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Zimbabwe’s central bank has introduced gold coins that it hopes will ease citizens’ demands for foreign currency. But economists and ordinary Zimbabweans are skeptical.

At the official launch of the gold coins in Harare on Monday, John Mangudya, head of the Reserve Bank of Zimbabwe, said the coins are designed to reduce demand for U.S. dollars in the country.

Zimbabweans are largely shunning the weak local dollar in favor of U.S. greenbacks, which Zimbabweans see as more acceptable abroad and better at holding their value long term.

Mangudya said he hoped that Zimbabweans will now opt for the gold coins, which cost about $1,800 each.

“We are now providing that store of value to ensure that people do not run to the parallel market in search for foreign currency to store value,” he said. “And there is no other better product that can be used to store value other than gold.”

Mangudya said the coin is a sign of respect for the people of Zimbabwe.

“We know what you have been going through in terms of the fear factor of losing value and therefore we are providing this gold coin,” he said. It’s a genuine gold coin to ensure that it is saved and invested there.”

Mangudya said 2,000 coins will be manufactured, with future production depending on the public’s appetite.

Prosper Chitambara, a senior researcher and economist at the Labor and Economic Development Research Institute of Zimbabwe, said despite the bank’s hopes he doubts the coins will drastically reduce demand for American dollars.

“Even the demand for U.S. dollar as a store of value, it will also rise because there are still a lot of uncertainties relating to the convertibility of these gold coins — are [they] internationally tradeable, especially given the trust and confidence issues?” Chitambara said.

Chitambra also expressed caution about the coin.

“Most people may not have money to buy this since most citizens are literally living from hand to mouth,” Chitambara said.

One of those Zimbabweans struggling to get by is Christine Kayumba, a high school teacher in Harare.

“The issue of gold coins to us teachers in Zimbabwe, is something we can dream of,” Kayumba said. “It means a teacher who is getting a salary of $190 to $200 would need nine to 10 months to buy one gold coin.”

For Kayumba, that $200 of salary pays for transport, food, rent and money to send children to school. It’s money to live, she said, not to buy a gold coin.

“So, I believe the gold coins were meant for the rich people, not the ordinary teacher or any civil servant in Zimbabwe,” she said.

Mangudya told reporters Monday that gold coins of lesser value would be minted in future to cater for people who have fewer resources.
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German business morale fell more than expected in July, the Ifo business sentiment survey showed on Monday, as the institute that compiles it said high energy prices and looming gas shortages had left Europe’s largest economy on the cusp of recession.

The Ifo institute’s closely watched business climate index dropped to 88.6, its lowest in more than two years and below the 90.2 forecast in a Reuters poll of analysts. June’s reading was marginally revised down to 92.2.

“Recession is knocking on the door. That can no longer be ruled out,” said Ifo surveys head Klaus Wohlrabe.

Germany faces the threat of gas rationing unprecedented in generations this winter following a significant drop in supplies from Russia, whose president, Vladimir Putin, the West accuses of weaponizing energy in response to sanctions levied against him over the war in Ukraine.

Russia says it is conducting a “special military operation” there to fight nationalists.

Russia this month shut down the Nord Stream 1 pipeline that supplies Germany with gas via the bed of the Baltic Sea for 10 days of maintenance that some feared would be extended.

Pumping resumed on Thursday, but at only 40% of capacity.

Wohlrabe told Reuters in an interview that if German gas deliveries continued at that level “there will be no recession.”

However, Germany’s gas network regulator said on Friday that, if gas through the pipeline continued to be pumped at only 40%, the country would need to take “additional measures” to reach the 90% of storage capacity set as a target to avert winter rationing.

The government has said it would prioritize residents over the corporate sector in the event of rationing, and Monday’s Ifo index, which surveys about 9,000 firms, showed expectations for business to significantly worsen in the coming months.

“The Ifo business climate index, like the purchasing managers’ index, now clearly points to a downturn in the German economy,” said Commerzbank economic analyst Jorge Kraemer.

“How bad it ends up unfortunately lies mainly in Putin hands.”

S&P Global’s flash Purchasing Managers’ Index (PM) for German services and its index for manufacturing both fell to 49.2 in July, data showed on Friday, below analyst forecasts for them to hold above the 50 mark that separates growth from contraction.
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Treasury Secretary Janet Yellen on Sunday said the U.S. economy is slowing but pointed to healthy hiring as proof that it is not yet in recession.

Yellen spoke on NBC’s “Meet the Press” just before a slew of economic reports will be released this week that will shed light on an economy currently besieged by rampant inflation and threatened by higher interest rates. The data will cover sales of new homes, consumer confidence, incomes, spending, inflation, and overall output.

The highest-profile report will likely be Thursday, when the Commerce Department will release its first estimate of the economy’s output in the April-June quarter. Some economists forecast it may show a contraction for the second quarter in a row. The economy shrank 1.6% in the January-March quarter. Two straight negative readings is considered an informal definition of a recession, though in this case economists think that’s misleading.

Instead, the National Bureau of Economic Research — a nonprofit group of economists — defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

Yellen argued that much of the economy remains healthy: Consumer spending is growing, Americans’ finances, on average, are solid, and the economy has added more than 400,000 jobs a month this year, a robust figure. The unemployment rate is 3.6%, near a half-century low.

“We’ve got a very strong labor market,” Yellen said. “This is not an economy that’s in recession.”

Still, Yellen acknowledged the economy is “in a period of transition in which growth is slowing,” from a historically rapid pace in 2021.

She said that slowdown is “necessary and appropriate,” because “we need to be growing at a steady and sustainable pace.”

Slower growth could help bring down inflation, which at 9.1% is the highest in two generations.

Still, many economists think a recession is on the horizon, with inflation eating away at Americans’ ability to spend and the Federal Reserve rapidly pushing up borrowing costs. Last week, Bank of America’s economists became the latest to forecast a “mild recession” later this year.

And Larry Summers, the treasury secretary under President Bill Clinton, said on CNN’s “GPS” Sunday that “there’s a very high likelihood of recession,” as the Fed lifts interest rates to combat inflation. Those higher borrowing costs are intended to reduce consumer spending on homes and cars and slow business borrowing, which can lead to a downturn.

On Wednesday, the Federal Reserve is likely to announce its second 0.75% point increase in its short-term rate in a row, a hefty increase that it hasn’t otherwise implemented since 1994. That will put the Fed’s benchmark rate in a range of 2.25% to 2.5%, the highest level since 2018. Fed policymakers are expected to keep hiking until its rate reaches about 3.5%, which would be the highest since 2008.

The Fed’s hikes have torpedoed the housing market, as mortgage rates have doubled in the past year to 5.5%. Sales of existing homes have fallen for five straight months. On Tuesday, the government is expected to report that sales of new homes dropped in June.

Fewer home sales also means less spending on items that typically come with purchasing a new house, such as furniture, appliances, curtains, and kitchenware.

Many other countries are also grappling with higher inflation, and slower growth overseas could weaken the U.S. economy. Europe is facing the threat of recession, with soaring inflation and a central bank that just last week raised interest rates for the first time in 11 years.

European Central Bank President Christine Lagarde also sought to minimize recession concerns in a news conference last Thursday.

“Under the baseline scenario, there is no recession, neither this year nor next year,” Lagarde said. “Is the horizon clouded? Of course it is.”
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Police in Madagascar detained two leading members of the main opposition party on Saturday during a protest in the capital against rising living costs and economic hardship.

Several hundred anti-government demonstrators gathered in the center of Antananarivo in the morning, watched by a heavy military and police presence.

Police said they arrested Rina Randriamasinoro, the secretary general of the opposition Tiako I Madagasikara (TIM) party, and its national coordinator Jean-Claude Rakotonirina following tensions between demonstrators and security forces. The pair were later released.

“They were arrested and placed in police custody because they made comments inciting hatred and public unrest,” Antananarivo’s prefect Angelo Ravelonarivo told AFP.

Inflation has soared to the highest level in decades in many countries, fueled by the war in Ukraine and the easing of COVID-19 restrictions.

Organizers had wanted to hold the rally inside a warehouse belonging to opposition leader Marc Ravalomanana, but demonstrators arrived to find security forces blocking access to the venue.

Protesters then staged a sit-in outside the building.

Footage shared on social media showed police pulling Randriamasinoro and Rakotonirina from the crowd before taking them away in a police vehicle.

“The rally was authorized yesterday by the prefect and then this morning we discovered the police outside the gate,” said opposition lawmaker Fetra Ralambozafimbololona.

The arrests sparked further remonstrations, with demonstrators vowing not to leave the area until the two men were released — before eventually dispersing in the afternoon.

Randriamasinoro and Rakotonirina were eventually let go early in the evening, a police spokesperson said, adding authorities were yet to decide whether to press charges against them.

Protests are rare in the country with the opposition and rights groups accusing the government of President Andry Rajoelina of stifling dissent and rarely allowing demonstrations.

“We can’t say anything anymore,” said Samuel Ravelarison, a 63-year-old accountant attending the rally. “We came to demonstrate against the high cost of living.”

Ravelonarivo, the prefect, said that while the demonstration had not been banned, he had suggested it be held at a different location away from the city center.

One of the poorest nations in the world, Madagascar is still reeling from the economic effects of the coronavirus pandemic and a series of extreme weather events.

Tropical storms and cyclones have battered the country this year, killing more than 200 people, adding to the damage of a severe drought that has ravaged the island’s south leading to malnutrition and instances of famine.

Rajoelina, 48, first came to power in 2009, ousting Ravalomanana with the backing of the military.

He returned to the presidency in 2019, after beating his predecessor in an election beset by allegations of fraud.
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As inflation surges around the world, politicians are scrambling for ways to keep food affordable as people increasingly protest the soaring cost of living. One knee-jerk response has been food export bans aimed at protecting domestic prices and supplies as a growing number of governments in developing nations try to show a nervous public that their needs will be met.

For business owners, the rising cost of cooking ingredients — from oil to chicken — has prompted them to raise prices, with people paying 10% to 20% more at Soki Wu’s food stall in Singapore. For consumers, it has meant paying more for the same or lesser-quality food or curbing certain habits altogether.

In Lebanon, where endemic corruption and political stalemate has crippled the economy, the U.N. World Food Program is increasingly providing people with cash assistance to buy food, particularly after a devastating 2020 port blast that destroyed massive grain silos. Constant power cuts and high fuel prices for generators limit what people can buy because they can’t rely on freezers and refrigerators to store perishables.

Tracy Saliba, a single mother of two and business owner in Beirut, says she used to spend around a quarter of her earnings on food. These days, half her income goes to feeding her family as the currency loses strength amid soaring prices.

“I’m not buying (groceries) like I used to,” Saliba said. “I’m just getting the necessary items and food, like day by day.”

Food prices have risen by nearly 14% this year in emerging markets and by over 7% in advanced economies, according to Capital Economics. In countries where people spend at least a third or more of their incomes on food, any sharp increase in prices can lead to crisis.

Capital Economics forecasts that households in developed markets will spend an extra $7 billion a month on food and beverages this year and much of next year due to inflation.

The pain is being felt unevenly, with 2.3 billion people going severely or moderately hungry last year, according to a global report by the World Food Program and four other U.N. agencies.

Food prices accounted for about 60% of last year’s increase in inflation in the Middle East and North Africa, with the exception of oil-producing Gulf countries. The situation is particularly dire for Sudan, where inflation is expected to hit 245% this year, and Iran, where prices spiked as much as 300% for chicken, eggs and milk in May, sparking panic and scattered protests.

In Somalia, where 2.7 million people cannot meet their daily food requirements and where children are dying of malnutrition, sugar is a source of energy. In May, a kilogram of sugar cost about the equivalent of 72 cents in Mogadishu, the capital. A month later, it had shot up to $1.28 a kilogram.

“In my home, I serve tea (with sugar) three times a day, but from now on, I have to reduce it drastically to only making it when guests arrive,” said Asli Abdulkadir, a Somali housewife and mother of four.

People there are bracing for even higher costs after India announced it would cap sugar exports this year. Even if that doesn’t reduce India’s sugar exports compared with previous years, news of the restriction was enough to cause speculation among traders like Ahmed Farah in Mogadishu.

“The cost of sugar is expected to surge since Somalia counts heavily on the white sugar exported from India and a few brown sugars from Brazil,” he said.

Food export restrictions aimed at protecting domestic supplies and capping inflation is one reason for the rising cost of food.

Food prices had been steadily climbing worldwide because of drought, supply chain issues, and high energy and fertilizer costs. The U.N. Food and Agriculture Organization says food commodity prices were up 23% last year.

Russia’s war in Ukraine further sent the price of wheat and cooking oils up, fueling a global food crisis. There was a breakthrough this week to create safe corridors for Black Sea shipments, but Ukrainian ports have been blocked from exporting these key goods for months and it will take time to get them moving again to vulnerable countries worldwide.

There’s concern that the impact of all these factors will lead more countries to resort to food export bans, which are felt globally. When Indonesia blocked the export of palm oil for a month in April, palm oil prices spiked by at least 200%.

Analysts say food export bans are shortsighted because they have a domino effect of driving up prices.

“I would say that roughly 80% of the bans we see are ill-advised — a kind-of, sort-of gut reaction by certain politicians,” said David Laborde, who is credited with creating a food trade policy tracker at the International Food Policy Research Institute.

“In the world where you will be the only one to do it, that can make sense,” he said. “But in a world where other countries can also do it, actually that’s far from being a good idea.”

Laborde said bans are “a very selfish policy … because you try to get better by making things worse for others.”

The list of food export restrictions Laborde has been tracking since the COVID-19 pandemic is long and changes constantly. Examples of their impact include Kazakhstan’s restrictions on grains and oil on prices in Uzbekistan, Tajikistan, Turkmenistan and Afghanistan; Cameroon’s rice export restriction on Chad; and Tunisia’s fruit and vegetable restrictions on Libya.

In Singapore, 29-year-old Wu is hopeful he can keep the family business running as Singapore’s government signed off on Indonesia as a new chicken supplier.

“Things will get better,” he said. “(This) will only make us more resilient.” 
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From his small office in Singapore, Kelvin Pang is ready to wager a $23 million payday that the worst of the chip shortage is not over for automakers – at least in China.

Pang has bought 62,000 microcontrollers, chips that help control a range of functions from car engines and transmissions to electric vehicle power systems and charging, which cost the original buyer $23.80 each in Germany.

He’s now looking to sell them to auto suppliers in the Chinese tech hub of Shenzhen for $375 apiece. He says he has turned down offers for $100 each, or $6.2 million for the whole bundle, which is small enough to fit in the back seat of a car and is packed for now in a warehouse in Hong Kong.

“The automakers have to eat,” Pang told Reuters. “We can afford to wait.”

The 58-year-old, who declined to say what he had paid for the microcontrollers (MCUs), makes a living trading excess electronics inventory that would otherwise be scrapped, connecting buyers in China with sellers abroad.

The global chip shortage over the past two years – caused by pandemic supply chaos combined with booming demand – has transformed what had been a high-volume, low-margin trade into one with the potential for wealth-spinning deals, he says.

Automotive chip order times remain long around the world, but brokers like Pang and thousands like him are focusing on China, which has become ground zero for a crunch that the rest of the industry is gradually moving beyond.

Globally, new orders are backed up by an average of about a year, according to a Reuters survey of 100 automotive chips produced by the five leading manufacturers.

To counter the supply squeeze, global automakers like General Motors, Ford and Nissan have moved to secure better access through a playbook that has included negotiating directly with chipmakers, paying more per part and accepting more inventory.

For China though, the outlook is bleaker, according to interviews with more than 20 people involved in the trade from automakers, suppliers and brokers to experts at China’s government-affiliated auto research institute CATARC.

Despite being the world’s largest producer of cars and leader in electric vehicles (EVs), China relies almost entirely on chips imported from Europe, the United States and Taiwan. Supply strains have been compounded by a zero-COVID lockdown in auto hub Shanghai that ended last month.

As a result, the shortage is more acute than elsewhere and threatens to curb the nation’s EV momentum, according to CATARC, the China Automotive Technology and Research Center. A fledgling domestic chipmaking industry is unlikely to be in a position to cope with demand within the next two to three years, it says.

Pang, for his part, sees China’s shortage continuing through 2023 and deems it dangerous to hold inventory after that. The one risk to that view, he says: a sharper economic slowdown that could depress demand earlier.

Forecasts ‘hardly possible’

Computer chips, or semiconductors, are used in the thousands in every conventional and electric vehicle. They help control everything from deploying airbags and automating emergency braking to entertainment systems and navigation.

The Reuters survey conducted in June took a sample of chips, produced by Infineon, Texas Instruments, NXP, STMicroelectronics and Renesas, which perform a diverse range of functions in cars.

New orders via distributors are on hold for an average lead time of 49 weeks – deep into 2023, according to the analysis, which provides a snapshot of the global shortage though not a regional breakdown. Lead times range from six to 198 weeks.

German chipmaker Infineon told Reuters it is “rigorously investing and expanding manufacturing capacities worldwide” but said shortages may last until 2023 for chips outsourced to foundries.

“Since the geopolitical and macroeconomic situation has deteriorated in recent months, reliable assessments regarding the end of the present shortages are hardly possible right now,” Infineon said in a statement.

Taiwan chipmaker United Microelectronics told Reuters it has been able to reallocate some capacity to auto chips due to weaker demand in other segments. “On the whole, it is still challenging for us to meet the aggregate demand from customers,” the company said.

TrendForce analyst Galen Tseng told Reuters that if auto suppliers needed 100 PMIC chips – which regulate voltage from the battery to more than 100 applications in an average car – they were currently only getting around 80.

Urgently seeking chips

The tight supply conditions in China contrast with the improved supply outlook for global automakers. Volkswagen, for example, said in late June it expected chip shortages to ease in the second half of the year.

The chairman of Chinese EV maker Nio, William Li, said last month it was hard to predict which chips would be in short supply. Nio regularly updates its “risky chip list” to avoid shortages of any of the more than 1,000 chips needed to run production.

In late May, Chinese EV maker Xpeng Motors pleaded for chips with an online video featuring a Pokemon toy that had also sold out in China. The bobbing duck-like character waves two signs: “urgently seeking” and “chips.”

“As the car supply chain gradually recovers, this video captures our supply-chain team’s current condition,” Xpeng CEO He Xiaopeng posted on Weibo, saying his company was struggling to secure “cheap chips” needed to build cars.

All roads lead to Shenzhen

The scramble for workarounds has led automakers and suppliers to China’s main chip trading hub of Shenzhen and the “gray market,” brokered supplies legally sold but not authorized by the original manufacturer, according to two people familiar with the trade at a Chinese EV maker and an auto supplier.

The gray market carries risks because chips are sometimes recycled, improperly labeled, or stored in conditions that leave them damaged.

“Brokers are very dangerous,” said Masatsune Yamaji, research director at Gartner, adding that their prices were 10 to 20 times higher. “But in the current situation, many chip buyers need to depend on the brokers because the authorized supply chain cannot support the customers, especially the small customers in automotive or industrial electronics.”

Pang said many Shenzhen brokers were newcomers drawn by the spike in prices but unfamiliar with the technology they were buying and selling. “They only know the part number. I ask them: Do you know what this does in the car? They have no idea.”

While the volume held by brokers is hard to quantify, analysts say it is far from enough to meet demand.

“It’s not like all the chips are somewhere hidden and you just need to bring them to the market,” said Ondrej Burkacky, senior partner at McKinsey.

When supply normalizes, there may be an asset bubble in the inventories of unsold chips sitting in Shenzhen, analysts and brokers cautioned.

“We can’t hold on for too long, but the automakers can’t hold on either,” Pang said.

Chinese self-sufficiency

China, where advanced chip design and manufacturing still lag overseas rivals, is investing to decrease its reliance on foreign chips. But that will not be easy, especially given the stringent requirements for auto-grade chips.

MCUs make up about 30% of the total chip costs in a car, but they are also the hardest category for China to achieve self-sufficiency in, said Li Xudong, senior manager at CATARC, adding that domestic players had only entered the lower end of the market with chips used in air conditioning and seating controls.

“I don’t think the problem can be solved in two to three years,” CATARC chief engineer Huang Yonghe said in May. “We are relying on other countries, with 95% of the wafers imported.”

Chinese EV maker BYD, which has started to design and manufacture IGBT transistor chips, is emerging as a domestic alternative, CATARC’s Li said.

“For a long time, China has seen its inability to be totally independent on chip production as a major security weakness,” said Victor Shih, professor of political science at the University of California, San Diego.

With time, China could build a strong domestic industry as it did when it identified battery production as a national priority, Shih added.

“It led to a lot of waste, a lot of failures, but then it also led to two or three giants that now dominate the global market.”
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Online sales boomed during the COVID-19 pandemic, including those in some parts of Africa, where industry analysts say online trade is expected to grow by over half in the next three years. The continent’s online market potential faces numerous challenges, though. For VOA, Linda Givetash reports from Johannesburg.
Videographer: Zaheer Cassim
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With tensions growing over the war in Ukraine and Russia’s energy cuts, the European Union’s executive arm is calling on member nations to cut natural gas consumption by 15% between August and next March to avoid what it calls energy ‘blackmail” — and its potentially catastrophic economic fallout.

The EU’s executive branch wants the 15% cuts to be across the board and, for now, voluntary, but seeks the power to make the reductions mandatory if Moscow deeply or completely cuts its gas exports to the bloc.   

“We have to be proactive. We have to prepare for a potential full disruption of Russian gas,” said European Commission President Ursula von der Leyen. “And this is a likely scenario. What we’ve seen in the past, as we know, Russia is calculatingly trying to put pressure on us by reducing the supply of gas.”  

Russia’s Gazprom has already partly or fully cut supplies to nearly a dozen of the EU’s 27 members, as Brussels tightens sanctions against Moscow over the war in Ukraine. Already, the International Monetary Fund says, even this partial cutoff is hurting European economies.  

More recently, Gazprom shut its key Nord Stream 1 pipeline to Germany and beyond, ostensibly for short-term maintenance. It’s unclear if the pipeline will resume operation. Brussels wants member states to prepare for the worst.  

“Russia is blackmailing us. Russia is using energy as a weapon,” von der Leyen said.  

Last year, Russia provided 40% of the EU’s total gas. Since Moscow invaded Ukraine in late February, the bloc has been seeking to diversify supply sources. But experts say that won’t be enough to meet its energy needs. Countries like Finland and the Netherlands are already cutting consumption.  

While proposed cuts cover European industries, Brussels wants ordinary citizens and others to save energy — especially as climate change fears hit home this week, with record-breaking heatwaves in some parts of Europe.  

Commission Vice President Frans Timmermans said a new creative approach is needed.  

“Do we need to have the lights on in empty office buildings or shop fronts all nights? he asked. “Do we have to have air conditioning set at 20 degrees (68 degrees Fahrenheit)? It could be higher, couldn’t it?”  

Still, some of Brussels’ proposals, like diversifying gas sources and extending coal plants, will inject more emissions into the air in the short term. EU member states still need to approve the commission’s proposals. Energy ministers will discuss them next week.
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Treasury Secretary Janet Yellen said the U.S. and South Korea should deepen their trade ties to avoid working with countries that use their market positions to unfair advantage — calling out China by name.

“We cannot allow countries like China to use their market position in key raw materials, technologies, or products to disrupt our economy or exercise unwanted geopolitical leverage,” Yellen said in remarks prepared for delivery Monday, according to excerpts provided by the Treasury Department.

She is set to make the speech at an LG Corp. factory in South Korea. LG in April announced plans to build a $1.4 billion battery plant in Queen Creek, Arizona. 

Yellen represented the U.S. at the Group of 20 finance minister meetings on Indonesia’s resort island of Bali and made stops in Tokyo, Japan and Seoul, South Korea. She avoided visiting China but held a call with China’s vice premier at the start of the month.

Yellen has been a critic of China’s economic relationship with Russia — urging the Asian superpower to use its “special relationship with Russia” to persuade Russia to end its invasion of Ukraine.

China “has directed significant resources to seek a dominant position in the manufacturing of certain advanced technologies, including semiconductors, while employing a range of unfair trade practices to achieve this position,” she said in her prepared speech.

Citing “the unfair Chinese practices that damage our national security interests,” Yellen calls on countries to engage in “friend-shoring” as a means to lower economic risks for participating economies.

Friend-shoring, which Yellen has brought up in several speeches, refers to countries with shared values agreeing to trade practices that encourage manufacturing and reducing risks to supply chains.

The global economy has been ravaged by the impacts of the war in Ukraine and shutdowns caused by COVID-19. Skyrocketing energy costs and high inflation have touched every part of the globe.

The Indo-Pacific region is seeing this play out in Sri Lanka, which is struggling through the island nation’s worst economic crisis.

Yellen is set to make her statements ahead of a Tuesday meeting with South Korean President Yoon Suk Yeol to end her first trip as treasury secretary to the Indo-Pacific region. 
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Chinese regulators Sunday urged banks to extend loans to qualified real estate projects and meet developers financing needs where reasonable, in their latest effort to ease concerns triggered by a widening mortgage-payment boycott on unfinished houses.

The remarks by the China Banking and Insurance Regulatory Commission (CBIRC) came after a growing number of home buyers across China threatened to stop making their mortgage payments for stalled property projects, aggravating a real estate crisis that has already hit the economy. 

Investors have continued to dump Chinese banking stocks as well as developers’ shares and bonds, even after the CBIRC vowed Thursday to strengthen its coordination with other regulators to “guarantee the delivery of homes.” 

In an interview with the official China Banking and Insurance News on Sunday, the CBIRC reiterated that it will support local governments to promote home delivery, and expressed confidence that with concerted efforts, “all the difficulties and problems will be properly solved.”

More specifically, the regulator urged banks to “shoulder social responsibility” and actively participate in the study of plans to fill the funding gap, so that the construction of stalled real estate projects can be resumed swiftly, and homes can be delivered to buyers early.

It also urged banks to strengthen communication with mortgage clients and support acquisitions of real estate projects to help stabilize the property market.

In addition, the watchdog said that financial risks in the northeastern province of Liaoning has been growing recently but were under control, and the government will take measures to prevent risks at China’s small lenders.
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Thailand’s recent pledge to finish a long-delayed high-speed rail line linking it to China through Laos within six years is reigniting doubts about the country’s commitment and whether the $12 billion megaproject will pay off.

Transport and Foreign Affairs ministries officials told reporters July 6 Thailand will complete the 609-kilometer line from the capital, Bangkok, to the Lao border at Nong Khai, now only 5% built, by 2028. Nong Khai is just across the Mekong River from the Lao capital of Vientiane, where a high-speed train to the Lao-China border started service in December.

With trains running at a maximum speed of 250 km/h, the new line will collapse the time the Bangkok-Nong Khai journey takes now on existing standard-gauge tracks.

The 2028 announcement came a day after Chinese Foreign Minister Wang Yi met with Thai Prime Minister Prayut Chan-ocha and Foreign Affairs Minister Don Pramudwinai in Bangkok. A Thai Foreign Affairs Ministry statement on Wang’s visit says the meeting included talks on a “Thailand-Laos-China Connectivity Development Corridor.”

The project is part of Beijing’s long-term plans to link China’s Yunnan province to the bustling ports of Singapore via high-speed trains cutting through Laos, Thailand and Malaysia in a key piece of its grand Belt and Road initiative.

Cautious commitment

When Thailand started planning its portion of the line with China over a decade ago, the goal was to have it done by about the same time as Laos finished its own 414-kilometer stretch, Ruth Banomyong, a professor of international trade, transport and logistics at Thailand’s Thammasat University, told VOA. But with that target long since abandoned, he said top government transport officials were still noncommittal on a new goal just last month at a seminar he attended, making the announcement on July 6 “a bit confusing.”

Ruth said the new target was feasible but may be more of a political statement than a “technical” one, made with an eye on national elections due next year and Prayut’s fractious coalition government looking increasingly unsteady.

“The prime minister is probably at his lowest in terms of various [opinion] polls that have been published, and he wants to stay in power, but he needs to have something to show for himself,” said Ruth. “So, they need to re-put this project in the public eye, saying that, oh yes, it is going to be done.”

He said growing frustration in Beijing with the pace of Thailand’s progress may have played a part in the announcement, too.

“The fact that it’s announced after a meeting with the Chinese foreign minister, Wang Yi, it does make it look like they’re feeling some pressure to be at least looking like they’re moving forward with this project,” said Greg Raymond, a lecturer at Australian National University studying China’s growing connections with mainland Southeast Asia.

“But when you look at the pattern of [Thailand’s] decision-making, the pattern of action … the degree of commitment has to be questioned,” he added.

Analysts say the line, once complete, will help plug some of Southeast Asia’s largest and most dynamic economies into China’s landlocked south, giving the underdeveloped region a much-needed boost.

As with much of the Belt and Road Initiative, Raymond said, it also builds on Beijing’s broader goal of forging a regional economy centered on China, and of wielding that position to bend the foreign policies of other countries to its will. He pointed to Thailand’s scrapping of plans years ago to host a NASA climate change monitoring program, which he said was probably because China would not like having something like that so close. At the same time, he added, linking southern China to some of mainland Southeast Asia’s main ports would ease the pressure on China’s vital sea trade routes in case of conflict.

“If there’s a conflict between China and the United States, I think one of the things that China’s vulnerable to is a blockade by the [U.S. Navy’s] 7th Fleet, particularly at the Malacca Strait, so I think there is that sort of strategic imperative,” Raymond said.

Cost and benefit

For Thailand, the new line could mean more exports to, and investment from, China.

Ruth, though, said it will take decades, not years, for the $12 billion project to pay for itself, and only if the government also invests in the additional freight and passenger services needed to bring out the line’s full potential. Done right, he added, the line could also spur new growth and development along its route through Thailand’s rural northeast.

But Ruth said the government has yet to share its forecasts for key factors such as passenger numbers or freight traffic, making a hard-nosed assessment of the project impossible.

“What we tend to see is that a lot of these forecasts are very, very optimistic, and that’s why you sometimes end up with having white elephants … nice infrastructure that is not utilized fully, so that’s really the risk,” he warned.

Bryan Tse, Southeast Asia analyst for the Economist Intelligence Unit, said the high-speed train line’s focus, for now, appears to be on passengers, not freight, dimming the odds that Thailand can make the $12 billion back in 10 or even 20 years. If the main goal were boosting freight traffic, he said China would probably have focused on upgrading the network of regular train tracks crisscrossing Southeast Asia already, which would be cheaper.

But the project need not necessarily pay for itself directly to pay off for Thailand in other ways, Tse added.

“If getting this railway done means that you get the good will of the Chinese government … then you may get a lot of things in return politically and economically, in terms of investment, for instance,” he said.

Still, the analysts say Thailand is likely to remain hesitant about the project; $12 billion is a lot, and the added strain the pandemic has put on the country’s economy will only make it harder to move forward on the line to Laos, not to mention any high-speed line that might eventually be built south of Bangkok to Malaysia.

Raymond said Thailand is also wary of any moves, the high-speed rail line included, that might draw China too close for comfort.

“They don’t want to be drawn in, really, to a Beijing-centered economy if they think it’s going to reduce their freedom of maneuver,” he said. “They’re always seeking to balance their relationships; they don’t want to become too dependent on any of them. This is the classic hedging behavior, but it’s very strong with Thailand.”

Now that Laos is done with its stretch of the line, the analysts agreed that China is likely to focus its attention on seeing that Thailand picks up the pace.

Whatever their reservations, Raymond said, their Thai partners “might eventually feel like they have to do it.”

 
…

Long lines are back at food banks around the U.S. as working Americans overwhelmed by inflation turn to handouts to help feed their families.

With gas prices soaring along with grocery costs, many people are seeking charitable food for the first time, and more are arriving on foot.

Inflation in the U.S. is at a 40-year high and gas prices have been surging since April 2020, with the average cost nationwide briefly hitting $5 a gallon in June. Rapidly rising rents and an end to federal COVID-19 relief have also taken a financial toll.

The food banks, which had started to see some relief as people returned to work after pandemic shutdowns, are struggling to meet the latest need even as federal programs provide less food to distribute, grocery store donations wane and cash gifts don’t go nearly as far.

Tomasina John was among hundreds of families lined up in several lanes of cars that went around the block one recent day outside St. Mary’s Food Bank in Phoenix. John said her family had never visited a food bank before because her husband had easily supported her and their four children with his construction work.

“But it’s really impossible to get by now without some help,” said John, who traveled with a neighbor to share gas costs as they idled under a scorching desert sun. “The prices are way too high.”

Jesus Pascual was also in the queue.

“It’s a real struggle,” said Pascual, a janitor who estimated he spends several hundred dollars a month on groceries for him, his wife and their five children aged 11 to 19.

The same scene is repeated across the nation, where food bank workers predict a rough summer keeping ahead of demand.

The surge in food prices comes after state governments ended COVID-19 disaster declarations that temporarily allowed increased benefits under SNAP, the federal food stamp program covering some 40 million Americans .

“It does not look like it’s going to get better overnight,” said Katie Fitzgerald, president and chief operating officer for the national food bank network Feeding America. “Demand is really making the supply challenges complex.”

Charitable food distribution has remained far above amounts given away before the coronavirus pandemic, even though demand tapered off somewhat late last year.

Feeding America officials say second quarter data won’t be ready until August, but they are hearing anecdotally from food banks nationwide that demand is soaring.

The Phoenix food bank’s main distribution center doled out food packages to 4,271 families during the third week in June, a 78% increase over the 2,396 families served during the same week last year, said St. Mary’s spokesman Jerry Brown.

More than 900 families line up at the distribution center every weekday for an emergency government food box stuffed with goods such as canned beans, peanut butter and rice, said Brown. St. Mary’s adds products purchased with cash donations, as well as food provided by local supermarkets like bread, carrots and pork chops for a combined package worth about $75.

Distribution by the Alameda County Community Food Bank in Northern California has ticked up since hitting a pandemic low at the beginning of this year, increasing from 890 households served on the third Friday in January to 1,410 households on the third Friday in June, said marketing director Michael Altfest.

At the Houston Food Bank, the largest food bank in the U.S. where food distribution levels earlier in the pandemic briefly peaked at a staggering 1 million pounds a day, an average of 610,000 pounds is now being given out daily.

That’s up from about 500,000 pounds a day before the pandemic, said spokeswoman Paula Murphy said.

Murphy said cash donations have not eased, but inflation ensures they don’t go as far.

Food bank executives said the sudden surge in demand caught them off guard.

“Last year, we had expected a decrease in demand for 2022 because the economy had been doing so well,” said Michael Flood, CEO for the Los Angeles Regional Food Bank. “This issue with inflation came on pretty suddenly.”

“A lot of these are people who are working and did OK during the pandemic and maybe even saw their wages go up,” said Flood. “But they have also seen food prices go up beyond their budgets.”

The Los Angeles bank gave away about 30 million pounds of food during the first three months of this year, slightly less than the previous quarter but still far more than the 22 million pounds given away during the first quarter of 2020.

Feeding America’s Fitzgerald is calling on USDA and Congress to find a way to restore hundreds of millions of dollars worth of commodities recently lost with the end of several temporary programs to provide food to people in need. USDA commodities, which generally can represent as much as 30% of the food the banks disperse, accounted for more than 40% of all food distributed in fiscal year 2021 by the Feeding America network.

“There is a critical need for the public sector to purchase more food now,” said Fitzgerald.

During the Trump administration, USDA bought several billions of dollars in pork, apples, dairy, potatoes and other products in a program that gave most of it to food banks. The “Food Purchase & Distribution Program” designed to help American farmers harmed by tariffs and other practices of U.S. trade partners has since ended. There was $1.2 billion authorized for the 2019 fiscal year and another $1.4 billion authorized for fiscal 2020.

Another temporary USDA “Farmers to Families” program that provided emergency relief provided more than 155 million food boxes for families in need across the U.S. during the height of the pandemic before ending May 31, 2021.

A USDA spokesperson noted the agency is using $400 million from the Build Back Better initiative to establish agreements with states, territories and tribal governments t o buy food from local, regional and underserved producers that can be given to food banks, schools and other feeding programs.

For now, there’s enough food, but there might not be in the future, said Michael G. Manning, president and CEO at Greater Baton Rouge Food Bank in Louisiana. He said high fuel costs also make it far more expensive to collect and distribute food.

The USDA’s Coronavirus Food Assistance Program, which included Farmers to Families, was “a boon” for the Alameda County Community Food Bank, providing 5 billion pounds of commodities over a single year, said spokesman Altfest.

“So losing that was a big hit,” he said.

Altfest said as many as 10% of the people now seeking food are first timers, and a growing number are showing up on foot rather than in cars to save gas.

“The food they get from us is helping them save already-stretched budgets for other expenses like gas, rent, diapers and baby formula,” he said.

Meanwhile, food purchases by the bank have jumped from a monthly average of $250,000 before the pandemic to as high as $1.5 million now because of food prices. Rocketing gasoline costs forced the bank to increase its fuel budget by 66%, Altfest said.

Supply chain issues are also a problem, requiring the food bank to become more aggressive with procurement.

“We used to reorder when our inventory dropped to three weeks’ worth, now we reorder up to six weeks out,” said Altfest.

He said the food bank has already ordered and paid for whole chickens, stuffing, cranberries and other holiday feast items it will distribute for Thanksgiving, the busiest time of the year.

At the Mexican American Opportunity Foundation in Montebello east of Los Angeles, workers say they are seeing many families along with older people like Diane Martinez, who lined up one recent morning on foot.

Some of the hundreds of mostly Spanish-speaking recipients had cars parked nearby. They carried cloth bags, cardboard boxes or shoved pushcarts to pick up their food packages from the distribution site the Los Angeles bank serves.

“The prices of food are so high and they’re going up higher every day,” said Martinez, who expressed gratitude for the bags of black beans, ground beef and other groceries. “I’m so glad that they’re able to help us.”
…

China’s economy contracted in the three months ending in June compared with the previous quarter after Shanghai and other cities shut down to fight coronavirus outbreaks, but the government said a “stable recovery” is under way after businesses reopened.

The world’s second-largest economy shrank by 2.6%, down from the January-March period’s already weak 1.4%, official data showed Friday. Compared with a year earlier, which can hide recent fluctuations, growth slid to 0.4% from the earlier quarter’s 4.8%.

Activity was “much weaker than expected,” Rajiv Biswas of S&P Global Market Intelligence said in a report.

Asian stock markets were mixed following the news. Hong Kong was down 0.8% at mid-morning while Shanghai, Tokyo and Seoul gained.

Anti-virus controls shut down Shanghai, site of the world’s busiest port, and other industrial centers starting in late March, fueling concerns global trade and manufacturing might be disrupted. Millions of families were confined to their homes, depressing consumer spending.

“The resurgence of the pandemic was effectively contained,” the statistics bureau said in a statement. “The national economy registered a stable recovery.”

Data on factory output, consumer spending and other activity suggest overall growth was even weaker than the headline figure, Julian Evans-Pritchard of Capital Economics said in a report.

“Even accounting for June’s strength, the data are consistent with negative y/y (year-on-year) growth last quarter,” Evans-Pritchard wrote. “This isn’t the first time that the official GDP figures have seemingly understated the extent of an economic downturn.”

The slump hurts China’s trading partners by depressing demand for imported oil, food and consumer goods.

China’s infection numbers are relatively low, but Beijing responded to its biggest outbreak since the 2020 start of the pandemic with a “zero-COVID” policy that aims to isolate every person who tests positive. The ruling party has switched to quarantining individual buildings or neighborhoods with infections but those restrictions covered areas with millions of people.

Repeated shutdowns and uncertainty about business conditions have devastated entrepreneurs who generate China’s new wealth and jobs. Small retailers and restaurants have closed. Others say they are struggling to stay afloat.

Cheng Hong, a mother of one who owns the Qifei Travel Agency in Shijiazhuang, southwest of Beijing, said business is down more than 80%.

“I almost couldn’t hold on, but I am lucky to see the start of a recovery,” said Cheng.

The ruling Communist Party is promising tax refunds, free rent and other aid to get companies back on their feet, but most forecasters expect China to fail to hit the ruling party’s 5.5% growth target this year.

Other major economies report growth compared with the previous quarter, which makes their levels look lower than China. Beijing for decades reported only growth compared with the previous year, which hid short-term fluctuations, but has started to release quarter-on-quarter figures.

Forecasters say Beijing is using cautious, targeted stimulus instead of across-the-board spending, a strategy that will take longer to show results. Chinese leaders worry too much spending might push up politically sensitive housing costs or corporate debt they worry is dangerously high.

Growth for the first half of the year was 2.5% over a year earlier, one of the weakest levels in the past three decades.

Retails sales were off 0.7% from a year earlier in the first half after plunging 11% in April.

Song Haixia, a shopkeeper who sells food and cigarettes in the northern city of Taiyuan, said sales have fallen by up to 70% to as little as 300 yuan ($45) a day. She said migrant workers who were among her customers were driven away by anti-virus measures.

“People are just not making money,” said Song, 45, the mother of two children. “I am not very optimistic about future prospects.”

Investment in factories, real estate and other fixed assets climbed 6.1%, reflecting the ruling party’s effort to stimulate growth by boosting spending on public works construction and ordering state-owned companies to spend more.

China also faces headwinds from weak global demand. Exports jumped 17.9% in June over a year earlier, but forecasters say that reflected ports clearing out cargo after anti-virus curbs lifted. They say growth is likely to fall back.

Slowing growth in the United States and Europe “could weaken demand for China’s manufacturing exports,” said Biswas.

China rebounded quickly from the pandemic in 2020, but activity weakened as the government tightened controls on use of debt by its vast real estate industry, which supports millions of jobs. Economic growth slid due to a slump in construction and housing sales.

Investors are waiting to see what happens to one of China’s biggest developers, Evergrande Group. It has struggled since last year to avoid defaulting on $310 billion owed to banks and bondholders.
…

The United States is pressing to implement a plan meant to force Russia to sell oil at artificially low prices on the global market, in order to deprive the Kremlin of funding for its war in Ukraine.

Speaking at a news conference in Bali, Indonesia, before the start of a meeting of the finance ministers of the G-20 large economies, Yellen restated the Biden administration’s condemnation of Russia’s invasion of Ukraine. She said that cutting its profits from crude oil sales “would deny [Russian President Vladimir] Putin the revenue his war machine needs.” 

She also argued that capping the price of Russian oil would further one of the administration’s major domestic aims: reducing inflation. 

“A price cap on Russian oil is one of our most powerful tools to address the pain that Americans and families across the world are feeling at the gas pump and the grocery store right now,” she said.  

However, the price cap plan relies on a complicated mechanism that has never been tried before, and some experts in global energy markets have said they believe it will not work. 

Cap tied to sanctions 

The plan that Yellen is proposing is tied to a new set of financial sanctions that the European Union, United Kingdom and the U.S. are preparing to impose on Russia.  

In order to bring its crude oil to market, Russia relies on various transactions with international lenders, shipping firms and insurance companies. The current plan is to cut Russia off from those services beginning late this year. In theory, this would make it practically impossible for it to export any oil at all in the near term, and much more difficult in the future. 

If fully implemented and successful, the results of the sanctions could be bad for everyone. Russia would lose its oil revenues, and the rest of the world would experience potentially devastating price increases because of the supply shock created by abruptly removing Russian crude from the market. 

What Yellen and the Biden administration are proposing is an “exception” to the ban. If Russia agrees to sell its oil at a price that is under a certain cap — the level of which is to be determined by the countries imposing the sanctions — it will be allowed access to the services it needs to bring the oil to market. 

This would avoid a global supply shock while simultaneously reducing Russia’s oil revenues. 

Experts dubious 

People deeply familiar with global oil markets say that they don’t believe the price cap plan will work. 

Julian Lee, an oil strategist for Bloomberg First Word, wrote in an analysis published by The Washington Post that the scheme “stands very little chance of actually working.” 

He wrote, “[Putin’s] calculation will almost certainly be that cutting off Russian oil exports will do more damage to the economies of buyers in Europe than it will to Russia. So it’s hopeless to expect him to acquiesce to a price cap imposed by the West.” 

When VOA asked Edward C. Chow, a nonresident senior associate with the Center for Strategic and International Studies, if he believed the price cap plan was feasible, he provided a one-word answer. 

“No,” he said.  

Many workarounds 

Chow, who has spent 45 years working in the international oil and gas business, including 20 years with oil giant Chevron, said, “I’ve canvassed every single energy expert I know. And not one person thinks it can work.” 

He listed a series of potential workarounds, including alternative insurance arrangements, contracts that shift the risk of delivery to the seller rather than the buyer and the extensive use of Russia’s domestic tanker fleet — one of the world’s largest — that Moscow could use to get around the sanctions and avoid a price cap. 

Chow, a former professor at Georgetown University, said that reading about the proposed price caps reminded him of teaching a graduate seminar on energy security. 

“It struck me, when I first heard it, that it’s the kind of bright idea a group of grad students would come up with,” he said. “And professors love that, because it’s a great teaching moment to explain why this wouldn’t work as a practical matter, if you understand markets.” 

Pressing forward 

Doubts aside, the Biden administration appears to be intent on pressing forward.  

The Treasury secretary said Thursday that the level at which the price cap would be set has not yet been determined, but that “we would want a number that clearly gives Russia incentive to continue to produce — that would make production profitable for Russia.” 

If Russia refused to go along, she noted, it would suffer in the short term, as it failed to realize any revenue from oil that was ready for market. And it would also face long-term costs related to shutting down production and losing market share as oil buyers began to look elsewhere. 

“I think from Russia’s point of view, a price cap or price exception to a policy that would otherwise be yet harsher on Russia is something that they should be willing to go along with,” Yellen said. 

China and India 

In the months since Russia invaded Ukraine and since Western countries became more reluctant to purchase Russian oil, China and India have stepped in to fill the gap, buying up to 1 million barrels per day, and accounting for as much as 20% of Russia’s exports. 

Whether demand will remain high is an open question, especially in China, where there are signs the economy is slowing significantly. Also unclear is whether either or both of the two countries would abide by a cap on Russian oil prices. 

Assuming that a price cap could be implemented, it would be a complex calculation. If Russia refused to sell oil below the rate at which the cap is set, China and India might continue purchasing its oil anyway but would have the leverage to demand a significant discount. At the same time, the removal of Russian oil from the broader market would drive up the price of the commodity around the world, including for China and India, which also buy oil from other producers. 

If Russia does agree to sell oil under the price cap, China and India would have no incentive to pay anything above the capped rate. 

“I’m hopeful that China and India will see that observing a price cap would serve their own interests in lowering the price that they pay for Russian oil,” Yellen said.
…

The African Development Bank (AfDB) agreed this week to help Zimbabwe clear its $13.5 billion debt during a visit by the Abidjan-based lender’s president. The AfDB has also started releasing loans from a $1.5 billion fund to help Africa avert a looming food crisis fueled by Russia’s invasion of Ukraine. Zimbabwe is one of 38 countries set to benefit from the bank’s fund, which is known as the African Emergency Food Production Facility.

African Development Bank, or AfDB, President Akinwumi Adesina said during his visit that Zimbabwe President Emmerson Mnangagwa had sought his assistance for Zimbabwe to clear its external debt, which started accumulating after the late Robert Mugabe’s administration defaulted.

“I believe that Zimbabweans, ordinary Zimbabweans, have suffered long enough. You have a country, a beautiful country in which you now have 40 percent of the population that is living in extreme poverty. And they do not have the resources to get out of that. So, we have to create a new hope, a new pathway so that tomorrow can be a better day than yesterday. Zimbabwe has a significant amount of debt areas that it needs to clear. But you cannot run up the hill if you are carrying a backpack of sand. So, Zimbabwe cannot run up a hill for its economic recovery and growth and prosperity if it’s carrying a backpack of sand,” he said.

AfDB and Zimbabwe are looking for ways Harare can get access to international financial money while the debt is being settled over a long period.

Mthuli Ncube is Zimbabwe’s Finance Minister.

“What we have done so far is to begin token payments for the African Development Bank, the World Bank, the European Investment Bank, and also all the 17 Paris Club partners. But what needs to be done is to fully implement the full roadmap for the arrears clearance. But for us to work well, we need a champion, and I am pleased to say that Dr. Adesina has agreed to be the champion, to cajole all partners around the world for us to be able to implement our arrears strategy,” he said.

Gift Mugano, an economics professor at Durban University of Technology, said the post-Mugabe government is still “reckless and careless,” and so the AfDB will not be able to satisfy the world on a plan to clear Zimbabwe’s arrears.

“In four years, our debt has doubled. Doubled because we were borrowing money recklessly, doubling because we created a new debt through white farmer compensation deed. There is also a component of debt, which we do not know where it is coming from because minister of finance is not going to parliament at each and every time he assumes new debt. If the government wants to clear the debt, it must stop increasing the debt,” said Mugano.

During his visit to Zimbabwe, AfDB President Adesina said his organization was filling a food security gap of 30 million metric tons caused by Russia’s invasion of Ukraine. That will come through the African Emergency Food Production Facility, a fund worth $1.5 billion.

“It will support Africa, produce 38 million metric tons of food with a value of $12 billion. Wheat, corn, maize, that will include 6 million metric tons of rice, 2.5 million metric tons of soyabeans. So, we are very sensitive to this. Africa has no business of going around with bowls in hand to beg for food. Africa has a business and must be in the business of putting seed in the ground and producing its own food and making sure that it can unlock tremendous agriculture potential that it has, but we can’t eat potential. We have to unlock the potential of agriculture,” he said.

Africa, Adesina said, imports mainly wheat and corn from Ukraine and Russia, as well as 2 million metric tons of fertilizers.
…

Japan’s Panasonic Corp. selected Kansas as the location for a multibillion-dollar mega-factory to produce electric vehicle batteries for Tesla and other carmakers, Governor Laura Kelly announced Wednesday.

The decision comes five months after the Democratic governor and Republican-controlled Legislature rushed to approve a taxpayer-funded incentive package of as much as $1 billion, the state’s largest ever, to attract the company and the promised “thousands of jobs,” even though most of them didn’t know what company was in play. Kelly said Wednesday that the actual incentives will total $829 million over 10 years.

The plant will be in De Soto, Kansas, a town with about 6,000 people and 48 kilometers southwest of Kansas City, Missouri.

“People across the country are looking at Kansas as a leader in economic development,” Kelly told a gathering of about 250 state officials and business leaders in downtown Topeka, the state capital, on Wednesday.

Japanese broadcaster NHK reported this year that the company was looking to build the factory in Kansas or Oklahoma, close to Texas, where Tesla is building an electric-vehicle plant. The two companies jointly operate a battery plant in Nevada.

Kelly’s administration said the facility it was pursuing would be the largest economic development project in Kansas history. They said the company would employ 4,000 people and that other businesses supplying or supporting it would add several thousand more jobs. They said the company would pay an average of $50,000, which would far exceed Kansas’ median income for individuals of less than $32,000.

Kelly pushed for the permission to offer tax credits, payroll subsidies and training funds to lure what her administration said was a $4 billion project that at least one other state was also pursuing.

The measure requires the state to cut its corporate tax rates by half a percentage point for every big deal closed so that all businesses benefit. That would save companies roughly $100 million a year and drop the state’s top rate to 6% from 7% if two deals close.

Backers of the measure argued that Kansas has lost out on other large projects because it couldn’t offer generous enough incentives.

Oklahoma’s Republican-controlled Legislature approved an incentive package this year to offer rebates of up to nearly $700 million in state funds if Panasonic reached specific benchmarks, including at least a $4.5 billion capital expenditure and the creation of at least 4,000 jobs during the project’s first four years. State officials say that money could be returned to the general fund or used to lure another major project.

Ohio recently offered Intel Corp. incentives worth roughly $2 billion to secure a new $20 billion chipmaking factory. Michigan lawmakers in December approved $1 billion in incentives, two-thirds of it for General Motors for plants to assemble batteries for electric vehicles.

Electric vehicle maker Canoo has announced plans to open a factory in northeastern Oklahoma next year that is expected to create 2,000 jobs.

But Wisconsin scaled back incentives for electronics giant Foxconn. It was supposed to invest $10 billion there and create 13,000 jobs but the deal now is for about 1,450 jobs with an investment of $672 million by 2026. 
…

With thousands of sanctions already imposed on Russia to flatten its economy, the U.S. and its allies are working on new measures to starve the Russian war machine while also stopping the price of oil and gasoline from soaring to levels that could crush the global economy.

The Kremlin’s main pillar of financial revenue — oil — has kept the Russian economy afloat despite export bans, sanctions and the freezing of central bank assets. America’s European allies plan to follow the Biden administration and take steps to stop their use of Russian oil by the end of this year, a move that some economists say could cause the supply of oil worldwide to drop and push prices as high as $200 a barrel.

Washington and its allies want to form a buyers’ cartel to force Russia to accept below-market prices for oil. Group of Seven leaders have tentatively agreed to back a cap on the price of Russian oil. Simply speaking, participating countries would agree to purchase the oil at lower-than-market price.

Russia has given no sign whether it might go along with this. The Kremlin also has the option of retaliating by taking its oil off the market, which would cause more turmoil.

High energy costs are straining economies and threatening fissures among the countries opposing Russian President Vladimir Putin for the invasion of Ukraine in February. President Joe Biden has seen his public approval slip to levels that hurt Democrats’ chances in the midterm elections, while leaders in the United Kingdom, Germany and Italy are coping with the economic devastation caused by trying to move away from Russian natural gas and petroleum.

The idea behind the cap is to lower gas prices for consumers and help bring the war in Ukraine to a halt. Treasury Secretary Janet Yellen is currently touring Indo-Pacific countries to lobby for the proposal. In Japan on Tuesday, Yellen and Japanese Finance Minister Suzuki Shunichi said in a joint statement that the countries have agreed to explore “the feasibility of price caps where appropriate.”

However, China and India, two countries that have maintained business relationships with Russia during the war, will need to get on board. The administration is confident China and India, already buying from Russia at discounted prices, can be enticed to embrace the plan for price caps.

“We think that ultimately countries around the world that are currently purchasing Russian oil will be very interested in paying as little as possible for that Russian oil,” Treasury Deputy Secretary Wally Adeyemo told The Associated Press.

The Russian price cap plan has support among some leading economic thinkers. Harvard economist Jason Furman tweeted that if the plan works, it would be a “win-win: maximizing damage to the Russian war machine while minimizing damage to the rest of the world.” And David Wessel at the Brookings Institution said an “unpleasant alternative” is not attempting the price cap plan.

If a price cap is not implemented, oil prices will almost certainly spike because of a European Union decision to ban nearly all oil from Russia. The EU also plans to ban insuring and financing the maritime transport of Russian oil to third parties by the end of the year.

Without a price cap mechanism to reduce some Russian revenues, “there would be a greater risk that some Russian supply comes off the market. That could lead to higher prices, which would increase prices for Americans,” Adeyemo said.

A June Barclay’s report warns that with the EU oil embargo and other restrictions in place, Russian oil could rise to $150 per barrel or even $200 per barrel if most of its sea-borne exports are disrupted.

Brent crude on Tuesday was trading just under $100 per barrel.

James Hamilton, an economist at the University of California, San Diego, said garnering the participation of China and India will be important to enforcing any price cap plan.

“It’s an international diplomatic challenge on how you get people to agree. It’s one thing if you get the U.S. to stop buying oil, but if India and China continue to buy” at elevated prices, “there’s no impact on Russian revenues,” Hamilton told the AP.

“The less revenue Russia gets from selling oil, the less money they have to send these bombs on Ukraine,” he said.

One possibility is that Russia could retaliate and take its oil off the market completely.

In that case, “the main question is will countries have enough time to find alternatives” to prevent massive price increases, said Christiane Baumeister, an economist at the University of Notre Dame who studies the dynamics of energy markets.

With five months until the end of the year, when EU bans begin to take effect, a Russian price cap plan would likely need to be in place and operating effectively to avoid further spikes in gas prices that have frustrated U.S. drivers. Biden has warned that high gas prices this summer were the cost of stopping Putin, but prices could climb to new records and lead to economic and political pain for the president.

Without the price cap, “if the EU import ban goes into effect together with the insurance ban,” Baumeister said, the impacts “will be passed onto consumers through gasoline prices.”
…