Bassines Non Merci,” which organized the protest, said around 30 demonstrators had been injured. Of them, 10 had to seek medical treatment and three were hospitalized.

The group brings together environmental associations, trade unions and anti-capitalist groups against what it claims is a “water grab” by the “agro-industry” in western France.

Local officials said six people were arrested during the protest and that 4,000 people had turned up for the banned demonstration. Organizers put the turnout at 7,000.

The deployment of giant water “basins” is underway in the village of Sainte-Soline, in the Deux-Sevres department, to irrigate crops, which opponents claim distorts access to water amid drought conditions.

Around 1,500 police were deployed, according to the prefect of the Deux-Sevres department Emmanuelle Dubee.

Dubee said Friday she had wanted to limit possible “acts of violence,” referring to the clashes between demonstrators and security forces that marred a previous rally in March. 

The Sainte-Soline water reserve is the second of 16 such installations, part of a project developed by a group of 400 farmers organized in a water cooperative to significantly reduce water usage in the summer.

The open-air craters, covered with a plastic tarpaulin, are filled by pumping water from surface groundwater in winter and can store up to 650,000 square meters of water. 

This water is used for irrigation in summer, when rainfall is scarcer. 

Opponents claim the “mega-basins” are wrongly reserved for large export-oriented grain farms and deprive the community of access to essential resources.
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Heat waves, intensified by climate change, have cost the global economy trillions of dollars in the past 30 years, a study published Friday found, with poor countries paying the steepest price.

And those lopsided economic effects contribute to widening inequalities around the world, according to the research. 

“The cost of extreme heat from climate change so far has been disproportionately borne by the countries and regions least culpable for global warming,” Dartmouth College professor Justin Mankin, one of the authors of the study published in the journal Science Advances, told AFP. “And that’s an insane tragedy.”

“Climate change is playing out on a landscape of economic inequality, and it is acting to amplify that inequality,” he said.

Periods of extreme heat cost the global economy about $16 trillion between 1992 and 2013, the study calculated. 

But while the richest countries have lost about 1.5% of their annual per capita GDPs dealing with heat waves, poorer countries have lost about 6.7% of their annual per capita GDPs. 

The reason for that disparity is simple: poor countries are often situated closer to the tropics, where temperatures are warmer anyway. During heat waves, they become even hotter.

The study comes just days ahead of the start of the COP27 climate summit in Egypt, where the question of compensation for countries that are disproportionately vulnerable to but least responsible for climate change is expected to be one of the key topics. 

The costs of heat waves come from several factors: effects on agriculture, strains on health systems, less productive workforces and physical damage to infrastructure, such as melting roads. 

Study researchers examined five days of weather considered extreme for a specific region each year. 

“The general idea is to use variation in extreme heat, which is effectively randomly assigned to all these economic regions and see the extent to which that accounts for variation in economic growth” in a given region, Mankin explained. 

“Then the second part is to say, ‘OK, how has human-caused warming influenced extreme heat?'” he added.

Despite these calculations, the study results almost certainly underestimate the true cost of extreme heat, according to the paper — only studying five days per year does not reflect the increased frequency of such heat events, and not all potential costs were included. 

Previous studies on the subject had focused on the costs of heat to specific sectors, though scientists say it is important to look at the price tag of climate change wholistically. 

“You want to know what those costs are, so that you have a frame of reference against which to compare the cost of action,” Mankin said, such as establishing cooling centers or installing air conditioners, versus “the cost of inaction.”

“The dividends economically of responding to the five hottest days of the year could be quite great,” he said.

But according to Mankin, the most important response is to reduce carbon emissions to slow global warming at the source. 

“We need to adapt to the climate we have now, and we also need to deeply invest in mitigation,” he said.
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On Oct. 4, Elon Musk reversed himself and offered to honor his original proposal to buy Twitter for $44 billion — a deal he had spent the previous several months trying to wriggle out of. He posted a video of himself arriving at Twitter headquarters Wednesday, and Thursday evening new outlets announced the deal had been completed and Musk had fired at least two top Twitter executives.

If the case has your head spinning, here’s a quick guide to the major events in the saga featuring the billionaire Tesla CEO and the social platform.

January 31: Musk starts buying shares of Twitter in near-daily installments, amassing a 5% stake in the company by mid-March.

March 26: Musk, who has tens of millions of Twitter followers and is active on the site, says he is giving “serious thought” to building an alternative to Twitter, questioning the platform’s commitment to “free speech” and whether Twitter is undermining democracy. He also privately reaches out to Twitter board members including his friend and Twitter co-founder Jack Dorsey.

March 27: After privately informing Twitter of his growing stake in the company, Musk starts conversations with its CEO and board members about potentially joining the board. Musk also mentions taking Twitter private or starting a competitor, according to later regulatory filings.

April 4: A regulatory filing reveals that Musk has rapidly become the largest shareholder of Twitter after acquiring a 9% stake, or 73.5 million shares, worth about $3 billion.

April 5: Musk is offered a seat on Twitter’s board on the condition he amass no more than 14.9% of the company’s stock. CEO Parag Agrawal said in a tweet that “it became clear to us that he would bring great value to our Board.”

April 9: After exchanging pleasantries and bonding by text message over their love of engineering, a short-lived relationship between Agrawal and Musk sours after Musk publicly tweets “Is Twitter dying?” and gets a message from Agrawal calling the criticism unhelpful. Musk tersely responds: “This is a waste of time. Will make an offer to take Twitter private.”

April 11: Twitter CEO Parag Agrawal announces Musk will not be joining the board after all.

April 14: Twitter reveals in a securities filing that Musk has offered to buy the company outright for about $44 billion.

April 15: Twitter’s board unanimously adopts a “poison pill” defense in response to Musk’s proposed offer, attempting to thwart a hostile takeover.

April 21: Musk lines up $46.5 billion in financing to buy Twitter. Twitter board is under pressure to negotiate.

April 25: Musk reaches a deal to buy Twitter for $44 billion and take the company private. The outspoken billionaire has said he wanted to own and privatize Twitter because he thinks it’s not living up to its potential as a platform for free speech.

April 29: Musk sells roughly $8.5 billion worth of shares in Tesla to help fund the purchase of Twitter, according to regulatory filings.

May 5: Musk strengthens his offer to buy Twitter with commitments of more than $7 billion from a diverse group of investors including Silicon Valley heavy hitters like Oracle co-founder Larry Ellison.

May 10: In a hint at how he would change Twitter, Musk says he’d reverse Twitter’s ban of former President Donald Trump following the Jan. 6, 2021 insurrection at the U.S. Capitol, calling the ban a “morally bad decision” and “foolish in the extreme.”

May 13: Musk declares his plan to buy Twitter “temporarily on hold.” Musk says he needs to pinpoint the number of spam and fake accounts on the social media platform. Shares of Twitter tumble, while those of Tesla rebound sharply.

June 6: Musk threatens to end his $44 billion agreement to buy Twitter, accusing the company of refusing to give him information he requested about its spam bot accounts.

July 8: Musk says he will abandon his offer to buy Twitter after the company failed to provide enough information about the number of fake accounts.

July 12: Twitter sues Musk to force him to complete the deal. Musk soon countersues.

July 19: A Delaware judge says the Musk-Twitter legal dispute will go to trial in October.

August 23: A former head of security at Twitter alleges the company misled regulators about its poor cybersecurity defenses and its negligence in attempting to root out fake accounts that spread misinformation. Musk eventually cites the whistleblower as a new reason to scuttle his Twitter deal.

October 5: Musk offers to go through with his original proposal to buy Twitter for $44 billion. Twitter says it intends to close the transaction after receiving Musk’s offer.

October 6: Delaware judge delays Oct. 17 trial until November and gives both sides until Oct. 28 to reach agreement to close the deal.

October 20: The Washington Post reports that Musk told prospective Twitter investors that he plans to lay off 75% of the company’s 7,500 employees.

October 26: Musk posts a video of himself entering Twitter headquarters carrying a kitchen sink, indicating that the deal is set to go through.

October 27: In a message to advertisers, Musk says Twitter won’t become a “free-for-all hellscape.”  News organizations report the deal to buy Twitter has been completed.
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Elon Musk became Twitter Inc’s new owner on Thursday, firing top executives he had accused of misleading him and providing little clarity over how he will achieve the lofty ambitions he has outlined for the influential social media platform.

The CEO of electric car maker Tesla Inc TSLA.O has said he wants to “defeat” spam bots on Twitter, make the algorithms that determine how content is presented to its users publicly available, and prevent the platform from becoming an echo chamber for hate and division, even as he limits censorship.

Yet Musk has not offered details on how he will achieve all this and who will run the company. He has said he plans to cut jobs, leaving Twitter’s approximately 7,500 employees fretting about their future. He also said on Thursday he did not buy Twitter to make more money but “to try to help humanity, whom I love.”

Musk terminated Twitter Chief Executive Parag Agrawal, Chief Financial Officer Ned Segal and legal affairs and policy chief Vijaya Gadde, according to people familiar with the matter. He had accused them of misleading him and Twitter investors over the number of fake accounts on the social media platform.

Agrawal and Segal were in Twitter’s San Francisco headquarters when the deal closed and were escorted out, the sources added.

Twitter, Musk and the executives did not immediately respond to requests for comment.

The $44-billion acquisition is the culmination of a remarkable saga, full of twists and turns, that sowed doubt over whether Musk would complete the deal. It began on April 4, when Musk disclosed a 9.2% stake in the San Francisco company, making him its largest shareholder.

The world’s richest person then agreed to join Twitter’s board, only to balk at the last minute and offer to buy the company instead for $54.20 per share, an offer that Twitter was unsure whether to interpret as another of Musk’s cannabis jokes.

Musk’s offer was real, and over the course of just one weekend later in April, the two sides reached a deal at the price he suggested. This happened without Musk carrying out any due diligence on the company’s confidential information, as is customary in an acquisition.

In the weeks that followed, Musk had second thoughts. He complained publicly that he believed Twitter’s spam accounts were significantly higher than Twitter’s estimate, published in regulatory filings, of less than 5% of its monetizable daily active users. His lawyers then accused Twitter of not complying with his requests for information on the subject.

The acrimony resulted in Musk giving notice to Twitter on July 8 that he was terminating their deal on the grounds that Twitter misled him on the bots and did not cooperate with him. Four days later, Twitter sued Musk in Delaware, where the company is incorporated, to force him to complete the deal.

By then, shares of social media companies and the broader stock market had plunged on concerns that the Federal Reserve’s interest rate hikes, as it seeks to fight inflation, will push the U.S. economy into recession. Twitter accused Musk of buyer’s remorse, arguing he wanted to get out of the deal because he thought he overpaid.

Most legal analysts said Twitter had the strongest arguments and would likely prevail in court. Their view did not change even after Twitter’s former security chief Peiter Zatko stepped forward as a whistleblower in August to allege that the company failed to disclose weaknesses in its security and data privacy.

On Oct. 4, just as Musk was set to be deposed by Twitter’s lawyers ahead of the start of their trial later in the month, he performed another u-turn and offered to complete the deal as promised. The Delaware judge gave him an Oct. 28 deadline to close the transaction and avoid the trial.

‘Chief Twit’

Since then, Musk has indulged the deal hype. He walked into Twitter’s headquarters on Wednesday with a big grin and carrying a porcelain sink, subsequently tweeting “let that sink in.” He changed his description in his Twitter profile to “Chief Twit.”

He also tried to calm fears among employees that major layoffs are coming and assured advertisers that his past criticism of Twitter’s content moderation rules would not harm its appeal.

“Twitter obviously cannot become a free-for-all hellscape, where anything can be said with no consequences!” Musk said in an open letter to advertisers on Thursday.

Musk has indicated he sees Twitter as a foundation for creating a “super app” that offers everything from money transfers to shopping and ride hailing.

“The long-term potential for Twitter in my view is an order of magnitude greater than its current value,” Musk said on Tesla’s call with analysts on Oct 19.

But Twitter is struggling to engage its most active users who are vital to the business. These “heavy tweeters” account for less than 10% of monthly overall users but generate 90% of all tweets and half of global revenue.

Musk said in May he would reverse the ban on Donald Trump, who was removed after the attack on the U.S. Capitol, although the former U.S. President Donald Trump has said he won’t return on the platform. He has instead launched his own social media app, Truth Social.
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The European Central Bank piled on another outsized interest rate hike aimed at squelching out-of-control inflation, increasing rates Thursday at the fastest pace in the euro currency’s history and raising questions about how far the bank intends to go with the threat of recession looming over the economy.

The 25-member governing council raised its interest rate benchmarks by three-quarters of a percentage point at a meeting in Frankfurt, matching its record increase from last month and joining the U.S. Federal Reserve in making a series of rapid hikes to tackle soaring consumer prices.

“Inflation remains far too high and will stay above our target for an extended period,” ECB President Christine Lagarde told reporters after the meeting. Bank policymakers “expect to raise interest rates further to ensure the timely return of inflation” to the 2% target.

She pointed to continued rate hikes despite the bank expecting “further weakening in the remainder of this year and the beginning of next year.”

The ECB has now raised rates for the 19-country euro area by a full 2 percentage points in just three months, distance that took 18 months to cover during its last extended hiking phase in 2005-2007 and 17 months in 1999-2000.

Central banks around the world are rapidly raising interest rates that steer the cost of credit for businesses and consumers. Their goal is to halt galloping inflation fueled by high energy prices tied to Russia’s war in Ukraine, post-pandemic supply bottlenecks, and reviving demand for goods and services after COVID-19 restrictions eased. The Fed raised rates by three-quarters of a point for the third straight time last month.

Quarter-point increases have usually been the norm for central banks. But that was before inflation spiked to 9.9% in the eurozone, fueled by higher prices for natural gas and electricity after Russia cut off most of its gas supplies during the war in Ukraine.

Inflation in the U.S. is near 40-year highs of 8.2%, fueled in part by stronger growth and more pandemic support spending than in Europe.

Inflation robs consumers of purchasing power, leading many economists to pencil in a recession for the end of this year and the beginning of next year in both the U.S. and the 19 countries that use the euro as their currency.

Some analysts foresee a half-point increase at the last rate-setting meeting of the year in December and think the bank may pause after that.

The ECB predicts inflation falling to 2.3% by the end of 2024.

Higher rates can control inflation by making it more expensive to borrow, spend and invest, lowering demand for goods. But the concerted effort to raise rates has also raised concerns about their impact on economic growth and on markets for stocks and bonds. Years of low rates on conservative investments have pushed investors toward riskier holdings such as stocks, a process that is now going into reverse, while rising rates can lower the value of existing bond holdings.

The head of the International Monetary Fund, Kristalina Georgieva, has warned that tightening monetary policy “too much and too fast” raises the risk of prolonged recessions in many economies. The IMF forecasts that global economic growth will slow from 3.2% this year to 2.7% next year.

The ECB also must keep an eye on the euro’s sagging value against the U.S. dollar, although the ECB says it does not target any particular exchange rate. A weaker euro worsens inflation by raising the price of imported goods. The euro rose above parity with the dollar on Wednesday but remains near its lowest levels in 20 years.

Reasons for the dropping exchange rate include higher U.S. interest rates that attract money into investments priced in dollars and, more broadly, the dwindling prospects for Europe’s economy. Europe is facing headwinds from the loss of cheap Russian natural gas and an economic slowdown in key trade partner China.

ECB rate hikes, other things being equal, could support the euro by lessening the interest rate gap with the U.S.

The ECB’s benchmark for short-term lending to banks now stands at 2%, a level last seen in March 2009.
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The U.S. economy grew at a 2.6% annual rate from July through September, snapping two straight quarters of economic contraction and overcoming punishingly high inflation and interest rates.

Thursday’s estimate from the Commerce Department showed that the nation’s gross domestic product — the broadest gauge of economic output — grew in the third quarter after having shrunk in the first half of 2022. Stronger exports and steady consumer spending, backed by a healthy job market, helped restore growth to the world’s biggest economy.

Still, the outlook for the economy has darkened. The Federal Reserve has aggressively raised interest rates five times this year to fight chronic inflation and is set to do so again next week and in December. Chair Jerome Powell has warned that the Fed’s hikes will bring “pain” in the form of higher unemployment and possibly a recession.

The government’s latest GDP report comes as Americans, worried about inflation and the risk of recession, have begun to vote in midterm elections that will determine whether President Joe Biden’s Democratic Party retains control of Congress. Inflation has become a signature issue for Republican attacks on the Democrats’ stewardship of the economy.

With inflation still near a 40-year high, steady price spikes have been pressuring households across the country. At the same time, rising interest rates have derailed the housing market and are likely to inflict broader damage over time. The outlook for the world economy, too, grows bleaker the longer that Russia’s war against Ukraine drags on.

Last quarter’s U.S. economic growth reversed annual declines of 1.6% from January through March and 0.6% from April through June. Consecutive quarters of declining economic output are one informal definition of a recession. But most economists have said they believe the economy skirted a recession, noting the still-resilient job market and steady spending by consumers. Most of them have expressed concern, though, that a recession is likely next year as the Fed steadily tightens credit.

Preston Caldwell, head of U.S. economics for the financial services firm Morningstar, noted that the economy’s contraction in the first half of the year was caused largely by factors that don’t reflect its underlying health and so “very likely did not constitute a genuine economic slowdown.” He pointed, for example, to a drop in business inventories, a cyclical event that tends to reverse itself over time.

Higher borrowing costs have weakened the home market, in particular. The average rate on a 30-year fixed-rate mortgage, just 3.09% a year ago, is approaching 7%. Sales of existing homes have fallen for eight straight months. Construction of new homes is down nearly 8% from a year ago. 

Still, the economy retains pockets of strength. One is the vitally important job market. Employers have added an average of 420,000 jobs a month this year, putting 2022 on track to be the second-best year for job creation (behind 2021) in Labor Department records going back to 1940. The unemployment rate was 3.5% last month, matching a half-century low.

Hiring has been decelerating, though. In September, the economy added 263,000 jobs — solid but the lowest total since April 2021.

International events are causing further concerns. Russia’s invasion of Ukraine has disrupted trade and raised prices of energy and food, creating a crisis for poor countries. The International Monetary Fund, citing the war, this month downgraded its outlook for the world economy in 2023. 
…

China’s Huawei Technologies reported modest revenue growth for a second quarter on Thursday, citing steady growth in its ICT infrastructure business as it finds its footing after U.S. sanctions knocked its once mighty handset business.

Huawei posted revenue of $62.03 billion (445.8 billion yuan) for the first three quarters, 10 billion yuan less than it saw in the same period a year earlier, the company said on Thursday.

Profits fell 42.45% in the same period to 26.75 billion yuan, based on Reuters calculations, a drop a company spokesperson attributed to investment in research and development and new business areas.

Revenue for the third quarter alone came to 144.2 billion yuan, up 6.5% on a year earlier, based on Reuters calculations.

Performance was in line with the company’s forecast, said rotating Chairman Eric Xu.

“The decline in our device business continued to slow down, and our ICT infrastructure business maintained steady growth.”

The United States placed Huawei on an export blacklist in 2019, banning the telecom giant from buying components and technology from U.S. companies without U.S. government approval.

The move largely hobbled Huawei’s handset business, which commanded 42% of the China market in 2019. The company is now a bit of a player behind rivals, including its former budget unit Honor, which it sold in 2020.

Huawei is pushing to develop other businesses that are less dependent on U.S. technology, including smart car components, energy efficiency systems and cloud services.

In its first nine months the Aito M5 vehicle, which Huawei jointly developed with Seres, ranked 10th among all electric SUV models by sales in China, according to the China Passenger Car Association.

($1 = 7.1870 Chinese yuan)
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International Monetary Fund chief Kristalina Georgieva said on Wednesday that central banks should keep raising interest rates further to fight inflation until they hit a “neutral” level, though in most cases they have not reached this point.

Speaking to Reuters in Berlin a day before the European Central Bank is widely expected to raise rates by 75 basis points, the fund’s managing director said it would take until 2024 for the positive effect of central banks raising rates globally to be felt.

The ECB had for months said that its first step will be to raise rates to a neutral setting, where it was neither driving nor restricting growth, but some policymakers are now advocating more aggressive action, saying the ECB should go further to tame inflationary pressures.

“At this point we look for getting to a neutral mode, and in most places we are not quite yet there,” Georgieva said in an interview.

Central banks have to bring rates up because “when inflation runs high, that undermines growth, it hits the poorest parts of the population the hardest.”

Recent rate hikes by the ECB have come against the backdrop of a deteriorating economic outlook and inflation that hit 9.9% in the euro zone in September, driven by soaring food and energy prices after Russia’s invasion of Ukraine.

Asked how long she expected central banks to keep raising rates, Georgieva said the IMF projected that “by 2024 to get to a point when central banks are seeing the impact of their actions.”

“The benefits would come but they are not instantaneous, this requires some patience in society,” she added.
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