Deadly flash floods after record-breaking rainfall in central China have raised fears that the country’s early warning systems remain ill-equipped to handle extreme weather events worsened by climate change.
Whole blocks of Zhengzhou, the capital of Henan province in central China, were submerged this week after the city’s drainage system was overwhelmed when the equivalent of eight months of rain fell in 24 hours.
The official death toll across Henan province rose to 33 on Thursday with eight people were missing while 376,000 people had been relocated, according to state broadcaster CCTV. The direct economic costs were more than Rmb1.2bn ($186m), the broadcaster said.
China’s government has called the downpour a “once in 5,000 years” event. But climate activists fear that city authorities are only vaguely aware of the growing risks of climate change and how to manage them.
Scenes of passengers trapped in submerged subway cars and teams of volunteers linking arms to avoid being washed away sparked widespread discussion of why a red alert issued by weather forecasters failed to result in early evacuations or citywide closures of schools and public transport.
Cheng Xiaotao, former director of the Institute of Flood Control and Disaster Mitigation at the China Institute of Water Resources and Hydropower Research, said that the country had not created emergency response mechanisms for what to do once a red alert was issued.
“After the warnings, in what type of situation should we halt work and manufacturing? How should various departments co-ordinate? . . . What are the actual emergency actions to take in response?” he said in China Newsweek, a state-backed media outlet.
Environmentalists have warned that the risk of extreme downpours turning into dangerous flash floods has been exacerbated by China’s expanding cities and the depletion of natural water bodies capable of absorbing rainfall.
The Zhengzhou government planned in 2018 to spend Rmb53bn ($8.2bn) by 2020 to limit flooding by creating a “sponge” urban district capable of absorbing heavy rainfall with waterways and drainage infrastructure.
Even so, few cities strictly follow procedures that in theory require an immediate ban on outdoor activity and active monitoring of vulnerable locations as soon as a red alert is issued.
In the summer of 2012, about 80 people died in Beijing after torrential rain left drivers stuck in their cars in flooded underpasses. Authorities responded by upgrading warning systems to include clear guidance following red alerts, but few other local governments have followed its example.
“Risk assessments for climate change and extreme weather are not yet the priority for most cities, but they should be,” said Liu Junyan, a Beijing-based campaigner for Greenpeace East Asia.
China officially accepts the science of climate change and President Xi Jinping has made it a political priority to cap the country’s carbon dioxide emissions before 2030 and reach “carbon neutrality” by 2060.
But it is rare for Communist party officials to link individual weather events to broader ecological shifts. Unlike recent flooding in Europe, Chinese state media and officials have avoided connecting the floods in Henan to climate change.
Additional reporting by Emma Zhou in Beijing
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Thermal coal prices soar as demand for electricity rebounds
Supply disruptions, a drought in China and rebounding electricity demand have fired up the market for thermal coal, making the world’s least liked commodity one of this year’s best-performing assets.
Since the start of the year, the price of high energy Australia coal — the benchmark for the vast Asian market — has climbed 80 per cent to almost $146 a tonne, its highest level in more than a decade.
Its South African equivalent is also trading at its highest level in more than 10 years, after rising 44 per cent in 2021 according to the latest weekly assessment by commodity price provider Argus.
That puts the coal benchmarks ahead of two of this year’s best performing asset classes: real estate, which is up 28 per cent, and financial stocks, up 25 per cent. Only Brent crude, up 44 per cent, boasts comparable gains.
The resurgence of thermal coal, which is burnt in power stations to generate electricity, highlights the difficulties governments face as they try to make the switch to cleaner forms of energy.
Even though renewables such as wind and solar are growing rapidly they are struggling to keep pace with rising demand for electricity and power, leaving fossil fuels to fill the gap.
Several factors linked have combined to drive up prices, according to traders and analysts.
“Price increases have been primarily driven by robust demand from China, with Chinese buyers willing to secure material at highest prices,” said Dmitry Popov, senior thermal coal analyst at CRU, a consultancy.
A drought earlier this year in southern China, which knocked out hydroelectric dams and boosted demand for coal, has played a major role in the commodity’s turbocharged run.
China has also struggled to boost domestic supply to meet the increased demand due tough safety rules that have crimped production volumes.
At the same time output from Indonesia, China’s biggest overseas supplier of coal, has been hampered by persistent rainfall, while rail and port constraints have affected shipments from Russia and South Africa, two other key coal producers.
China has also been unable to buy Australia coal because of a ban, while surging natural gas prices have prompted some utility companies in Japan and Europe to switch to coal, further tightening the market.
“I have never seen China under this sort of pressure before,” said Tom Price, head of commodities strategy at Liberum. “Hydro down, local production struggling and key import options just not there.”
All this has come as electricity demand has picked up as Covid-related lockdowns have eased.
After falling by around 1 per cent in 2020, global electricity demand is set to grow by close to 5 per cent in 2021, according to the International Energy Agency, and by 4 per cent in 2022.
“While renewable energy sources are expected to continue to grow rapidly, they will only be able to serve around half of the net demand increase in 2021 and 2022,” the IEA said in its latest Electricity Market Report.
As a result, the Paris-based agency reckons coal-fired electricity will increase by almost 5 per cent this year to exceed pre-pandemic levels and grow by a further 3 per cent in 2022 when it could reach a record high.
Still, not everyone believes high prices will hold. Fitch Solutions predicts prices will peak later this year as Beijing releases coal from its strategic stockpiles and orders miners to increase production. In additional fossil power generation in China typically peaks in July and August before falling sharply.
“Consequently, we continue to expect a slowdown in domestic thermal coal demand by the start of September,” said Popov.
Looking further ahead, the big question for thermal coal is whether environmental polices will result in demand weakening more quickly than supply, as bank and insurers refuse to fund new projects.
“I expect supply to fall faster than demand,” said Price at Liberum, who thinks China and India will continue to buy coal in the export market for the next decade. “It is a super tight market. It’s not going to crash in a heap.”
Bets on electric vehicles light up lithium miners and battery makers
Investors are betting that the rise of electric cars will drive a period of rapid growth for lithium miners and battery producers.
Sales of electric cars have surged in Europe and China this year, boosting the outlook for the battery industry. The world’s largest carmakers have pledged to spend billions developing new models. Meanwhile the EU said last week it might ban petrol and diesel cars by 2035.
Volkswagen, the world’s largest carmaker, said its sales of electric cars rose 165 per cent in the first half of the year; China’s BYD reported a 154 per cent increase.
Prices for lithium carbonate, a key material for electric car batteries, have almost doubled over the past year, according to Benchmark Mineral Intelligence.
“We believe that a transformational bull market is under way for speciality metals, as the green revolution gains pace and the ‘green recovery’ from the Covid-19 crisis offers the sector a boost from stimulus and regulation,” said fund managers at Baker Steel Capital Managers.
Shares in Ganfeng Lithium, China’s largest producer of the battery material, have risen 98 per cent this year, giving the company a value of $42bn, which makes it the world’s largest listed lithium miner. The Xinyu-based company has been highly acquisitive, investing in lithium assets in Mali, Mexico, China and Argentina this year.
Shares in CATL, the world’s largest battery maker, have gained almost 38 per cent this year, lifting its market value to $200bn — $50bn more than VW.
“If you look at all the expansion plans for the battery makers and OEMs [carmakers] you have to be prepared,” said Wang Xiaoshen, Ganfeng’s chief executive, in an interview with the Financial Times. “The world needs all kinds of lithium resources.”
Wang said the lithium market faced the risks of supply lagging behind demand over the next couple of years because new mining projects could face delays. That could limit carmakers’ ability to meet their ambitious targets for EVs, he said.
“It looks like it [the market] might be balanced — but if it’s balanced, it will be a very tight balance,” he said.
Investor enthusiasm for batteries has prompted a number of battery technology start-ups to list on the stock exchange via reverse mergers with special acquisition vehicles, known as SPACs.
This month Singapore-based SES, which is developing a more powerful lithium-metal battery, said it would list on the New York Stock exchange via a combination with Ivanhoe Capital Acquisition Corp.
Still, rising raw material prices will translate into higher production costs for lithium-ion batteries, making electric cars and energy storage more expensive.
Steven Meersman, co-founder of UK battery start-up Zenobe Energy, said higher battery prices were causing some people to delay energy storage projects, which use large lithium-ion batteries to store energy for electricity grids.
“Battery prices are going up a lot,” he said. “We have a perfect storm happening at the moment, with what’s going on in the shipping sector, getting more expensive, and commodities . . . the supply chain is waking up from its slumber post Covid.”
The higher prices have created an incentive to re-use old lithium-ion batteries which have lost some capacity but can still be used in energy storage applications, he said.
Security concerns are weakening China’s place in the world
Hello from Italy, where I am in quarantine for five days before visiting family. Rome is trying to keep in check the Delta variant of coronavirus that is threatening the economic recovery of many countries around Europe.
We’re not the only ones suffering from a lack of freedom as a result of the pandemic. Today’s main story looks at how Chinese outward investment has rapidly weakened, limited by increased scrutiny both at home and investment destinations. The trend is in stark contrast with expectations of a spending spree, with Chinese groups feasting on distressed companies in advanced economies. It bucks the strong rebound in global mergers and acquisitions too.
The foreign, and homegrown, fears behind FDI’s fall
China’s role in global investment has diminished dramatically.
Its greenfield foreign projects in the 12 months to May almost halved compared with the previous 12 months.
This is much worse than the almost 30 per cent drop across the globe over the same time, with falls of about 25 per cent for the UK, the US and Europe’s leading economies.
The scale of the decline means Chinese companies dropped from being the sixth-biggest investors in greenfield projects to ninth place in the most recent 12 months, overtaken by Switzerland, the Netherlands and Spain.
Outbound Chinese mergers and acquisitions fell too. In the year to date, the number plunged 37 per cent compared with the same period in 2019, while the value of the deals stagnated.
This is against a backdrop in which M&A activity has surprised many by picking up, pushing the value of deals to a multiyear high.
China was the only major global economy to expand last year. So what exactly is going on?
One part of the story is foreign governments’ security concerns.
The UK government, for instance, recently intervened on the acquisition of the country’s UK’s largest silicon wafer manufacturer. Canada and Australia blocked the takeover of two construction companies. And Italy and Germany vetoed a Chinese acquisition of a national semiconductor company and a satellite group respectively.
Tougher investment screening frameworks are already having an impact — including the UK National Security and Investment Act, which is set to officially become law later this year. “The UK Government is reserving the ability to call in for review, once the rules are operational, any deals that have completed since November 2020, when the bill was published by the UK government,” said Sunny Mann, partner at Baker McKenzie. “This has prompted a number of acquirers to already start filing their proposed investments voluntarily with the newly formed investment screening unit.”
The UK’s step follows similar laws in the EU and Australia. Earlier in the year, US president Joe Biden signed an executive order to prohibit investments in 59 Chinese companies on security grounds, including Huawei, the telecoms equipment manufacturer, and Semiconductor Manufacturing International Corporation, China’s largest chipmaker.
The trend is well recorded by the recent annual report by Unctad, which tracks global investment and counted 50 restrictive measures in 2020, against 21 in the previous year, largely “driven by national security concerns over FDI in sensitive industries”. Many were introduced by developed economies.
But this is far from the only cause. There are factors closer to home too.
Thilo Hanemann, partner at Rhodium Group, a think-tank, said that while greater regulatory and political scrutiny abroad was a factor, “the fall of Chinese outbound investment since 2017 is largely a Chinese story”.
“Beijing reimposed capital controls as outflows grew too large for its comfort,” he said. The crackdown on large private conglomerates, such as Alibaba, tighter liquidity in the market, and concerns about access to sensitive personal data have become additional drivers in the past two years.
The US-China Investment Project, a think-tank, noted in a recent report that “throughout the pandemic, Beijing prioritized stability, refusing to loosen restrictions on outbound investment by private companies despite a massive trade surplus and upward pressure on its currency”.
“In China, the balance that leaders strike between domestic financial stability and openness to the outside world will shape the investment landscape,” the report said.
Deals so far this year are down more than four-fifths on the level seen in 2016. Hanemann said that a return to those high levels was “unlikely in the near future”.
Max J Zenglein, chief economist at Mercator Institute for China Studies, a think-tank, agreed that a pick-up was unlikely in the coming months. While the general interest in gaining access to foreign technology and securing market access had not changed, “the changing political circumstances require some adjustments”. As a result, he expected the structure of Chinese FDI would change, for example with more venture capital investments.
China could also see “more onshoring of critical technology and R&D” as “absorbing global value chains into China can be seen as a direct response to increased economic defence measures complicating Chinese investments abroad”, said Zenglein.
The trend towards shifting investment back home has been catalysed by the pandemic. In China, at least, we’re increasingly sure it will outlive it.
Brussels has, somewhat unsurprisingly, said it will not renegotiate the Brexit deal. That refusal came after the UK’s Brexit minister Lord David Frost issued a paper calling for the so-called Northern Ireland protocol agreed with the EU in 2019 to be renegotiated. Philip Stephens thinks the Johnson government has acted in bad faith, taking a stance it knows the EU cannot accept.
Tesla has agreed to buy nickel for its batteries from BHP, the world’s largest miner, as it looks to lock up supplies of the metal not controlled by China.
Reuters reports that the meat industry is warning that UK supply chains are now at risk of failing due to pandemic-related labour shortages.
As Beijing and Moscow bolster diplomatic ties, the city of Blagoveshchensk on the Chinese-Russian border is pursuing a trade and tourism boost (Nikkei, $, subscription required). Taiwan Semiconductor Manufacturing Company, the world’s biggest made-to-order chipmaker, may put its first chip plant in Japan into operation as early as 2023 (Nikkei, $). The aim is for it to supply electronics group Sony.
The Peterson Institute for International Economics has an interesting critique of the International Trade Commission’s assessment of some of the agreements negotiated under the now expired Trade Promotion Authority. The assessment claims the US economy is 0.5 per cent bigger as a result of the deals. Claire Jones
China rushes to set up bailout funds for indebted state-run firms
Local governments in China are racing to launch rescue funds worth billions of dollars to bail out state-owned groups after a flurry of high-profile bond defaults that shook international investors.
Public records showed that six Chinese provinces have committed at least Rmb110bn ($17bn) to the funds since the end of last year, as a cash crunch among indebted state-owned enterprises hit local economies.
The wave of defaults included companies such as Yongcheng Coal and Electricity Holding Group, which threw the local economy of central province of Henan into crisis when it missed an Rmb1bn debt payment last year and stopped paying some of its 180,000 workers.
“The entire province has suffered economically because a single SOE failed to make bond payments on time,” said an official in Henan, which started a bailout fund in April.
While China’s economy has been one of the first to recover from the Covid-19 pandemic, the rebound has been patchy in some provinces that are dependent on state-owned industries.
Distressed bonds issued by state-owned enterprises totalled Rmb119bn last year, the highest since China started allowing SOEs to default in 2014, and up from Rmb22bn in 2019. The defaults have worried investors, who previously had assumed the bonds would be backed by the state.
The rise of the provincial bailout funds marked local Chinese authorities’ latest effort to restore creditor confidence. But analysts warned that the strategy could instead worsen China’s debt overhang, which they characterised as a time-bomb for the world’s second-largest economy.
“The purpose of bailout funds is to send a message to the market that the government will step in when things go wrong,” said Zhang Pan, head of research at Raman Capital, a Shanghai-based asset manager. “They are not going to make a mismanaged SOE a better-run business.”
While China weathered an economic downturn in the 1990s by closing down tens of thousands of lossmaking state groups, Beijing is reluctant to do so again.
President Xi Jinping sees state companies as the “bulwark of the economy”, in contrast to former premier Zhu Rongji, who in the 1990s took the approach of “keeping the big and letting go of the small” to deal with SOE failures.
The highly indebted northern province of Hebei was the first to establish a bailout vehicle, a Rmb30bn SOE “credit guarantee fund” launched in September.
By the end of May, Jizhong Energy, a struggling state group in Hebei, had drawn Rmb15bn, or the equivalent of three-quarters of its revenue last year, from the provincial CGF to pay off bond principal and interest.
“Our liquidity problem has greatly eased following the bailout,” said an executive at Jizhong, adding that the group remained highly leveraged and would apply for another Rmb15bn from the Hebei CGF in the coming months.
The funds draw most of their funding from other companies controlled by local authorities. In Henan province, 26 SOEs ranging from coal mines to copper processors provided Rmb30bn of seed capital for a CGF.
“The provincial government wanted us to help each other when external funding dries up,” said an executive at Pingmei Shenma Group, an energy conglomerate and shareholder of the Henan CGF.
In the wake of the Yongcheng Coal default, bank loan issuance fell 10 per cent in Henan in the first half of the year, compared with growth of 6 per cent nationally.
In the meantime, official data showed the province’s net corporate bond financing — new bond issuance minus interest plus principal payments on existing bonds — was minus Rmb20.1bn in the first six months of the year. That compared with Rmb71bn a year earlier.
The credit crunch in Henan convinced Beijing to begin pressuring local authorities to help distressed SOEs. As a result, only one has defaulted on bond payments this year. But investors remained concerned about the lack reform among distressed SOEs.
“The government doesn’t have a long-term plan to turn bad SOEs into good ones,” said an adviser to Hebei’s State-owned Assets Supervision and Administration Commission, the SOE regulator. “Its priority is just to get through the short-run liquidity crisis.”
State banks, the biggest suppliers of credit, are also cautious.
“Bailout funds are too small to meet the funding demand from a great many cash-strapped SOEs,” said a risk management official at one of the country’s top lenders. “We need to prioritise performance instead of local interests.”
In Hebei, an executive at one of the shareholders of the local CGF said the company decided to pay into the bailout fund because of political considerations, rather than business ones.
“We don’t expect a market return from the investment,” said the official.
China is pushing Japan to take on a growing military role in Indo-Pacific
On the cover of Japan’s annual defence white paper released last week, a legendary 14th-century Samurai rides towards the viewer — a stark contrast with last year’s Mount Fuji and cherry blossoms.
The invocation of the famed warrior caste is no accident: Japan is putting stronger emphasis on defence and taking on a bigger role in regional security.
Front and centre is China, the giant neighbour on which Japan’s economy depends heavily but which the country’s politicians have also identified as its primary security threat.
“The steps China has taken in its regional security disputes — India, the South China Sea, Taiwan and the East China Sea — have put further fuel on a fire that was already burning,” says Bates Gill, a professor for Asia-Pacific security studies at Macquarie University.
Within the first five lines of the white paper, defence minister Nobuo Kishi accuses China of attempting to change the status quo in regional waters. The document also states that “stabilising the situation surrounding Taiwan is important for Japan’s security and the stability of the international community” — the latest of a recent string of high-profile mentions of the island which China claims as its territory and threatens to take by force. Last but not least, Tokyo stresses the need to focus on developing advanced technologies such as AI vital for the future of warfare and to protect them from China.
Japanese expressions of alarm about China are often drowned out in the global cacophony of concern over Beijing’s military expansion and assertive behaviour. But the white paper reflects what may be the largest shift in Tokyo’s security stance in more than 70 years.
Since its defeat in the second world war, Japan has lived under a constitution that renounces any use of military force. But in 2014, Shinzo Abe, then prime minister, reinterpreted the relevant article to allow military action even outside Japan proper for the purpose of what it calls ‘collective self defence’.
Since then — and boosted by reforms which streamline policymaking on security issues — Tokyo has taken a more active role in shaping regional security.
It was Abe, for example, who came up with the call for like-minded countries to protect freedom and security in the Indo-Pacific — a concept that has since become the backbone of the US’ strategy in the region. Tokyo has also taken a leading role in reviving the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) when the US’ retreat threatened to collapse the trade deal.
“Japan knows that it cannot ‘contain’ China, so it is trying to build a network of like-minded countries to show presence to protect rules-based order,” says Robert Ward, Japan Chair at the International Institute for Strategic Studies.
Japan has steadily increased its military engagement with friendly nations that share this goal. Earlier this year, Japanese, American and French troops held their first-ever joint drills on Japanese territory, simulating the defence of an island against enemy invasion in a scenario aimed at China.
The country is also negotiating a reciprocal access agreement with Australia to regulate visits of soldiers from the two countries to each other’s territories. According to experts, one of the goals is to allow Japanese forces to protect Australian military assets.
Tokyo is also helping to strengthen the capabilities of littoral states in south-east Asia to push back against China’s moves designed to enforce its expansive maritime claims in the disputed waters of the South China Sea. It has, for example, equipped Vietnam and the Philippines with patrol ships.
Still, experts believe that there are limits to the military component of Japan’s new prominence in regional security.
“The Japanese public continues to feel a profound discomfort with power projection, and fear of involvement and entanglement,” says Brad Glosserman, deputy director of the Centre for Rulemaking Strategies, a think-tank at Tama University. “Being the spear rather than the shield? Don’t go too far with that.”
Governments need to set standards to limit cyber paranoia
Hello from Beijing, where we’re nearing the end of a month of record-breaking thunderstorms that are closing schools and outdoor venues. Huddled indoors, the topic keeping us riveted is what to make of ride-hailing giant Didi Chuxing’s regulatory car crash.
Didi’s crisis and its implications for China’s data-rich multinationals will take months to fully unfold. Seven Chinese government departments, including state security forces, announced on Friday last week that they were stationing staff inside Didi’s offices.
They are there to carry out the cyber security review announced two weeks ago, just days after Didi’s $4.4bn initial public offering in New York. That announcement and the penalties that followed have sent Didi’s share price down more than 10 per cent below its IPO price.
US shareholders have already filed class-action lawsuits claiming Didi neglected to disclose its regulatory risks. The reality may be less straightforward and much more worrying: that the breadth and vagueness of China’s data security legislation puts many companies at risk of unintentional miscommunication with the regulators.
Charted waters looks at how shipping fees affecting US shippers continue to rocket.
China’s data fears risk morphing into US-style paranoia
Although China’s cyber space agency has not explained exactly why it initiated a cyber security inspection of Didi, it referred to national security and data security risks. Since 2018, the two concepts have become inseparable for the Chinese government, which recently passed its Data Security Law.
“Data is a country’s fundamental strategic asset. Without data security, there is no national security,” opens the law, which comes into effect on September 1.
Ahead of that looming deadline, and in the aftermath of the Didi debacle, businesspeople and lawyers are puzzling over how to comply with a vague set of legal obligations. Under China’s civil law, very broad laws are first passed and then clarified through subsequent implementing guidelines and industry standards. These clarifying measures are still missing, however. That leaves companies in a situation where the Data Security Law expands the scope of which cross-border transfers of “important” data require government approval, but sets no clear procedure to win approval.
The need to audit cross-border data flows has huge impacts on companies that don’t consider themselves tech groups. All multinationals need to transfer data in and out of the country, starting with payroll data. Medical insurance companies handle even more personally sensitive data. All of this could be subject to review.
In the absence of legal clarity, sources fear they will be subject to the whims of US-China tensions and opaque regulators. “This isn’t a cyber security compliance issue, this is a government relations issue,” complained one multinational executive.
I am sure the staff of ByteDance, the parent company of short-video app TikTok, had the same thought on their minds when then US president Donald Trump threatened to ban the app in August 2020 on national security grounds. At the time, many of us puzzled over the threat posed by Beijing having access to the nation’s latest dance crazes, given that the nature of TikTok means almost all data sent to the platform is posted publicly.
The problem is that data paranoia too easily becomes a self-perpetuating meme. Within days, Trump’s concerns started to be treated seriously by companies who banned their employees from using the app (although Amazon made a speedy U-turn). Data paranoia can also become unfalsifiable. Once Trump fired the allegation out into the world, everyone scrambled to figure out what it was based on — in other words, doing the US government’s job for it.
We are in a similar situation with Didi, whose faults have not been publicly aired and whose executives may be as much in the dark as the rest of us as to what the problem is. Indeed, the fact that Beijing is now conducting a cyber security review suggests that the government itself isn’t yet clear about the problem. It is concerned about the vast hordes of user itineraries and mapping data the company holds, and is trying to figure out what might go wrong.
While the Didi debacle exposes the lack of a clear regulatory framework in China to govern sensitive data, the past few years of US-China tussles have also highlighted how other governments are unclear about the nature of the cyber threats they face. This leads to trade policy that is based on political trust, rather than on technical standards.
Yet interpersonal trust is not a good gauge of cyber security. Political allies spy on one another and tech companies based in unfriendly countries may provide more secure services than less-skilled companies in allied countries.
That is not to say that Huawei or Didi harbour no security risks. But when it comes to deciding what to do about them, governments seem initially to tend towards being broad-brush and maximalist with regulation. In the end, they will find the only practical solution involves detailed technical guidance to companies over what data outflows are OK and what are not.
The cyber security industry has for a long time worked to create processes that do not rely on interpersonal trust to be secure. Trade Secrets can’t help but wonder whether if more government leaders were technology-literate, they would consider technical solutions before political sticks.
Yesterday’s Trade Secrets looked at the arguments for and against US president Joe Biden’s executive order aimed at limiting shipping transportation costs. We know what’s driven that order — sky-high rates for transcontinental shipments. The surges began during the second half of last year, but as the charts below show, rates are continuing to rocket, especially on the northern Europe to US east coast route. Claire Jones
How is China’s zero Covid-19 strategy going? Not well, according to this report. Beijing’s commitment to achieving no cases means most of its citizens will probably be cut off from the outside world until the end of the year. Not great news for a country so reliant on trade. There’s more on the aftermath of the Fit for 55 package unveiled last week, this time from US oil and gas exporters. They have been warned they face a further tightening of European anti-pollution rules despite energy’s exclusion from a swath of climate proposals introduced in Brussels last week.
The imbalance in vaccine supplies is deepening around the world, with an excess in the US and Europe contrasting with shortages in many countries in Asia. The result: 150m doses are unused (Nikkei, $, subscription required). India’s exports have been at a standstill (Nikkei, $) for three months so far — with little prospect of their resumption anytime soon — after a deadly second wave of the virus ravaged the south Asian nation of more than 1.3bn people in April and May. Claire Jones
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