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The United States is due to release economic growth data from April to June on Thursday, amid fears the economy could be approaching a recession.

Forecasters estimated slight growth in the second quarter of less than 1%.

The previous quarter saw the gross domestic product decline 1.6%.

A second consecutive negative quarter would meet the informal definition of a recession.

Thursday’s report comes a day after the Federal Reserve again raised the benchmark interest rate as it tries to bring down inflation.

Some information for this report came from The Associated Press and Agence France-Presse.
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Chinese authorities are promising to establish an initial rescue fund of $11.8 billion (80 billion yuan) to offset a looming crisis in the real estate sector, where homebuyers routinely purchase residences from developers’ plans and begin making mortgage payments before the dwellings are finished. 

By having customers purchase homes “off plan,” builders can receive construction financing and shift risks — such as costly pandemic-related supply chain delays and bankrupt builders — to the middle-class homebuyers. 

For many buyers, the risks seemed worth it. But then China’s COVID-cooled economy strained many family budgets, and draconian lockdowns stalled work on residential projects. As home prices fell, some buyers found themselves paying mortgages on properties worth less than what they had agreed to pay. That was followed by the tightening policies in August 2020, when the central government realized real estate developers’ debt was getting out of control, and draconian lockdowns stalled work on residential projects. 

Amid all this, many homebuyers announced they would stop making mortgage payments to banks until work resumed on unfinished projects. 

Experts say the boycott is a byproduct of two decades of insufficient oversight over a red-hot real estate sector. One economist likened the situation to a Ponzi scheme, a type of fraud that pays existing investors with funds collected from new investors. 

Reuters describes the promised rescue fund as the first step in creating a “war chest” of as much as $44 billion (300 billion yuan). The state hopes the effort, announced Sunday, will not only help property developers resolve a debt crisis but also restore confidence in the real estate sector. 

A state bank official who declined to be named due to the sensitivity of the matter told Reuters that the fund would initially be set at 80 billion yuan through People’s Bank of China and China Construction Bank. 

High risks, low supervision

Mr. Fang, a real estate developer in China and the United States who asked that VOA Mandarin not use his real name for fear of reprisal, said while U.S. banks supervise and control loans issued to off-plan property developers from groundbreaking to occupancy, Chinese banks offer less supervision. 

According to China’s presale housing regulation, funds received from sales of homes must be used to build them, a process supervised by the Ministry of Housing and Urban-Rural Development and banks.

In practice, however, poor supervision is common, according to Fang. 

In this environment, Chinese developers “want to take big risks,” Fang said. 

Instead of putting buyers’ mortgage payments toward construction of their homes, Fang said, Chinese developers buy more property. 

With the economy and housing market cooling off, it is “basically suicidal” to buy more land on the assumption that developing it will pay for finishing construction underway elsewhere, Fang said. 

‘A bit like a Ponzi scheme’

An economist in China, who requested anonymity due to fear of reprisal, told VOA Mandarin that real estate companies have never been regulated. 

“When the economy is good, with the continuous expansion, most of the properties can be delivered. But when the economy is not good, it becomes a bit like a Ponzi scheme. If there is no follow-up funding, they will not able to complete construction,” she said. 

A Chinese banking regulator said on July 21 that it will coordinate support to property developers in need of loans after homebuyers stopped making mortgage payments, usually putting the money into escrow accounts instead. 

At a press conference in Beijing last Thursday, Liu Zhongrui, director of the Statistical Information and Risk Monitoring Department of the China Banking and Insurance Regulatory Commission (CBIRC), said that banks and other government departments will meet reasonable financing needs of real estate developers. But he did not give details. 

“We actively strengthen the coordination and cooperation with the Ministry of Housing and Urban-Rural Development, the People’s Bank of China and other departments, and support local governments to more effectively promote the work of ‘guaranteeing the delivery of buildings, protecting people’s livelihood, and maintaining stability,'” Liu said. 

The earliest “mortgage boycott notice” by more than 5,000 homebuyers appeared in April 2021 in Taiyuan, in the northern province of Shanxi, after a local developer’s project languished unfinished for more than two years. 

Letters to banks

Last month, homeowners in Jingdezhen, in northeastern Jiangxi province, sent a letter to their banks announcing they were suspending mortgage payments because of the delayed delivery of residential units purchased off plan. Since then, homeowners of more than 300 unfinished residential projects nationwide have sent similar public letters to banks. 

Last week, some 200 frustrated home buyers in Wuhan demonstrated outside a bank regulator’s office, according to an article in The Wall Street Journal. 

It’s unclear how many homebuyers are involved in the protests because Chinese censors are clamping down on news of mortgage boycotts, Reuters reported.

A study, the “2022 National Unfinished Building Research Report,” published July 18 by the Shanghai-based E-House China Research and Development Institution, a think tank that analyzes the real estate market, found that 54% of homeowners who issued mortgage suspension notices came from the central China province of Henan, home to a billion-dollar banking scandal.

According to the report, the value of mortgage loans involving unfinished buildings nationwide was $133.2 billion (900 billion yuan) in the first half of 2022, accounting for 1.7% of the national mortgage balance. 

“This industry is a mess, and no one used this kind of quantitative analysis to analyze it before,” Yan Yuejin, the report’s author and the think tank’s director of research, told VOA Mandarin. 

Although 1.7% does not sound high, it is already very high and poses a serious risk for banks, Yan said. “The banks’ tolerance rate for this [kind of] nonperforming loan … should not exceed 1%.”
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The U.S. Senate has passed a $280 billion initiative that would boost domestic production of microchips and provide support for a key industry that competes with overseas countries including China. VOA’s Congressional Correspondent Katherine Gypson reports.
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Meta Platforms Inc. issued a gloomy forecast after recording its first ever quarterly drop in revenue Wednesday, with recession fears and competitive pressures weighing on its digital ads sales. 

Shares of the Menlo Park, California-based company were down about 4.6% in extended trading. 

The company said it expected third-quarter revenue to be in the range of $26 billion to $28.5 billion, which would be a second consecutive year-over-year drop. Analysts were expecting $30.52 billion, according to IBES data from Refinitiv. 

Total revenue, which consists almost entirely of ad sales, fell 1% to $28.8 billion in the second quarter ended June 30, from $29.1 billion last year. The figure slightly missed Wall Street’s projections of $28.9 billion, according to Refinitiv. 

The company, which operates the world’s largest social media platform, reported mixed results for user growth. 

Monthly active users on flagship social network Facebook came in slightly under analyst expectations at 2.93 billion in the second quarter, an increase of 1% year over year, while daily active users handily beat estimates at 1.97 billion. 

Like many global companies, Meta is facing some revenue pressure from the strong dollar, as sales in foreign currencies amount to less in dollar terms. Meta said it expected a 6% revenue growth headwind in the third quarter, based on current exchange rates. 

Still, the Meta results also suggest that fortunes in online ads sales may be diverging between search and social media players, with the latter affected more severely as ad buyers reel in spending. 

Alphabet Inc., the world’s largest digital ad platform, reported a rise in quarterly revenue on Tuesday, with sales from its biggest moneymaker, Google search, topping investor expectations. 

Snap Inc. and Twitter both missed sales expectations last week and warned of an ad market slowdown in the coming quarters, sparking a broad sell-off across the sector. 

On top of economic pressures, Meta’s core business is also experiencing unique strain as it competes with short video app TikTok for users’ time and adjusts its ads business to privacy controls rolled out by Apple Inc. last year. 

The company is simultaneously carrying out several expensive overhauls as a result, revamping its core apps and boosting its ad targeting with AI, while also investing heavily in a longer-term bet on “metaverse” hardware and software. 

Meta executives told investors they were making progress in replacing ad dollars lost as a result of the Apple changes but said it was being offset by the economic slowdown. 

They added that Reels, a short video product Meta is increasingly inserting into users’ feeds to compete with TikTok, was now generating over $1 billion annually in revenue. 

However, Reels cannibalizes more profitable content that users could otherwise see and will continue to be a headwind on profits through 2022 before eventually boosting income, executives told analysts on Wednesday. 

“They are being greatly affected by everything,” Bokeh Capital Partners’ Kim Forrest said, referring to the economic slowdown as well as competition from TikTok and Apple.  

“Meta has a problem because they’re chasing TikTok and if the Kardashians are talking about how they don’t like Instagram … Meta should really pay attention to that.” 

On Monday, two of Instagram’s biggest users, Kim Kardashian and Kylie Jenner, shared a meme imploring the company to abandon its shift to TikTok-style content suggestions and “make Instagram Instagram again.” 

Not persuaded

CEO Mark Zuckerberg did not appear to be swayed, however. 

About 15% of content on Facebook and Instagram is currently recommended by AI from accounts users do not actively follow, and that percentage will double by the end of 2023, he told investors on the call. 

For now, at least, the metaverse part of Meta’s business remains largely theoretical. In the second quarter, Meta reported $218 million in non-ad revenue, which includes payments fees and sales of devices like its Quest virtual reality headsets, down from $497 million last year. 

Its Reality Labs unit, which is responsible for developing metaverse-oriented technology like the VR headsets, reported sales of $452 million, down from $695 million in the first quarter. 

Although Meta has recently slowed investments as cost pressures increased, executives reassured investors it was still on track to release a mixed-reality headset called Project Cambria later this year, focused on professionals. 

Meta broke out the Reality Labs segment in its results for the first time earlier this year, when it revealed the unit had lost $10.2 billion in 2021. 

Its second-quarter operating profit margin fell to 29% from 43% as costs rose sharply and revenue dipped. 

In November, Chief Financial Officer David Wehner will become Meta’s first chief strategy officer. Susan Li, Meta’s current vice president of finance, will become CFO.
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The U.S. Federal Reserve is expected to impose a second major interest rate increase Wednesday in an effort to combat soaring inflation.

Observers say the central bank will likely announce an interest rate hike of three-quarters of one percentage point. The expected rate hike would be similar to one last month — the biggest boost in nearly three decades as the U.S. inflation rate soared to an annual rate of 8.6%, the highest in 40 years.

The U.S. economy has seen rising demand for goods and services among consumers as the global COVID-19 pandemic has steadily waned. But that has also led to the rising cost of most commonly used items, such as gasoline, food and clothing, as well as major items like cars, appliances and furniture.

The decision by the Federal Reserve to increase the interest rate consumers pay to borrow money is aimed at lowering such demand, which could help lower prices and bring inflation back down to the central bank’s target rate of 2% per year — but without pushing too far and causing a recession, which could lead to job losses and more economic pain.

All three major U.S. stock indices closed lower Tuesday after giant retailer Walmart cut its profit outlook and warned that rising prices of food and gasoline were prompting consumers to cut back on buying higher priced goods like electronics and clothes.

Some information for this report came from The Associated Press and Reuters.
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Two decades ago, China’s factory-driven economy awed the world as it expanded at more than 10% per year. But the country has missed double-digit growth over the past decade. The GDP shrank from April to June this year compared with the previous three months, though it topped the same quarter of 2021, but just barely.

Economists tell a consistent story about how the drop happened: Lockdowns to stop COVID-19 infections hurt factory work and export shipments. They say those setbacks added to financial hardships among China’s top property firms and the shocks of a 2021 crackdown on major Chinese tech icons. 

China’s $18 trillion economy, the world’s second largest after the United States, shrunk 2.6% from April to June compared to the first three months of the year. 

“China’s economy has seen signs of disruption since February due to the impact of COVID-19 outbreaks in a number of Chinese cities,” said Rajiv Biswas, executive director and Asia-Pacific chief economist at S&P Global Market Intelligence. He called industrial production, retail sales and port operations particular trouble spots. 

“The resulting disruption to retail sales and industrial production has been quite severe during April and May. And in Shanghai, port operations and logistics were also quite heavily disrupted during April,” Biswas said. 

Shanghai is China’s chief port city. The central government ordered lockdowns there in April. 

China’s economy grew close to 10% per year from 2003 to 2010, World Bank data show. Annual growth gradually slowed through 2019 before dipping to 2.2% in the first pandemic year, 2020, and rebounding to 8.1% last year.

Pressure on jobs, spending 

The lockdown-weary country recorded more than 6% unemployment in April, compared with nearly 5% (4.8%) at the end of 2021. Younger workers  and smaller firms have been hit especially hard, analysts say.  

Individuals contacted by VOA in Beijing, Shanghai and the inland city of Changsha this week said they knew about the employment crunch but felt their own jobs were stable.

“At least I don’t know of any friends around me who are jobless, and I’ve not heard that many complaints,” said a fashion importer who spoke on condition of anonymity.

Chinese consumers are now spending less than normal because they cannot go outside during mandatory closures, or they fear cuts in income from eventual job losses, said Alicia Garcia-Herrero, chief Asia-Pacific economist at French investment bank Natixis, who is based in Hong Kong. 

Retail sales grew at a low of 3% in June, even as lockdowns eased, Garcia said, pointing to “very negative sentiment as well as very slow growth in disposable income.”

“It is very clear that the household sentiment remains very negative, perhaps because of the uncertainty of future lockdowns as mass testing remains pervasive,” she said. 

Setbacks in property, tech, global confidence 

Last year, the economy was already faltering due to problems in real estate and tech. 

A number of big name Chinese property developers began to default on billions of dollars’ worth of loans last year, according to consultant firm Dezan Shira & Associates, who said homeowners who bought units through a “pre-pay model” are now refusing to pay mortgages on unfinished homes.

In tech, Chinese regulators began in cracking down on the country’s most powerful firms in late 2020, including e-commerce giant Alibaba Group and social media juggernaut Tencent. Regulators have cited concerns about monopolistic activity and data security.  

China’s economic malaise is worrying world markets because the “slope” of recovery is less steep than it was when COVID-19 hit in 2020, said Zerlina Zeng, a senior analyst at the CreditSights research firm in Singapore. Missed mortgage payments threaten the value assets, including property, she added.

Disruptions to export shipping and manufacturing in China have hobbled supply chains in much of the world, in turn adding to inflation and fears of recession.

Is the worst over? 

Officials in Beijing are nudging the economy forward again by spending on infrastructure. The GDP is already showing signs of recovery, Zeng said. Demand for cement and cars, including electric ones, is already up, she said. Officials are also relaxing last year’s tough stance on the tech industry, Zeng added.  

“Overall, we are seeing a better macro picture” this quarter, she said. “We think that for sure, [the economy] is going to recover but that the slope of the recovery is not going to be as good as what the market had expected back in the first quarter of this year.” 

Any future lockdowns will probably target neighborhoods rather than all of Shenzhen or Shanghai as the government did earlier this year, Zeng said. But she cautioned that China’s goal of 5.5% economic growth this year is “very ambitious.”

The government-run China Daily posted an investment bank editorial last week calling for 5.3% economic growth year on year from July through September, and 5.9% in the final months of 2022.
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World economic growth is slowing and the prospects for a quick recovery are gloomy, the International Monetary Fund said Tuesday.

The IMF said it expects growth to slow from last year’s 6.1% advance across the globe to 3.2% this year, four-tenths of a percentage point lower than it forecast in April.

“A tentative recovery in 2021 has been followed by increasingly gloomy developments in 2022 as risks began to materialize,” the IMF said. “Global output contracted in the second quarter of this year, owing to downturns in China and Russia, while U.S. consumer spending undershot expectations.”

The Washington-based international finance agency said that “several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide – especially in the United States and major European economies – triggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting COVID-19 outbreaks and lockdowns; and further negative spillovers from [Russia’s] war in Ukraine.”

The IMF said the price of consumer goods, especially for food and energy, is increasing throughout the world. The cost is expected to rise by 6.6% in advanced economies this year and by 9.5% in emerging market and developing economies, with both figures up nearly a percentage point from the IMF’s earlier projection.

“The risks to the outlook are overwhelmingly tilted to the downside,” the IMF said.

It said the war in Ukraine “could lead to a sudden stop” of Russia’s export of natural gas to European countries and that “inflation could be harder to bring down than anticipated” if employers cannot find enough workers to meet their labor demands or inflation increases at a faster pace than expected.

The IMF said that a “plausible alternative scenario” to its already diminished forecast would be a world economy “in which risks materialize, inflation rises further, and global growth declines” to about 2.6% and 2% percent in 2022 and 2023, respectively, figures that would put growth in the bottom 10% of outcomes since 1970.

“With increasing prices continuing to squeeze living standards worldwide, taming inflation should be the first priority for policymakers,” the IMF said.

The IMF forecast came as policy makers at the U.S. central bank, the Federal Reserve, began two days of meetings in Washington with the expectation they will announce another three-quarters of a percentage point increase in the Fed’s benchmark percentage rate on Wednesday, an effort to curb rampant inflation in the U.S., the world’s biggest economy.

With June’s 9.1% year-over-year surge in consumer prices in the U.S. – the fastest pace in four decades – the Fed has already boosted its prime lending rate this year from near zero percent to 1.6% and expects to end 2022 at 3.4%.

Increases in the Fed’s interest rate reverberate through the U.S. economy, with higher borrowing costs for car loans and consumer goods. By making it costlier to borrow money, the Fed’s expectation is that consumers and businesses will cut their spending and thus help curb inflation.
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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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