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  • 5 key takeaways from Xi’s trip to Saudi Arabia | CNN

    5 key takeaways from Xi’s trip to Saudi Arabia | CNN

    Editor’s Note: A version of this story appears in CNN’s Meanwhile in today’s Middle East newsletter, a three-times-a-week look inside the region’s biggest stories. Sign up here.


    Abu Dhabi
    CNN
     — 

    Years of progressing ties between oil-wealthy Saudi Arabia and China, an economic giant in the east, this week culminated in a multiple-day state visit by Chinese President Xi Jinping to Riyadh, where a number of agreements and summits heralded a “new era” of Chinese-Arab partnership.

    Xi, who landed on Wednesday and departed Friday, was keen to show his Arab counterparts China’s value as the world’s largest oil consumer, and how it can contribute to the region’s growth, including within fields of energy, security and defense.

    The trip was widely viewed as yet another snub to Washington, which holds grievances toward both states over a number of issues.

    The United States, which has for more than eight decades prized its strategic alliance with Saudi Arabia, today finds its old partner in search of new friends – particularly with China, which the US worries is expanding its sphere of influence around the world.

    While Saudi Arabia was keen to reject notions of polarization or “taking sides,” it also showed that with China it can develop deep partnerships without the criticism or “interference” for which it has long resented its Western counterparts.

    Here are five key takeaways from Xi’s visit to Saudi Arabia.

    During Xi’s visit, Saudi Arabia and China released a nearly 4,000-word joint statement outlining their alignment on a swathe of political issues, and promising deeper cooperation on scores of others. From space research, digital economy and infrastructure to Iran’s nuclear program, the Yemen war and Russia’s war on Ukraine, Riyadh and Beijing were keen to show they are in agreement on most key policies.

    “There is very much an alignment on key issues,” Saudi author and analyst Ali Shihabi told CNN. “Remember this relationship has been building up dramatically over the last six years so this visit was simply a culmination of that journey.”

    The two countries also agreed to cooperate on peaceful uses of nuclear energy, to work together on developing modern technologies such as artificial intelligence and innovate the energy sector.

    “I think what they are doing is saying that on most issues that they consider relevant, or important to themselves domestically and regionally, they see each other as really, really close important partners,” said Jonathan Fulton, a nonresident senior fellow at the Atlantic Council think tank.

    “Do they align on every issue? Probably not, but [they are] as close as anybody could be,” he said.

    Xi Jinping, who landed on Wednesday and departed Friday, was keen to show his Arab counterparts China's value as the world's largest oil consumer.

    An unwritten agreement between Saudi Arabia and the US has traditionally been an understanding that the kingdom provides oil, whereas the US provides military security and backs the kingdom in its fight against regional foes, namely Iran and its armed proxies.

    The kingdom has recently been keen to move away from this traditional agreement, saying that diversification is essential to Riyadh’s current vision.

    During a summit between China and countries of the Gulf Cooperation Council (GCC) in Riyadh, Xi said China wants to build on current GCC-China energy cooperation. The Chinese leader said the republic will continue to “import crude oil in a consistent manner and in large quantities from the GCC, as well as increase its natural gas imports” from the region.

    China is the world’s biggest buyer of oil, with Saudi Arabia being its top supplier.

    And on Friday, the Saudi national oil giant Aramco and Shandong Energy Group said they are exploring collaboration on integrated refining and petrochemical opportunities in China, reported the Saudi Press Agency (SPA).

    The statements come amid global shortages of energy, as well as repeated pleas by the West for oil producers to raise output.

    The kingdom this year already made one of its largest investments in China with Aramco’s $10 billion investment into a refinery and petrochemical complex in China’s northeast.

    China is also keen to cooperate with Saudi Arabia on security and defense, an important field once reserved for the kingdom’s American ally.

    Disturbed by what they see as growing threats from Iran and waning US security presence in the region, Saudi Arabia and its Gulf neighbors have recently looked eastward when purchasing arms.

    Chinese leader Xi Jinping and Arab counterparts pose for a group photo during the China-Arab summit in Riyadh on December 9, 2022.

    One of the most sacred concepts cherished by China is the principle of “non-interference in mutual affairs,” which since the 1950s has been one of the republic’s key ideals.

    What began as the Five Principles of Peaceful Coexistence between China, India and Myanmar in 1954 was later adopted by a number of countries that did not wish to choose between the US and the Soviet Union during the Cold War.

    Today, Saudi Arabia is keen to adopt the concept into its political rhetoric as it walks a tightrope between its traditional Western allies, the eastern bloc and Russia.

    Not interfering in one another’s internal affairs presumably means not commenting on domestic policy or criticizing human rights records.

    One of the key hurdles complicating Saudi Arabia’s relationship with the US and other Western powers was the repeated criticism over domestic and foreign policy. This was most notable over the killing of Washington Post columnist Jamal Khashoggi, the Yemen war and the kingdom’s oil policy – which US politicians accused Riyadh of weaponizing to side with Russia in its war on Ukraine.

    China has had similar resentments toward the West amid international concerns over Taiwan, a democratically governed island of 24 million people that Beijing claims as its territory, as well as human rights abuses against Uyghurs and other ethnic groups in China’s western Xinjiang region (which Beijing has denied).

    The agreed principle of non-interference, says Shihabi, also means that, when needed, internal affairs “can be discussed privately but not postured upon publicly like Western politicians have a habit of doing for domestic political purposes.”

    For both China and Saudi Arabia, not interfering in one another's internal affairs presumably means not commenting on domestic policy or criticizing human rights records.

    During his visit, Xi urged his GCC counterparts to “make full use of the Shanghai Petrol and Gas Exchange as a platform to conduct oil and gas sales using Chinese currency.”

    The move would bring China closer to its goal of internationally strengthening its currency, and would greatly weaken the US dollar and potentially impact the American economy.

    While many awaited decisions on the rumored shift from the US dollar to the Chinese yuan with regards to oil trading, no announcements were made on that front. Beijing and Riyadh have not confirmed rumors that the two sides are discussing abandoning the petrodollar.

    Analysts see the decision as a logical development in China and Saudi Arabia’s energy relationship, but say it will probably take more time.

    “That [abandonment of the petrodollar] is ultimately inevitable since China as the Kingdom’s largest customer has considerable leverage,” said Shihabi, “Although I do not expect it to happen in the near future.”

    John Kirby, Coordinator for Strategic Communications at the National Security Council in the White House, said the US is

    The US has been fairly quiet in its response to Xi’s visit. While comments were minimal, some speculate that there is heightened anxiety behind closed doors.

    John Kirby, the strategic communications coordinator at the US National Security Council, at the onset of the visit said it was “not a surprise” that Xi is traveling around the world and to the Middle East, and that the US is “mindful of the influence that China is trying to grow around the world.”

    “This visit may not substantively expand China’s influence but signal the continuing decline of American influence in the region,” Shaojin Chai, an assistant professor at the University of Sharjah in the United Arab Emirates, told CNN.

    Saudi Arabia was, however, keen to reject notions of polarization, deeming it unhelpful.

    Speaking at a press conference on Friday, Saudi Foreign Minister Prince Faisal bin Farhan Al Saud stressed that the kingdom is “focused on cooperation with all parties.”

    “Competition is a good thing,” he added, “And I think we are in a competitive marketplace.”

    Part of that drive for competitiveness, he said, comes with “cooperation with as many parties as possible.”

    The kingdom feels it is important that it is fully engaged with its traditional partner, the US, as well as other rising economies like China, added the foreign minister.

    “The Americans are probably aware that their messaging has been very ineffective on this issue,” said Fulton, normally “lecturing” partners about working with China “rather than putting together a coherent strategy working with its allies and partners.”

    “There seems to be a big disconnect between how a lot of countries see China and how the US does. And to Washington’s credit, I think they are starting to realize that.”

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  • When China and Saudi Arabia meet, nothing matters more than oil | CNN Business

    When China and Saudi Arabia meet, nothing matters more than oil | CNN Business


    Hong Kong
    CNN Business
     — 

    Chinese President Xi Jinping is visiting Saudi Arabia this week for the first time in nearly seven years, during which he is expected to sign billions of dollars of deals with the world’s largest oil exporter and meet leaders from across the Middle East.

    The visit is a sign that China and the Gulf region are deepening their economic relations at a time when US-Saudi ties have crumbled over OPEC’s decision to slash crude oil supply. As Xi wrote in an article published in Saudi media, the trip was intended to strengthen China’s relations with the Arab world.

    China is Saudi Arabia’s biggest trading partner and a source of growing investment. It’s also the world’s biggest buyer of oil. Saudi Arabia is China’s largest trading partner in the Middle East and the top global supplier of crude oil.

    “Energy cooperation will be at the center of all discussions between the Saudi-Chinese leadership,” said Ayham Kamel, head of Eurasia Group’s Middle East and North Africa research team. “There is great recognition of the need to build a framework to ensure that this interdependence is accommodated politically, especially given the scope of energy transition in the West.”

    Governments around the world have committed to drastically cutting carbon emissions over the coming decades. Countries such as Canada and Germany have doubled down on renewable energy investments to expedite their transition to net-zero economies.

    The United States has significantly increased domestic oil and gas output since the 2000s, while accelerating its transition to clean energy.

    The Russian invasion of Ukraine in February has triggered a global energy crisis that has left all countries racing to shore up supplies. And the West has further scrambled the oil markets by slapping an embargo and price cap on the world’s second biggest exporter of crude.

    Energy security has also increasingly become a key priority for China, which is facing significant challenges of its own.

    Last year, bilateral trade between Saudi Arabia and China hit $87.3 billion, up 30% from 2020, according to Chinese customs figures.

    Much of the trade was focused on oil. China’s crude imports from Saudi Arabia stood at $43.9 billion in 2021, accounting for 77% of its total goods imports from the kingdom. That amount also makes up more than a quarter of Saudi Arabia’s total crude exports.

    “Stability of energy supplies, in terms of both prices and quantities, is a key priority for Xi Jinping as the Chinese economy remains heavily reliant on oil and natural gas imports,” said Eswar Prasad, a professor of trade policy at Cornell University.

    The world’s second largest economy is heavily reliant on foreign oil and gas. 72% of its oil consumption was imported last year, according to official figures. 44% of natural gas demand was also from overseas.

    At the 20th Party Congress in October, Xi stressed that ensuring energy security was a key priority. The comments came after a spate of severe power shortages and soaring global energy prices following Russia’s invasion of Ukraine.

    As the West shunned Russian crude in the months that followed the invasion, China took advantage of Moscow’s desperate search for new buyers. Between May and July, Russia was China’s No. 1 oil supplier, until Saudi Arabia regained the top spot in August.

    “Diversity is a key ingredient for China’s long-term energy security because it cannot afford to put all of its eggs in one basket and turn itself into a captive of another power’s energy and geostrategic interests,” said Ahmed Aboudouh, a nonresident fellow with the Middle East Programs at the Atlantic Council, a research institute based in DC.

    “Although Russia is a source of cheaper supply chains, nobody can guarantee, with utmost certainty, that the China and Russia relationship will continue to shore up 50 years from now,” Aboudouh said.

    The Saudi Press Agency cited Saudi energy minister Prince Abdulaziz bin Salman as saying Wednesday that the kingdom would remain China’s “credible and reliable partner in this field.”

    Saudi Arabia also has strong motivations to deepen energy ties with China, according to Gal Luft, co-director of the Institute for the Analysis of Global Security.

    “The Saudis are concerned about losing market share in China in the face of a tsunami of heavily discounted Russian and Iranian crude,” he said. “Their goal is to ensure China remains a loyal customer even when the competitors offer [a] cheaper product.”

    Oil prices have fallen back to where they were before the Ukraine war on fears of a sharp global economic slowdown. The extent to which the Chinese economy can pick up pace next year will have a huge bearing on how bad that slump will be.

    Beyond security of supply, Saudi Arabia could offer Beijing another prize with bigger geopolitical ramifications.

    Riyadh has been in talks with Beijing to price some of its oil sales to China in the Chinese currency, the yuan, rather than the US dollar, according to a Wall Street Journal report. Such a deal could be a boost to Beijing’s ambitions to expand the Chinese currency’s global influence.

    It would also hurt the long-standing agreement between Saudi Arabia and the United States that requires Saudi Arabia to sell its oil only for US dollars and to hold its reserves partly in US Treasuries, all in return for US security guarantees. The “petrodollar system” has helped preserve the dollar’s status as the top global reserve currency and payment medium for oil and other commodities.

    Although Beijing and Riyadh never confirmed the reported talks, analysts said it was logical that the two sides would be exploring the possibility.

    “In the near future, Saudi Arabia could sell some of its oil and receive revenues in Chinese yuan, which makes economic sense as China is the kingdom’s top trading partner,” said Naser Al Tamimi, senior associate research fellow at ISPI, an Italian think tank on international affairs.

    Some believe it’s already happening, but that neither China nor the Saudis want to highlight it publicly.

    “They know too well how sensitive this issue [is] for the United States,” said Luft. “Both parties are overexposed to the US currency and there is no reason for them to continue to conduct their bilateral trade in a third party’s currency, especially when this third party is no longer a friend of either.”

    Xi’s visit could mark another step “in the erosion of the dollar’s status” as reserve currency, he added.

    Nonetheless, there are limits to the growing ties between Riyadh and Beijing.

    “The Biden administration’s approach to the Middle East has concerned the Saudis, and they see a growing relationship with China as a hedge against potential US abandonment and a tool for leverage in negotiations with the United States,” said Jon B. Alterman, director of the Middle East Program at the Center for Strategic and International Studies, a Washington DC-based think tank.

    The Biden administration has reoriented its policy priorities with a focus on countering China. At the same time, it has indicated its intention to downsize its own presence in the Middle East, sparking worries among allies there that the United States may not be as committed to the region as it used to be.

    “All that being said, Chinese-Saudi ties pale in both depth and complexity to Saudi-US ties,” Alterman said. “The Chinese remain a novelty to most Saudis, and they are additive. The United States is foundational to how Saudis see the world, and how they have seen it for 75 years.”

    Despite the possibility of shifting to yuan transactions, it’s too early to say Saudi Arabia would ditch the dollar in pricing its oil sales, analysts said.

    Eurasia Group’s Kamal believes it’s “highly unlikely” that Saudi Arabia would take such a step, unless there is an implosion on the US-Saudi relationship.

    “In essence there could be discussion on pricing of barrels to China in yuan, but this would be limited in size and probably only correspond to bilateral trade volumes,” he said.

    Prasad from Cornell University said countries like China, Russia, and Saudi Arabia are all eager to reduce their dependence on the dollar for oil contracts and other cross-border transactions.

    “However, in the absence of serious alternatives and with few international investors willing to place their trust in these countries’ financial markets and their governments, the dollar’s dominant role in global finance is hardly under serious threat,” he said.

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  • China markets tank as protests erupt over Covid lockdowns | CNN Business

    China markets tank as protests erupt over Covid lockdowns | CNN Business


    Hong Kong
    CNN Business
     — 

    China’s major stock indices and its currency have opened sharply lower Monday, as widespread protests against the country’s stringent Covid-19 restrictions over the weekend roiled investor sentiment.

    Hong Kong’s Hang Seng

    (HSI)     Index fell as much as 4.2% in early trading. It has since pared some losses and last traded 2% lower. The Hang Seng

    (HSI)     China Enterprises Index, a key index that tracks the performance of mainland Chinese companies listed in Hong Kong, lost 2%.

    In mainland China, the benchmark Shanghai Composite briefly fell 2.2%, before trimming losses to 0.9% lower than Friday’s close. The tech-heavy Shenzhen Component Index dropped 1.1%.

    The Chinese yuan, also known as the renminbi, plunged against the US dollar on Monday morning. The onshore yuan, which trades in the tightly controlled domestic market, briefly weakened 0.9%. It was last down 0.6% at 7.206 per dollar. The offshore rate, which trades overseas, dropped 0.3% to 7.212 per dollar.

    The plunging yuan suggests that “investors are running ice cold on China,” said Stephen Innes, managing partner of SPI Asset Management, adding that the currency market might be “the simplest barometer” to gauge what domestic and overseas investors think.

    The markets tumble comes after protests erupted across China in an unprecedented show of defiance against the country’s stringent and increasingly costly zero-Covid policy.

    In the country’s biggest cities, from the financial hub of Shanghai to the capital Beijing, residents gathered over the weekend to mourn the dead from a fire in Xinjiang, speak out against zero-Covid and call for freedom and democracy.

    Such widespread scenes of anger and defiance, some of which stretched into the early hours of Monday morning, are exceptionally rare in China.

    Asian markets were also broadly lower. South Korea’s Kospi lost 1%, Japan’s Nikkei 225

    (N225)     shed 0.6%, and Australia’s S&P/ASX 200 fell by 0.3%.

    US stock futures — an indication of how markets are likely to open — fell, with Dow futures down 0.5%, or 171 points. Futures for the S&P 500 were down 0.7%, while futures for the Nasdaq dropped 0.8%.

    Oil prices also dropped sharply, with investors concerned that surging Covid cases and protests in China may sap demand from one of the world’s largest oil consumers. US crude futures fell 2.7% to trade at $74.19 a barrel. Brent crude, the global oil benchmark, lost 2.6% to $81.5 per barrel.

    On Friday, a day before the protests started, China’s central bank cut the amount of cash that lenders must hold in reserve for the second time this year. The reserve requirement ratio for most banks (RRR) was reduced by 25 percentage points.

    The move was aimed at propping up an economy that had been crippled by strict Covid restrictions and an ailing property market. But analysts don’t think the move will have a significant impact.

    “Cutting the RRR now is just like pushing on a string, as we believe the real hurdle for the economy is the pandemic rather than insufficient loanable funds,” said analysts from Nomura in a research report released Monday.

    “In our view, ending the pandemic [measures] as soon as possible is the key to the recovery in credit demand and economic growth,” they said.

    Innes from SPI Asset Management said China’s economy is currently caught in the midst of a tug-of-war between weakening economic fundamentals and increasing reopening hopes.

    “For China’s official institutions, there are no easy paths. Accelerating reopening plans when new Covid cases are rising is unlikely, given the low vaccination coverage of the elderly,” he said. “Mass protests would deeply tilt the scales in favor of an even weaker economy and likely be accompanied by a massive surge in Covid cases, leaving policymakers with a considerable dilemma.”

    In the near term, he said, Chinese equities and currency will likely price in “more significant uncertainty” around Beijing’s reaction to the ongoing protests. He expects social discontent could increase in China over the coming months, testing policymakers’ resolve to stick to its draconian zero-Covid mandates.

    But in the longer term, the more pragmatic and likely outcome should be “a quicker loosening of [Covid] restrictions once the current wave subsides,” he said.

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  • Is The Bitcoin Price Still Correlated With Financial Markets?

    Is The Bitcoin Price Still Correlated With Financial Markets?

    This is an opinion editorial by Mike Ermolaev, head of public relations and content at Kikimora Labs.

    Setting The Context: Global Economy Fundamentals

    The economy is still recovering from the COVID-19 outbreak as new problems arise. We are now in a time of rampant inflation with central banks trying to remedy that by raising interest rates.

    The U.S. CPI data (consumer price index), released on October 13, came in higher than expected (8.2% year-over-year), negatively impacting the bitcoin price. But inflation is not the only issue, the global economy is also struggling with the energy crisis, affecting Europe more than the U.S., due to its strong dependency on Russian natural gas and raw material.

    Mike Ermolaev

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  • China’s yuan tumbles to all-time low amid fears about Xi’s third term | CNN Business

    China’s yuan tumbles to all-time low amid fears about Xi’s third term | CNN Business


    Hong Kong
    CNN Business
     — 

    China’s yuan tumbled to an all-time low on international markets on Tuesday, as investors fled Chinese assets amid fears about Xi Jinping’s shocking move to tighten his grip on power at a major leadership reshuffle.

    In trading outside of mainland China, the yuan briefly plunged to around 7.36 per dollar early Tuesday, the lowest level on record, according Refinitiv, which has data going back to 2010. It then pared losses, trading at 7.33 by 1 pm Hong Kong time.

    On the tightly managed domestic market, the yuan also dropped sharply on Tuesday, hitting the weakest level in nearly 15 years.

    The declines came alongside a historic market rout for Chinese assets worldwide. On Monday, Chinese stocks plummeted in Hong Kong and New York, wiping out billions of dollars in their market value. Hong Kong’s benchmark Hang Seng

    (HSI)     Index closed down 6.4%. The Nasdaq Golden Dragon China Index also dived more than 14%. On Tuesday, the Hang Seng

    (HSI)     rebounded slightly, up 0.8% by noon.

    The huge sell-offs came just days after the ruling Communist Party unveiled its new leadership for the next five years. In addition to securing an unprecedented third term as party chief, Xi packed his new leadership team with staunch loyalists.

    A number of senior officials who have backed market reforms and opening up the economy were missing from the new top team, stirring concerns about the future direction of the country and its relations with the United States.

    International investors spooked by the outcome of the Communist Party’s leadership reshuffle dumped Chinese assets despite the release of stronger-than-expected GDP data. They’re worried that Xi’s tightening grip on power will lead to the continuation of Beijing’s existing policies and further dent the economy.

    China’s leadership reshuffle “sparked worries about the continuation of market-unfavourable policies and increasing risk of policy mistakes under President Xi’s power domination in coming years,” said Ken Cheung, chief Asian forex strategist at Mizuho Bank.

    “Foreign investors took action to cut their exposure on Chinese assets,” he said, adding that the Chinese currency was faced with mounting capital outflow pressure.

    The Chinese yuan, together with other major global currencies, has weakened rapidly against the dollar in recent months. The greenback has surged to the highest level in two decades against a basket of major counterparts, boosted by a hawkish Fed that attempts to contain runaway inflation.

    So far this year, the yuan has slumped more than 15% against the dollar, on track to log its worst year since 1994 — when China devalued its currency by 33% overnight as part of market reforms.

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  • Hong Kong stocks plunge 6% as fears about Xi’s third term trump China GDP data | CNN Business

    Hong Kong stocks plunge 6% as fears about Xi’s third term trump China GDP data | CNN Business


    Hong Kong
    CNN Business
     — 

    Hong Kong stocks had their worst day since the 2008 global financial crisis, just a day after Chinese leader Xi Jinping secured his iron grip on power at a major political gathering.

    Foreign investors spooked by the outcome of the Communist Party’s leadership reshuffle dumped Chinese equities and the yuan despite the release of stronger-than-expected GDP data. They’re worried that Xi’s tightening grip on power will lead to the continuation of Beijing’s existing policies and further dent the economy.

    Hong Kong’s benchmark Hang Seng

    (HSI)     Index plunged 6.4% on Monday, marking its biggest daily drop since November 2008. The index closed at its lowest level since April 2009.

    The Chinese yuan weakened sharply, hitting a fresh 14-year low against the US dollar on the onshore market. On the offshore market, where it can trade more freely, the currency tumbled 0.8%, hovering near its weakest level on record, even as the Chinese economy grew 3.9% in the third quarter from a year ago, according to the National Bureau of Statistics. Economists polled by Reuters had expected growth of 3.4%.

    The sharp sell-off came one day after the ruling Communist Party unveiled its new leadership for the next five years. In addition to securing an unprecedented third term as party chief, Xi packed his new leadership team with staunch loyalists.

    A number of senior officials who have backed market reforms and opening up the economy were missing from the new top team, stirring concerns about the future direction of the country and its relations with the United States. Those pushed aside included Premier Li Keqiang, Vice Premier Liu He, and central bank governor Yi Gang.

    “It appears that the leadership reshuffle spooked foreign investors to offload their Chinese investment, sparking heavy sell-offs in Hong Kong-listed Chinese equities,” said Ken Cheung, chief Asian forex strategist at Mizuho bank.

    The GDP data marked a pick-up from the 0.4% increase in the second quarter, when China’s economy was battered by widespread Covid lockdowns. Shanghai, the nation’s financial center and a key global trade hub, was shut down for two months in April and May. But the growth rate was still below the annual official target that the government set earlier this year.

    “The outlook remains gloomy,” said Julian Evans-Pritchard, senior China economist for Capital Economics, in a research report on Monday.

    “There is no prospect of China lifting its zero-Covid policy in the near future, and we don’t expect any meaningful relaxation before 2024,” he added.

    Coupled with a further weakening in the global economy and a persistent slump in China’s real estate, all the headwinds will continue to pressure the Chinese economy, he said.

    Evans-Pritchard expected China’s official GDP to grow by only 2.5% this year and by 3.5% in 2023.

    Monday’s GDP data were initially scheduled for release on October 18 during the Chinese Communist Party’s congress, but were postponed without explanation.

    The possibility that policies such as zero-Covid, which has resulted in sweeping lockdowns to contain the virus, and “Common Prosperity” — Xi’s bid to redistribute wealth — could be escalated was causing concern, Cheung said.

    “With the Politburo Standing Committee composed of President Xi’s close allies, market participants read the implications as President Xi’s power consolidation and the policy continuation,” he added.

    Mitul Kotecha, head of emerging markets strategy at TD Securities, also pointed out that the disappearance of pro-reform officials from the new leadership bodes ill for the future of China’s private sector.

    “The departure of perceived pro-stimulus officials and reformers from the Politburo Standing Committee and replacement with allies of Xi, suggests that ‘Common Prosperity’ will be the overriding push of officials,” Kotecha said.

    Under the banner of the “Common Prosperity” campaign, Beijing launched a sweeping crackdown on the country’s private enterprise, which shook almost every industry to its core.

    “The [market] reaction in our view is consistent with the reduced prospects of significant stimulus or changes to zero-Covid policy. Overall, prospects of a re-acceleration of growth are limited,” Kotecha said.

    On the tightly controlled domestic market in China, the benchmark Shanghai Composite Index dropped 2%. The tech-heavy Shenzhen Component Index lost 2.1%.

    The Hang Seng Tech Index, which tracks the 30 largest technology firms listed in Hong Kong, plunged 9.7%.

    Shares of Alibaba

    (BABA)     and Tencent

    (TCEHY)     — the crown jewels of China’s technology sector — both plummeted more than 11%, wiping a combined $54 billion off their stock market value.

    The sell-off spilled over into the United States as well. Shares of Alibaba and several other leading Chinese stocks trading in New York, such as EV companies Nio

    (NIO)     and Xpeng, Alibaba rivals JD.com

    (JD)     and Pinduoduo

    (PDD)     and search engine Baidu

    (BIDU)    , were all down sharply Thursday afternoon.

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  • Billionaire dumps Australia netball team in dispute over father’s racist comments | CNN

    Billionaire dumps Australia netball team in dispute over father’s racist comments | CNN


    Brisbane, Australia
    CNN
     — 

    When Australia’s richest woman Gina Rinehart threw a financial lifeline to Netball Australia, she triggered a debate about sponsorships and the role of social and political issues in the sporting sphere. Then she walked away.

    Rinehart’s bombshell decision to withdraw a 14 million Australian dollar ($8.9 million) sponsorship deal for the Diamonds, Australia’s national netball team, caught the players off-guard and struck a blow to the future of Netball Australia – a sporting body mired in debt.

    The drama engulfing the Diamonds is not new, but experts say disputes could become more common as athletes and fans take a stronger stance on the source of sponsorship money.

    Last week, high-profile fans of the AFL’s Fremantle Dockers urged management to sever ties with long-term sponsor, fossil fuel company Woodside, over its carbon emissions.

    Meanwhile, Australian test cricket captain Pat Cummins reportedly raised issues with Cricket Australia’s deal with Alinta Energy, for the same reasons.

    For members of the Diamonds, the objections focused on racist comments made almost 40 years ago by Rinehart’s father, Lang Hancock, the founder of her company Hancock Prospecting.

    Rinehart is a prolific supporter of Australian sports teams and typically earns praise for her sponsorship deals. Last year, Olympic swimmer Cate Campbell reportedly said that Rinehart had “saved swimming.”

    But Kevin Argus, a lecturer in marketing from RMIT University, said Rinehart’s decision on Saturday to pull funding from Netball Australia was a “lost opportunity” to “embrace the national mood.”

    “In Australia, we have witnessed many large powerful companies benefit enormously from positive associations with sport and withdraw their funding support as soon as an issue arises with athletes,” he told CNN Sport.

    “The Diamonds athletes raised concerns about being seen to be supporting a legacy of Aboriginal discrimination. Some have expressed concerns about the environment.

    “These are major issues today that won’t go away,” he said.

    At the center of the controversy is Noongar woman Donnell Wallam, a rising star who is set to make her debut this week as only the third Indigenous netball player to represent Australia.

    Wallam had reportedly expressed reservations about wearing the Hancock logo due to comments Rinehart’s father made about Australia’s First Nations people.

    During a televised interview in 1984, Hancock said he’d “dope the water up so they were sterile and breed themselves out.”

    His words are a dark reminder of racist attitudes toward Indigenous people, and though Rinehart promotes her longstanding support of Aboriginal communities through mining royalties and charities, she has never publicly condemned her father’s statements.

    Wallam’s teammates have rallied around her, and when the team ran onto the court to play New Zealand in the Constellation Cup last week, they wore their old uniforms, without the Hancock logo.

    In the statement on Saturday, Rinehart and Hancock Prospecting said there was no requirement for the Diamonds to wear the logo during the New Zealand games and they did not refuse to wear it.

    The statement said Hancock’s majority-owned mining company Roy Hill would also pull its support of Netball WA, a state netball body, as the two companies “do not wish to add to Netball’s disunity problems.”

    Both Netball Australia and Netball WA would be offered four months of funding while they find new partners, the statement added.

    Separately, Rinehart and Hancock seemed to take a swipe at the players by saying they consider it “unnecessary for sports organisations to be used as a vehicle for social or political causes.”

    “There are more targeted and genuine ways to progress social or political causes without virtue signalling or for self-publicity,” the statement added.

    On Monday, Kathryn Harby-Williams, CEO of the Australian Netball Players’ Association told the Australian Broadcasting Corporation that Wallam had asked for an exemption not to wear the logo and was refused.

    “In the end, unfortunately, Donnell found the pressure too much and decided that she would wear the logo.”

    But it was too late.

    Gina Rinehart poses in Western Australia in this undated handout photo obtained in January, 2018.

    Netball Australia has made no secret of its financial difficulties. Despite being the most popular team sport in Australia with 1.2 million players, it made a loss last year of 4.4 million Australian dollars ($2.8 million).

    Netball Australia CEO Kelly Ryan told Nine News the loss of Hancock sponsorship was “disappointing” but a “strong balance” needs to be struck between social issues and funding.

    “There is a really important role that sporting organizations do play from grassroots right through to the elite to create a safe environment to have really strong social conversations,” Ryan said.

    “But there also needs to be a balance in terms of the commercial realities of that as well.”

    In a statement, the players said they were “disappointed” with Hancock’s decision to withdraw sponsorship and thanked other sponsors for their ongoing support.

    The statement added: “Reports of a protest on behalf of the players, on environmental grounds, and a split within the playing group are incorrect. The singular issue of concern to the players was one of support for our only Indigenous team member.”

    Vickie Saunders, founder of The Brand Builders, says Wallam’s objection to wearing the Hancock logo was deeply personal, and not a matter of a player using their public profile to promote a political cause.

    “Her 60,000-year-old culture will tell you that it’s important. Her 200 years of survival, and her fellow Indigenous people will tell you it’s important,” Saunders said.

    “She has a very personal reason for not wanting to wear a logo that represents a person who said that her people should be sterilized or bred out,” she said. “This isn’t a new issue for her. This is her life.”

    A truck drives past machinery at Hancock Prospecting Pty's Roy Hill Mine operations in the Pilbara region, Western Australia.

    Hancock Prospecting was founded in 1955 and retains interests in iron ore, coal, and mineral exploration, as well as beef and dairy.

    The company also funds services for remote and rural Aboriginal communities, including health and education programs, and Rinehart is a familiar face in elite sporting circles.

    The billionaire sponsors Swimming WA, Swimming Queensland, Volleyball Australia, Rowing Australia and Artistic Swimming Australia, and recently struck a deal to sponsor the Australian Olympic Team until 2026.

    This week, in response to debate surrounding the Diamonds, many of those sporting bodies released statements lauding Rinehart’s dedication to sport.

    “Mrs Rinehart’s selfless commitment to women’s sport deserves the accolades of our great sporting nation,” said Craig Carracher, president of Volleyball Australia. Swimming Queensland CEO Kevin Hasemann said he found “the negative characterization in some quarters of Mrs Rinehart’s new sponsorship of another sport regrettable.”

    The Australian newspaper also weighed in with an editorial saying there was no room for “cancel culture” – “to sacrifice Mrs Rinehart because of comments made decades ago by her father, Lang Hancock, is a bridge too far.”

    The Netball Australia sponsorship deal would have been worth 3.5 million Australian dollars ($2.2 million) per year for four years – an almost negligible amount for a company that posted a 7.3 billion Australian dollar ($4.6 billion) profit in 2021 on the back of soaring iron ore prices.

    Kim Toffoletti, an associate professor of sociology at Melbourne’s Deakin University, said for less established sports, it can be difficult to say no to any offer of sponsorship.

    “Their livelihoods are on the line … it’s very hard to turn that down that kind of money because that keeps your sport viable,” Toffoletti told CNN Sport.

    “I don’t see it as a failure of the sport but maybe a system in which certain sports are economically and culturally rewarded over others, which means that there are many that do miss out.”

    Today’s up and coming sports stars are members of Gen Z, born in the late 1990s to around 2010, whose attitudes may differ from the executives running established sporting bodies and big name brands.

    Experts say sponsors can’t expect young athletes to align themselves with their values.

    “Some of these sports have got very old-fashioned business models, which are built probably around 30-40 years ago in a different era,” Andrew Hughes, a marketing expert from the Australian National University, told CNN Sport.

    “But now we put a lot of value on what brands stand for, what they represent. I think we see that reflected in how the athletes themselves think.”

    Saunders, from The Brand Builders, said athletes are realizing that protecting their personal brand is more important than falling into line with the values of their sponsors.

    “Your brand is actually your most valuable asset because after the game, or after your career, that’s the thing that you get to take with you into employment or other opportunities in life,” she said.

    And that’s especially important for players who aren’t earning big money – like netballers – who need to find another source of income when their sports career is over, Saunders added.

    Kevin Argus from RMIT University said Rinehart’s response to the debate – to cancel the contract – demonstrates “reactive decision making” that’s counterproductive for a company seeking to win public support.

    He said a better option would have been to engage with the players, as a mentor would in a workplace, to better understand their values and how they can work together for the benefit of both parties.

    “Exiting sponsorships when athletes behave as normal functioning human beings demonstrates reactive decision making and shines a light on the need for bolder, transformative leadership,” he said.

    “When done well, sport sponsorship is brand transforming for both the sport and sponsor.”

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  • Europe racks up record trade deficit. Can it bounce back?

    Europe racks up record trade deficit. Can it bounce back?

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    Europe, the world’s largest economic bloc, enjoyed stable trade surpluses for a decade but the war in Ukraine and the ensuing energy crisis have tipped the Continent into a spiraling external deficit unseen since the launch of the euro.

    The terms-of-trade shock maxed out in August, the latest month for which trade figures are available. And, even though energy prices have since eased, European leaders are still scrambling to shore up supplies of affordable oil and gas to replace lost Russian deliveries. A harsh winter looms.

    A breakdown of the trade figures shows that the EU’s manufacturing trade surplus has nearly halved this year.

    Can Europe bounce back? Or will its industrial base become hollowed out as industry moves offshore? And will the eurozone, and the EU more broadly, end up being saddled with the chronic external deficits that have long plagued the United States and, more recently, destabilized Britain? POLITICO breaks it down for you:

    What’s going on?

    The eurozone’s negative trade balance with the rest of the world in August stood at €50.9 billion, the highest deficit ever recorded, compared to a €2.8 billion surplus a year ago, according to the latest Eurostat numbers.

    The trade deficit for the EU as a whole spiraled to €64.7 billion.

    The eurozone’s current account balance — the balance of all trade in goods and services as well as international transfers of capital, such as remittances — hit a €26.32 billion deficit in August, largely driven by the trade deficit in goods, the European Central Bank reported.

    Is that a bad thing?

    A trade deficit occurs when a country or trading bloc’s imports exceed its exports. A trade surplus is the opposite. Trade deficits are not per se good or bad, although many countries seek a trade surplus, including by setting up tariffs and quotas to artificially boost their trade balance, a practice known as mercantilism.

    Is it temporary?

    The trade deficit is largely driven by high energy prices, which in August hit a record €350 per megawatt hour. Prices have come down from their peak, trading at around €150/MWh, but they are still a multiple of where they were a year ago. 

    “Markets have gone from pricing this energy crisis as being temporary, they are now pricing it to be a much longer-term story, albeit not as elevated as it was in August,” said Kristoffer Kjær Lomholt, chief FX analyst at Danske Bank.

    “We think that it is a kind of a more long-term thing that is going to weigh on the currencies of economies that are energy importers, where the eurozone, of course, stands out to a very large extent,” he added.

    Others believe that the shift, being largely energy related, could resolve itself over time, said Sam Lowe, who covers trade policy at Flint Global. 

    An EU official also pointed to EU-Russia trade. “The peak in energy prices has made the value of our imports from Russia increase substantially (while the volume of those imports from Russia decreased), and our exports have spiralled down because of sanctions (export controls),” the official said.

    Will the EU be less competitive if energy prices remain high? 

    A negative trade balance and consequently a weaker currency makes imports more expensive. “Net importers will have to pay more for goods and services,” said Lomholt.

    On the other hand, a weaker euro could fuel exports, said Matthias Krämer, head of external economic policy at German industry federation BDI. “If the euro currency was a little bit weaker, it could also make Europe’s position on global markets better by making exports cheaper,” he said.

    But there’s another way of looking at this. Lowe argued the sustained large eurozone trade surplus was itself problematic, in that it was a function of intra-EU demand being lower than it should be. “Being overly dependent on external demand also leaves the EU quite vulnerable to both external shocks, and political coercion.”

    What does that mean for the euro?

    “We expect the euro to decline further in coming months as part of this adjustment,” said Robin Brooks, chief economist at the Institute of International Finance.

    A negative trade balance or current account deficit puts downward pressure on the value of free-floating currencies, which move with demand of goods: less demand for a country’s exports means less demand for its currency, which in turn lowers its value relative to others. Conversely, strong foreign demand for goods strengthens a country’s currency.

    “Foreign investors need to be compensated via a real depreciation of the exchange rate, and generally higher real interest rates,” said Lomholt at Danske Bank.

    The Danish lender has recently downgraded its forecast for the € to $ exchange rate to $0.93 in 12 months from virtual parity now, driven in part by the energy price shock. “We have for some time been arguing that €/$ looked overvalued and not undervalued … And just given the additional push to the energy crisis that we got during summer, we saw a case that the euro/dollar [exchange rate] should actually hit even lower,” he said.

    Is business freaking out? 

    A bit. 

    “The data are not so surprising considering the high energy prices, but they are worrying”, said Luisa Santos, responsible for international relations at BusinessEurope. She called on the EU to try to bring energy prices down and to boost exports by opening new market opportunities via more trade agreements. 

    Germany, the bloc’s export powerhouse, increased its exports by 14 percent in the first eight months of the year but imports have surged by more than 27 percent, according to national trade figures.

    “We’re not performing in a segment which is highly influenced by a cost driven competition,” said Krämer at the German industry federation. “But if this situation will last longer of course some parts of our industry will be more and more under pressure.”

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  • Global crypto markets face tougher rules under G20 plan

    Global crypto markets face tougher rules under G20 plan

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    Crypto’s Wild West era may be coming to an end.

    According to the Financial Stability Board (FSB), a global financial standard-setter, most of the cryptocurrency market should be subject to the same tough rulebook that governs traditional finance.

    The FSB, which was born in the wake of the 2008 financial meltdown to stave off further shocks, will propose the plan to rein in crypto to finance ministers and central bankers from the Group of 20 industrialized countries gathering in Washington next week, the plan’s chief architect, Steven Maijoor, told POLITICO.

    “A lot of the activities in crypto assets and crypto assets markets resemble activities in the traditional financial system and therefore we take the approach: Same activity, same risk, same regulation,” Maijoor, who sits on the Dutch central bank’s governing board and oversees banking supervision, said in Prague in early September.

    The move is set to put major crypto trading platforms on red alert, coming as the U.S. Securities and Exchange Commission seeks to impose securities regulation on cryptocurrencies and as the EU prepares its own rules for digital markets.

    More broadly, the FSB’s work on digital assets is likely to act as a cold shower for crypto currencies that seek to expand their services without complying with regulations.

    Regulators fear the lack of investor safeguards could see volatility in cryptocurrency markets spilling over into the traditional finance sector, as banks and money managers venture into the market.

    Some $2 trillion of the market’s value has evaporated since its highs of November last year, triggering corporate collapses and exposing scams that left millions of crypto investors penniless. Risks within the crypto markets are still contained. But that could quickly change and threats could spill over to financial markets from various channels, according to the European Securities and Markets Authority.

    Maijoor will present G20 policymakers with draft recommendations that he’s been developing with a team of global regulators within the FSB since April with the view of securing financial stability as crypto goes mainstream. Countries around the world will need to decide whether new rules are needed for novel arrivals within the crypto market, such as digital wallets. The rest should be captured by new or existing financial rules.

    “This is not only related to securities,” said the 58-year-old, who used to lead the EU’s securities regulator before getting a job at De Nederlandsche Bank. “There are also already some crypto activities that are captured by anti-money laundering laws and regulations and we can observe that also, in that case, there is non-compliant behavior.”

    The example of companies skirting around dirty money safeguards is an easy one for the Dutchman to give. His central bank in late April fined the world’s biggest crypto exchange, Binance, €3 million for offering services to Dutch citizens without having cleared the required Dutch safeguards against dirty money — gaining a competitive advantage against its rivals. Binance objected to the fine in June.

    The Financial Stability Oversight Council, chaired by U.S. Treasury Secretary Janet Yellen, said the crypto industry needs to be brought to heel in several areas | Alex Wong/Getty Images

    Ministers and governors will also get updated recommendations on how to regulate global stablecoins, digital tokens that are tied to national currency or a reserve of financial products to keep their value steady. The stablecoin update is separate from the crypto recommendations and came in response to Facebook’s failed bid to introduce a virtual currency for some 2.9 billion social media users around the world.

    Maijoor’s work will be subject to consultation, so companies and countries will be able to suggest changes to what will become the global blueprint for supervising the market.

    Locking horns

    The recommendations could embolden U.S. banking and markets regulators, which are increasingly taking the position that digital asset trading platforms and brokerages should follow existing regulations.

    The Financial Stability Oversight Council, which is chaired by U.S. Treasury Secretary Janet Yellen and counts SEC Chair Gary Gensler and the heads of other federal agencies among its members, on Monday released a report that identified several areas where the crypto industry needs to be brought to heel. 

    “Crypto cannot exist outside of our public policy frameworks. That’s regardless of what [Bitcoin’s pseudonymous creator] Satoshi Nakamoto might have initially thought, or what market participants might say today,” Gensler said during Monday’s FSOC meeting. 

    Ripple and Coinbase, both major crypto exchanges that have locked horns with Gensler, will be hoping for a different outcome that involves new rules.

    Coinbase has argued that crypto assets are more akin to commodities and that the SEC classifying them as securities is like putting a straitjacket on how the market could develop, especially considering those rules were developed in the 1930s. The Commodity Futures Trading Commission would be a far better fit, according to the exchange.

    “I think it is reasonable to assume that none of the authors who drafted these securities statutes from the 1930s … did so while thinking of a day when a decentralized, cryptographically-based, automated financial instrument would be adopted en masse by millions of people in the United States and around the world,” Coinbase’s chief policy officer, Faryar Shirzad, wrote in a blog in July.

    Sam Sutton contributed reporting from New York.

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