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For Musk and other foreign CEOs visiting China, silence is golden

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For Musk and other foreign CEOs visiting China, silence is golden

A veritable parade of overseas CEOs including Tesla’s Elon Musk and Goldman Sachs’ David Solomon have made their way to a reopened China in the last few months.

One notable common strand: they’ve not talked much in public about their trips which have mostly consisted of meetings with government officials, local staff and business partners. Media events and other public engagements, once frequent before the pandemic, are now rare.

Even Musk, known for his unreserved banter on Twitter, was uncharacteristically silent on a whirlwind trip last week.
In 2020, the billionaire celebrated the delivery of the first cars made at Tesla’s Shanghai plant with a dance on stage that was open to the press. This time around, media were not invited to cover his plant visit.

And while Musk has mentioned the trip in two posts since leaving, he didn’t tweet once while in China.

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Goldman’s Solomon has similarly been more low-key. In 2019, he gave media interviews and participated in several forums. But during his trip in March this year, his only known engagements were closed-door meetings with regulators, China’s sovereign wealth fund and at a university.

The lack of information from Western CEOs and their companies about the trips to China can be attributed to wariness given that US-Sino political and trade tensions have worsened to their lowest point in decades, said senior staff at chambers of commerce and trade associations.

President Xi Jinping’s increasing focus on national security – in particular a recent crackdown on consultancies and due diligence firms – has also left many foreign companies uncertain where they might step over the line of the law, they said.

Noah Fraser, managing director of the Canada China Business Council, said visiting executives are no longer chasing new business opportunities but are concentrating on maintaining existing relationships and will often stipulate no press, big dinners or speaking opportunities.

They appear to be keeping “their heads down and will have private lunches where they can learn from people on the ground what’s happening,” he said.

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Before travelling to China, US CEOs have been seeking advice about how Beijing’s expansion of its counter-espionage law could affect them, according to the head of a U.S. trade association who declined to be identified, citing the sensitive nature of doing business in China currently.

The CEOs also want to know how to deal with Chinese government officials and with questions once the trip becomes public, the association head said, adding it was not in their interest to speak to media and run the risk of being asked to comment on stances taken by Washington and Beijing.

The EU Chamber of Commerce said in a statement that companies operating in China have always exercised a certain level of caution and were now adapting to changes in areas that might be deemed sensitive.

Tesla did not respond to a request for comment while Goldman declined to comment.

China’s foreign ministry said in a statement that the numerous visits from US CEOs were a “vote of confidence” in the Chinese economy. That their trips were relatively low-key stemmed from what it called the US government’s “wrong policy” of containing China, it said.

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With respect to concerns about its counter-espionage law, it was China’s right to safeguard national security through domestic legislation, it added.

The US Department of Commerce declined to comment.

While US President Joe Biden said last month he expected a thaw in frosty relations with Beijing “very shortly”, there is no denying that tensions have soared this year with flashpoints including U.S. export curbs on semiconductors and data security concerns.

That said, after three years of harsh COVID curbs that hampered entry into China, foreign CEOs appear eager to get the lay of the land.

Those travelling here in recent months have included Apple’s Tim Cook, Intel’s Patrick Gelsinger, General Motors’ Mary Barra, Blackstone’s Stephen Schwarzman and JPMorgan’s Jamie Dimon.

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Sixty-seven foreign business leaders attended the high-profile China Development Forum this year, although that is still 20 fewer than in 2019.

“The idea is that you have to show sufficient commitment to the China market if you’re playing there,” said Christopher Johnson, president of China Strategies Group, a political risk consultancy.

At the same time, the CEOs need to do that “without setting off alarm bells with the U.S. government, and it’s a very difficult task,” he added.

JPMorgan and Blackstone declined to comment. Apple, General Motors and Intel did not respond to requests for comment.

The few known comments by foreign CEOs whilst they were in China have been in line with Biden’s stance that he is not seeking to decouple the world’s two largest economies.

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The foreign ministry quoted Musk as saying he was opposed to a decoupling of the U.S. and China economies which he described as “conjoined twins”.

JPMorgan’s Dimon told the JPMorgan Global China Summit last week he favoured East-West “de-risking” rather than decoupling, according to a source from the event.

Daniel Russel, vice president for international security and diplomacy at the Asia Society Policy Institute, said the difference between de-risking and decoupling was a subtle but important one.

It “makes clear that the issue is managing the risk of dependency on China rather than a determination to separate the world into two competing spheres,” he said.

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Inflation and cost-of-living crisis: UK to experience more premature deaths

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Inflation and cost-of-living crisis: UK to experience more premature deaths

 As the cost-of-living crisis triggered and sustained by a persistently high inflation is hitting the low income groups disproportionately around the world, even the developed nations are experiencing its fallout. The United Kingdom is an example where, according to a study, the proportion of people dying before their time (under the age of 75) – premature deaths – is set to rise by nearly 6.5 per cent.

This alarming revelation published in the British Medical Journal translates into 30 extra deaths per 100,000 of the population annually. But the those in the most deprived households experiencing a rate four times that of the least deprived.

It means the crisis is set to “cut lives short” and “significantly widen the wealth-health gap” as the poorest having to spend a larger proportion of their income on the expensive energy.

Without any mitigation, the model found that inflation could increase deaths by 5pc in the least deprived areas and by 23pc in the most deprived – coming down to 2pc and 8pc with mitigation, with an overall rate of around 6.5pc. Overall life expectancy would also fall in each case, it added.

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“Our analysis contributes to evidence that the economy matters for population health,” said the researchers. “The mortality impacts of inflation and real-terms income reduction are likely to be large and negative, with marked inequalities in how these are experienced.

“Implemented public policy responses are not sufficient to protect health and prevent widening inequalities,” they added.
UK inflation unexpectedly slowed in August to 6.7pc from a high of 11.1pc, but remains the highest in the G7, fuelled by coronavirus lockdowns, Brexit and the war in Ukraine – a scenario not seen since 1970s.

The researchers modelled three scenarios: without any mitigating measures, (2) with the inclusion of the EPG; and (3) with the inclusion of the Energy Price Guarantee (EPG) + Cost of Living Support payments. These were compared against ‘business as usual’ (average inflation from previous years) to estimate the health effects of each one.

Explaining the impacts of rising cost of living, the study says, “Our analysis contributes to evidence that the economy matters for population health. Evidence suggests that since 2012, economic conditions in the UK have caused a stalling of life expectancy and widened health inequalities, as austerity led to weaker social security and reduced income for the poorest households.”

“The mortality impacts of inflation and real-terms income reduction are likely to be large and negative, with marked inequalities in how these are experienced. Implemented public policy responses are not sufficient to protect health and prevent widening inequalities.”

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Inflation is changing habits including eating less, reduced focus on personal hygiene

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Asian shares dip with eyes on China economy, US shutdown

Your buying habits and priorities depend upon your income. You may like Gucci or Ralph Lauren products, but it is your income and purchasing power which determine what you will buy or not.

The prevailing cost-of-living crisis fuelled by inflation is making the people – especially those from low income groups and middle class – to change their priorities not withstanding what they like or dislike. With most of the money spent on food and energy needs, an overwhelming majority has is very little spend on other items. You can observe it easily in Pakistan.

Meanwhile, many don’t have money to eat enough as they are opting to eat less while some completely removing items like milk, eggs and meat from their grocery lists.

With no increase in income or reduction in prices in sight, the only solution they have is to adjust their needs and find less expensive alternatives.

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However, the reduced purchasing power is itself causing or complicating other problems. The less they spend, the fewer consumer goods are sold. It means reduced domestic demand that hurts the industries badly.

So the existing businesses aren’t expanding and the new ones not established, which means fewer or no employment opportunities besides the negative effects on revenue collection by the government. It’s a vicious circle for everyone, but more clearly visible in countries like Pakistan.

An example of change in buying habits amid the rising cost of living has emerged from France where, according to Reuters, French consumers are buying fewer personal hygiene and household products, sacrificing tampons and laundry detergent as prices of products made by big brands like P&G and Unilever surge.

The shift in shoppers’ habits could create a new battleground for retailers, politicians and consumer goods makers that have for months been fighting over food prices.

The data, compiled by NielsenIQ, showed overall sales volumes for shower gel, tampons, dishwashing products, laundry detergent and toilet paper declined in the year ended Sept 17. Supermarket prices for items in each of these categories were sharply higher so far this month versus the same period last year.

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“Where there are good private label alternatives you see a big shift towards private labels,” said Anton Delbarre, chief economist at retail trade group Eurocommerce.

“And what you also see is some people actually do eat less, shower less, clean the house less, or they use a little less product for their dishwasher or their washing machine.”

President Emmanuel Macron’s government is due to address grocery inflation in its budget on Wednesday, with legislation to bring forward annual negotiations between food producers and supermarkets. It hopes price cuts can then take effect from Jan 15 rather than March 1 as usual.

Food makers like Nestle and Pepsico have been criticised by supermarkets and politicians for not “co-operating” in pricing negotiations, and for reducing pack sizes of products.

Carrefour, which has pricing power as France’s No 2 supermarket operator, last week slapped “shrinkflation” labels on products that are getting smaller with no price cuts.

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Major brands like Ariel laundry detergent and Dove soaps have for years dominated the market versus retailers’ private label goods.

But the NielsenIQ data shows volumes for private label personal products are inching up while those for big brands decline. For instance, shower gel volumes fell 6 per cent overall and 10pc for big brands but rose 14pc for private label products.

Similarly, while laundry detergent volumes were down about 2pc across the category and fell 10pc for big brands, they surged 28pc for private label brands.

Where people bought less shower gel, tampons, dishwashing products, laundry detergent and toilet paper made by big brands in the year to Sept 17, they bought more of each type of product made by retailers’ private label brands.

While grocers and the government have been vocal about their frustrations in the media and at hearings with lawmakers, consumer goods companies have largely kept quiet, leaving trade groups to speak on their behalf. Unilever declined to comment and P&G did not respond to a request for comment for this story.

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“Consumer goods volumes are weak because of the weak economy in France,” said Bernstein analyst Bruno Monteyne.

Carrefour CEO Alexandre Bompard warned in August that high prices had forced consumers to make massive cuts to spending on essential goods.

Bompard, who has for months slashed prices to win shoppers away from rivals, said then that Carrefour was free to sell washing powder at a 60% discount, but would not be able to do so after a cap on the promotions retailers can offer becomes law.

He said the change would limit Carrefour’s bargaining power with large suppliers like Procter & Gamble, Henkel and Unilever.

Delbarre at Eurocommerce said some of the change in what shoppers buy was likely to persist even after the cost-of-living squeeze eases.

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“People are actually rationing, in part because of decreased purchasing power, and also because salaries always lag behind inflation,” he said. “Once salaries catch up to inflation that effect should probably diminish, but some of it will remain because people create new habits.”
 

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Asian shares dip with eyes on China economy, US shutdown

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Asian shares dip with eyes on China economy, US shutdown

Asian shares mostly sank Tuesday over worries about a possible U.S. government shutdown and the troubled Chinese economy.

Japan’s benchmark Nikkei 225 index slipped 0.6% in morning trading to 32,469.85. Australia’s S&P/ASX 200 dipped 0.5% to 7,042.50. South Korea’s Kospi dropped nearly 1.0% to 2,471.30. Hong Kong’s Hang Seng shed 0.9% to 17,578.90, while the Shanghai Composite fell 0.2% to 3,110.86.

Investors are watching for Chinese economic indicators being released later in the week.

“The Chinese property woes are far from over, as the notorious developer Evergrande defaulted on its 4 billion yuan onshore bond repayment and delayed the restructuring meetings,” said Tina Teng, market analyst at CMC Markets APAC & Canada.

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Wall Street clawed back some of its steep losses from last week. The S&P 500 rose 17.38, or 0.4%, to 4,337.44, coming off its worst week in six months. The Dow Jones Industrial Average edged up 43.04, or 0.1%, to 34,006.88, and the Nasdaq composite gained 59.51, or 0.5%, to 13,271.32.

Realization is sinking in that the Federal Reserve will likely keep interest rates high well into next year. The Fed is trying to ensure high inflation gets back down to its target, and it said last week it will likely cut interest rates in 2024 by less than earlier expected. Its main interest rate is at its highest level since 2001.

The growing understanding that rates will stay higher for longer has pushed yields in the bond market up to their highest levels in more than a decade. That in turn makes investors less willing to pay high prices for all kinds of investments, particularly those seen as the most expensive or making their owners wait the longest for big growth.

The yield on the 10-year Treasury rose to 4.53% from 4.44% late Friday and is near its highest level since 2007. That’s up sharply from about 3.50% in May and from 0.50% about three years ago.

“Stocks digest gradual, growth driven increases in interest rates far better than rapid increases driven by other factors such as inflation or Fed policy,” Goldman Sachs strategists led by David Kostin wrote in a report.

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Higher yields are at the head of a long line of concerns weighing on Wall Street. Not only have oil prices jumped by $20 per barrel since June, economies around the world are looking shaky. The resumption of U.S. student-loan repayments may also weaken what’s been the U.S. economy’s greatest strength, spending by households.

In the near term, the U.S. government may be set for another shutdown amid more political squabbles on Capitol Hill. But Wall Street has managed its way through previous shutdowns, and “history shows that past ones haven’t had much of an impact on the market,” according to Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley.

On Wall Street, Amazon rose 1.7% and was the strongest single force pushing up on the S&P 500. The company announced an investment of up to $4 billion in Anthropic, as it takes a minority stake in the artificial intelligence startup. It’s the latest Big Tech company to pour money into AI in the race to profit from opportunities that the latest generation of the technology is set to fuel.

Stocks of media and entertainment companies were mixed after unionized screenwriters reached a tentative deal on Sunday to end their historic strike. No deal yet exists for striking actors.

Netflix rose 1.3%, while The Walt Disney Co. slipped 0.3%. Warner Brothers Discovery dropped 4% for the day’s largest loss in the S&P 500.

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Also on the losing end of Wall Street were stocks of travel-related companies, which slumped under the weight of worries about higher fuel costs. Southwest Airlines sank 2% and Norwegian Cruise Line fell 3.1%.

In energy trading, benchmark U.S. crude slipped 7 cents to $89.61 a barrel. Brent crude, the international standard, fell 14 cents to $93.15 a barrel. On Wall Street, Exxon Mobil rose 1.1% and ConocoPhillips gained 1.6%. Oil prices have leaped sharply since the early summer.

In currency trading, the U.S. dollar rose to 148.93 Japanese yen from 148.84 yen. The euro cost $1.0586, down from $1.0594. 

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