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Tag: World economy

  • To counter China, Biden is backing the World Bank for a bigger role on the global stage

    To counter China, Biden is backing the World Bank for a bigger role on the global stage

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    During the G20 leaders’ summit, U.S. President Joe Biden called on G20 leaders to support the World Bank and other multilateral development banks to increase their ability to support low and middle-income countries. From left, World Bank President Ajay Banga, Brazil’s President Luiz Inacio Lula da Silva, India’s Prime Minister Narendra Modi, South Africa’s President Cyril Ramaphosa and U.S. President Joe Biden in New Delhi on Sept. 9, 2023.

    Evan Vucci | Afp | Getty Images

    World leaders have called for the World Bank’s expansion to boost its lending capacity — but that can’t happen without funding from the private sector, the bank said. 

    The World Bank is no longer just focused on eradicating poverty, but also on other impending global challenges — like pandemics, climate change and food insecurity, its president Ajay Banga told CNBC’s Tanvir Gill on Saturday. 

    “There’s no way there’s enough money in the multilateral development bank, or even in governments … that can drive the kinds of changes we need for this polycrisis. Getting the private sectors’ capital and ingenuity into the game is going to be very important,” he told CNBC in an exclusive interview on the sidelines of the Group of 20 nations leaders’ summit in New Delhi.

    “We are digging deep to boost our lending capacity, but we are going further, creating new mechanisms that would allow us to do even more,” Banga said at the G20 leaders summit. 

    “We’re working to expand concessional financing to help more low-income countries achieve their goals, while thinking creatively about how to encourage cooperation across borders and tackle shared challenges,” he added. 

    Biden backs World Bank

    Leaders at the summit agreed that this isn’t something the World Bank can tackle alone. 

    During the summit, U.S. President Joe Biden called on G20 leaders to further support the World Bank and other multilateral development banks over the next year in order to increase the institution’s ability to support low and middle-income countries. 

    Biden has asked Congress to increase the World Bank’s financing by more than $25 billion, a move that will enable the bank to further help developing countries achieve their development and economic goals. 

    The world needs institutions to work together.

    Kristalina Georgieva

    Managing Director, IMF

    “This initiative will make the World Bank a stronger institution that is able to provide resources at the scale and speed needed to tackle global challenges and address the urgent needs of the poorest countries,” the White House said. 

    The World Bank was created in 1944 to help rebuilding efforts in Europe and Japan after the Second World War. It started with just 38 members but today includes most of the countries in the world.

    World Bank president: China has been a very consistent partner

    Biden has previously said that developing countries need more funding options to reduce their dependency on China, and help them recover from the effects of Russia’s war on Ukraine. The administration asked for $3.3 billion to increase development and infrastructure finance by the World Bank.

    “It is essential that we offer a credible alternative to the People’s Republic of China’s (PRC) coercive and unsustainable lending and infrastructure projects for developing countries around the world,” the White House said in August.

    Apart from providing more resources to help developing countries reduce poverty, the World Bank’s expansion also aims to help these nations in their renewable energy transition. 

    “I do have the idea that if I could get a certain amount of money in the bank to put into say, renewable energy, could I get the private sector to put one-is-to-one, two-is-to-one, three-is-to-one?” Banga said. 

    He highlighted that investors are keen on investing in renewable energy in developing countries, and are confident that solar, wind and geothermal projects “can be built to make money.” 

    ‘Work together’

    Both the World Bank and IMF have pledged to form a stronger partnership to help countries with their debt struggles, sustainability goals, and digital transition. 

    In a separate interview with CNBC’s Martin Soong at the G20 summit, the IMF’s Managing Director Kristalina Georgieva said: “The world has changed. the horizon of how many different lenders there are and different conditions they provide their resources, is much, much broader that it was 10 years ago.”

    “We need this conversation because if you don’t have it, we have no solutions and the debt problem is very pressing,” Georgieva said Sunday.

    She added that “25% of debt of emerging markets is treading in distressed territory.”

    “We now have more than half of of the low income countries either in or close to that distress.”

    The world has changed and institutions need to work together, says IMF chief

    The IMF Chief reiterated that the World Bank and the fund must work to complement each other and promote synergies.

    “The bank has very deep sectoral expertise. We don’t and we would never ever get into sectoral investments,” she explained.

    “What we bring is how you can use fiscal policies to advance the transition to digital economy; how you can use monetary policy to assess the new types of risks — including from crypto from climate; and how you can use data to cover what matters to policymakers today and in the future.”

    “The world needs institutions to work together,” she added, pledging that both the IMF and World Bank will work with others to “set the right example of what it means for the whole to be bigger than the sum of individual parts.”

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  • IMF chief says new Biden-backed economic corridor should not exclude any countries

    IMF chief says new Biden-backed economic corridor should not exclude any countries

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    India’s Prime Minister Narendra Modi (R) shakes hand with International Monetary Fund Managing Director Kristalina Georgieva ahead of the G20 Leaders’ Summit at the Bharat Mandapam in New Delhi on September 9, 2023.

    Evan Vucci | Afp | Getty Images

    NEW DELHI — The Biden-led rail-to-sea economic corridor linking India with Middle Eastern and European countries should not be exclusionary and should engage in the spirit of an integrated world economy, according to the International Monetary Fund’s Managing Director Kristalina Georgieva.

    At a time when supply chains are aligning along shifting global geopolitical lines, U.S. President Joe Biden’s initiative appears to be aimed at not only countering China’s influence in the energy-rich Middle East, but also Beijing’s decade-old Belt and Road global infrastructure initiative. A more fragmented global economy though, has limited global trade growth — which now lags global economic growth.

    “If we want trade to be an engine of growth, then we have to create corridors and opportunities,” Georgieva told CNBC’s Martin Soong Sunday on the sidelines of the Group of 20 nations leaders’ summit in New Delhi.

    “What is important is to do it for the benefit of everybody, and not for exclusion of others,” she said. “In that sense, I would encourage all countries working collaboratively with each other to do so in the spirit of integrated economy.”

    At the leaders’ summit Saturday, Biden and Indian Prime Minister Narendra Modi announced a plan to develop a network of railways and sea routes that will connect India, the European Union and Middle Eastern countries such as Israel, Jordan, Saudi Arabia and the United Arab Emirates in “a transformative regional investment.”

    The deal underscores not only the burgeoning partnership between India and U.S., but also their urgency and resolve in persuading the world they represent a more viable strategic proposition in facilitating the developmental needs of the Global South.

    Virtuous cycle

    In reality, this Biden-backed economic corridor would add to existing infrastructure investment for the regions involved. The countries involved will meet within the next two months to develop and commit to an action plan with relevant timetables, which are all lacking at this point.

    “In a world where we learned from Covid and the [Ukraine] war, that supply chains need to be reinforced, they need to be diversified, that connectivity matters tremendously,” Georgieva told CNBC in the exclusive interview.

    “The more there is investment in infrastructure connectivity, the more there is a platform for trade among nations, the better for the countries involved, but also for the world economy because expansion of transportation links, communication links and trade have positive spillovers,” she added.

    Her comments came at the end of the summit, where fierce Russian and Chinese opposition to references to the lingering war in Ukraine had almost derailed consensus on a joint communique that typically binds G20 member states.

    In the Delhi Declaration that was eventually adopted Saturday, G20 nations pledged to protect the most vulnerable in the world by promoting equitable growth and enhancing macroeconomic and financial stability. Under Modi, India’s year-long presidency of the multilateral bloc of the world’s largest economies was focused on elevating the place of the Global South on the G20 agenda.

    IMF quota review

    Multilateral bank reform was among the issues on the agenda, which included establishing a global framework to restructure sovereign debt, particularly for vulnerable developing economies.

    The IMF warned the the economic recovery after a series of major shocks is slow and uneven, with growth prospects in the medium term at its weakest in decades in an environment of stubbornly high inflation, high interest rates and growing fragmentation.

    “And I call on our members to strengthen the global financial safety net,” Georgieva separately said Sunday in a press release, released shortly after the G20 summit formally ended.

    IMF chief: World needs institutions to work together

    “Since the start of the pandemic, the IMF has injected $1 trillion in reserves and liquidity through lending to nearly 100 countries and the historic [special drawing rights] allocation; and I thank our members who have helped us reach the goal of channeling $100 billion to vulnerable countries,” she added.

    The IMF is undergoing its 16th quota review that is scheduled to wrap up by year-end. The Fund conducts these reviews once every five years to assess its ability to meet the needs of member states’ balance of payments financing needs, and to adjust members’ quota to reflect changes in their relative positions in the world economy.

    “To make the global economy stronger and more resilient in a more shock-prone world, it is vital to reach an agreement to increase the IMF’s quota resources before the end of the year and secure the needed resources for the Fund’s interest-free support to the poorest countries through the Poverty Reduction and Growth Trust,” Georgieva added in the statement.

    Correction: This story has been updated with the correct reference for the acronym SDR.

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  • G20 nations soften Russia condemnation to reach Delhi summit compromise, draw Ukraine’s ire

    G20 nations soften Russia condemnation to reach Delhi summit compromise, draw Ukraine’s ire

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    India’s Prime Minister Narendra Modi (2L) addresses the opening session of the G20 Leaders’ Summit at the Bharat Mandapam in New Delhi on September 9, 2023.

    Ludovic Marin | Afp | Getty Images

    NEW DELHI — The Group of 20 nations on Saturday overcame differences in references to the war in Ukraine, reaching a consensus on a joint declaration that paves the way for frameworks on debt resolution, and country-specific climate financing solutions among other pledges aimed at enhancing development in the Global South.

    In an 83-paragraph joint communique aimed at deepening the integration of the needs of developing economies into the multilateral forum’s agenda, the Delhi declaration omitted words from the last year’s statement that overtly condemned Russian aggression against Ukraine — instead highlighting the human suffering and other negative impacts of the war in Ukraine that have complicated recovery efforts in the aftermath of the Covid-19 pandemic.

    The wording of “most members strongly condemned the war” was among the changes. Instead, G20 member states agreed to lean on the tenets of the United Nations charter on territorial integrity and against the use of force.

    “Considerable time was spent — especially in the last few days — in regard to geopolitical issues, which really centered around the war in Ukraine,” Indian Foreign Minister Subrahmanyam Jaishankar said Saturday at a press conference following Prime Minister Narendra Modi’s initial announcement of the consensus on a joint declaration.

    “Everybody helped, because everybody came together for the consensus, but the emerging markets took a particular lead on this and many of us have a strong history of working together,” Jaishankar added.

    This accomplishment underscores India’s diplomatic clout at a time when global alliances are shifting. With the Russian and Chinese heads of state conspicuously absent from this year’s leaders’ summit, Modi has been keen to position India as a key global player advocating the interests of the Global South, while serving as an interlocutor with the developed nations.

    Yet, there were some fears Delhi negotiators and diplomats might not have been able to broker a consensus at this year’s meeting. Fierce objections by the Russians and Chinese to references to the ongoing war in Ukraine have hobbled India’s efforts at fostering consensus in the major discussion tracks in the course of its year-long presidency.

    Oleg Nikolenko, a spokesperson for the Ukraine’s foreign ministry, criticized the compromise in a Facebook post, saying the G20 joint communique was “nothing to be proud of.”

    ‘Cascading challenges’

    In the Delhi declaration, G20 leaders called for the “full, timely and effective implementation” of the Black Sea grain deal “to ensure the immediate and unimpeded deliveries of grain, foodstuffs, and fertilizers/inputs from the Russian Federation and Ukraine.”

    Russia unilaterally withdrew from the deal — brokered between Turkey, the United Nations, Ukraine and Russia in July 2022 — that helped ease the Kremlin’s naval blockade in the Black Sea and established a humanitarian corridor for agricultural exports.

    The agreement had facilitated the transport of 725,167 tons of wheat for the World Food Program to some of the world’s most food-insecure countries, including Afghanistan, Ethiopia, Somalia, Sudan and Yemen.

    The ensuing food insecurity from the festering Ukraine crisis added to the many challenges that have afflicted the world in the last few years, complicating policy efforts to recover from the adverse economic and social impact of the Covid-19 pandemic.

    Challenge that the region is facing is 'immense,' says Asian Development Bank

    “Years of cascading challenges and crises have reversed gains in the 2030 Agenda and its Sustainable Development Goals,” G20 leaders said in the Delhi declaration, as they pledged to protect the most vulnerable in the world by promoting equitable growth and enhancing macroeconomic and financial stability.

    To further cement that goal, India also fostered the admission of the African Union as the second regional grouping to gain full G20 membership after the European Union.

    Other than the mitigation of the impact on geopolitics of food and energy security, the Delhi declaration also included the expediting of climate action, the provision of more loans to developing nations by multilateral institutions and restructuring the world’s debt architecture as well as an international framework for cryptocurrencies.

    Leveraging the G20

    Leaders of India, Brazil, South Africa and the U.S. met on the margins of the G20 summit, pledging “to build on the historic progress of India’s G20 presidency to address global challenges” in partnership with the World Bank in building “better, bigger, and more effective” multilateral development banks. 

    These pledges build on a G20 agreement to expand lending by multilateral institutions such as the World Bank and the International Monetary Fund. Such steps could yield as much as $200 billion in extra funding in the next decade, Indian Finance Minister Nirmala Sitharaman said Saturday at the press conference explaining the Delhi declaration.

    World Bank President: Tangible plans on G20 financing will come

    These four countries represent the current and the next three G20 member states that are due to hold the rotating presidency of the multilateral forum founded in 1999 to tackle the issues that afflict the global economy.

    In the flurry of activities independent of the auspices of the main G20 summit, Modi and U.S President Joe Biden underscored not only the deepening partnership between their two countries, but also their urgency and resolve in persuading the world they represent a more viable strategic proposition in facilitating the developmental needs of the Global South.

    Biden and Modi’s second bilateral meeting in less than six months on the eve of the two-day G20 leaders’ summit kicked off a series of other deals and announcements — a stark contrast, in particular, to Chinese President Xi Jinping’s decision to stay away from this summit.

    Modi and Biden were joined by leaders from Argentina, Brazil, Italy, Mauritius, and the United Arab Emirates in launching the Global Biofuels Alliance, a partnership aimed at deploying greener fuels around the world that help meet decarbonization goals. 

    What is the G-20, and what has it accomplished?

    The two leaders also announced a plan to develop a network of railways and sea routes that will connect India, the European Union and Middle Eastern countries such as Israel, Jordan, Saudi Arabia and the United Arab Emirates in “a transformative regional investment.”

    This seeks to not only counter China’s influence in the energy-rich Middle East, but also its Belt and Road global infrastructure initiative.

    Biden also announced a partnership with the European Union in a new greenfield rail line expansion to develop the Lobito Corridor connecting the southern part of the Democratic Republic of the Congo and northwestern Zambia to regional and global trade markets via the port of Lobito in Angola.

    “This is a big deal, this is a real big deal,” Biden said Saturday. “The world stands at an inflection point in history, a point where decisions we make today affect the course of all our futures for decades to come.”

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  • Modi, Biden pledge to deepen India-U.S. partnership as world leaders descend on Delhi for G20 summit

    Modi, Biden pledge to deepen India-U.S. partnership as world leaders descend on Delhi for G20 summit

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    Indian artist Jagjot Singh Rubal gives final touches to an oil painting of U.S. President Joe Biden, at his workshop in Amritsar on September 5, 2023, ahead of the two-day G20 summit in New Delhi.

    Narinder Nanu | Afp | Getty Images

    NEW DELHI — Indian Prime Minister Narendra Modi and U.S. President Joe Biden pledged Friday to deepen the partnership between their countries in their second bilateral meeting in less than six months, as Delhi prepares to host a meeting among leaders of the Group of 20 leading industrialized and developing countries.

    The two leaders met shortly at Modi’s official residence after Biden’s arrival in Delhi and then issued a 29-point statement that highlighted the depth and breadth of their relationship at a time of evolving global alliances — from building resilient strategic technology value chains and linking defense industrial ecosystems, to collaborating on renewable and nuclear energy, climate financing and cancer research.

    The two leaders “reaffirmed the importance of the Quad in supporting a free, open, inclusive, and resilient Indo-Pacific” and “expressed their appreciation for the substantial progress underway to implement the ground breaking achievements of Prime Minister Modi’s historic June 2023 visit to Washington.” The Quad is an informal security alignment of Australia, India, Japan and the U.S., which came about in response to China’s rising strength in the Indo-Pacific region.

    This closed-door meeting with Biden was the third — after meetings with leaders from Mauritius and Bangladesh — that Modi convened on the eve of the G20 leaders’ summit and part of the dozen or so bilateral meetings planned for this weekend, underscoring India’s strategic ambitions as a key global player connecting the developed world and the Global South.

    The summit is an important one for Modi, whose government has turned the normally sedate rotating G20 presidency into a branding vehicle to burnish India’s geopolitical importance ahead of national elections next year. Many governments, investors and businesses are also starting to look toward India — as China slows — which the International Monetary Fund expects to be the fastest growing economy this year.

    Weekend consensus

    This weekend’s agenda includes the expected admission of the African Union as an official G20 member as part of India’s broad focus on elevating the place of the Global South and fostering inclusive and sustainable growth in the multilateral forum founded in 1999 as a platform to address issues afflicting the global economy.

    Russian President Vladimir Putin and China President Xi Jinping though won’t be in attendance this weekend.

    While Putin is sending Foreign Minister Sergey Lavrov to take his place, China Premier Li Qiang will take Xi’s place — the first time Xi is skipping the G20 meeting in the decade since he became president.

    What is the G-20, and what has it accomplished?

    Putin has not traveled outside of Russia since the International Criminal Court issued a warrant for his arrest for war crimes in Ukraine.

    The pair’s absence has sparked fears that a communique binding member states may not be issued at the end of a G20 leaders’ summit — undercutting India’s clout and diminishing his domestic messaging.

    India’s diplomats have been unable to foster binding agreements in the key discussion tracks since it assumed the rotating presidency in December 2022 — because Russia and China have objected to the wording referring to the war in Ukraine.

    A war of words has ensued ahead of this weekend’s meeting.

    “The G7 countries (primarily the US, the UK, Germany, and France) have been exerting pressure on India in a bid to have their unilateral approaches to the Ukraine situation reflected in the final documents of G20 forums,” the Russian foreign ministry said in a statement.

    At a pre-summit press conference Friday, India’s G20 sherpa Amitabh Kant said the final declaration “is almost ready.”

    “I can assure you our presidency has been inclusive, decisive and action-oriented,” Kant said.

    Alternative to China

    With Putin and Xi conspicuously absent this weekend, India and the U.S. will hope this will be sufficient to persuade member states and other observers from the Global South they represent a more viable proposition from food security to debt resolution.

    In their joint statement after their Friday bilateral meeting, Biden and Modi “reaffirmed their commitment to the G20.”

    They also “expressed confidence that the outcomes of the G20 Leaders’ Summit in New Delhi will advance the shared goals of accelerating sustainable development, bolstering multilateral cooperation, and building global consensus around inclusive economic policies to address our greatest common challenges, including fundamentally reshaping and scaling up multilateral development banks.”

    Challenge that the region is facing is 'immense,' says Asian Development Bank

    While Putin has an obvious reason accounting for his absence, Xi, though, has not indicated a reason — triggering speculation the Chinese leader may be snubbing Modi for a variety of reasons.

    Despite recently traveling to South Africa for a BRICS meeting, Xi has rarely traveled abroad. Instead, he has tended to receive visiting dignitaries in Beijing — including Zambia and Venezuela in overlapping visits this weekend.

    India’s warming ties with the U.S. also sharply contrasts against its standoff with its neighbor, China.

    India — along with Malaysia, the Philippines, Vietnam and Taiwan — sharply rebuked China last week for a new national map that Beijing claims contested territories as its own.

    India also stands to gain from American companies looking to diversify their supply chains — at China’s expense — as the U.S. ramps up efforts to limit the transfers of strategic technology to China on the grounds of national security.

    This would likely be what Modi and Biden conceived as “their ambitious vision for an enduring India-U.S. partnership that advances the aspirations of our people for a bright and prosperous future, serves the global good, and contributes to a free, open, inclusive, and resilient Indo-Pacific.”

    Nigeria foreign minister says Africa won't be 'naïve' in trade negotiations with the West

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  • Asian Development Bank says the world faces ‘immense’ funding challenges

    Asian Development Bank says the world faces ‘immense’ funding challenges

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    Asia and the rest of the world face “immense” challenges, and the Asian Development Bank must work with others to address those issues, its director general told CNBC on Friday.

    “The challenge that we are facing in this region and also globally, are immense, including climate change. pandemic and natural disasters,” Tomoyuki Kimura told CNBC’s Tanvir Gill on the sidelines of the G20 Summit held in the Indian capital of New Delhi.

    After Covid, he explained, many countries had to borrow more money. “So this is a limitation for different countries to take more debt for their sustainable development and climate change.”

    He said multilateral development banks “can and must take bold action to help address the challenges.”

    The ADB “very much welcomes the efforts by all parties to ensure MDBs are well equipped to play this critical role,” he said, adding: “We also welcome India’s strong leadership advocacy for the importance of multilateralism.”

    Additionally, the director general highlighted the need for ADB to increase its lending capacity in order to help countries achieve their climate goals, but emphasized that more needs to be done.

    “First of all, we need to ramp up our lending capacity … but also, we need extra efforts to mobilize more money from private sector,” he said.

    According to the World Bank, developing nations need more than $1 trillion per year to make significant headway in climate transition.

    To aid in climate financing goals, Kimura called for the development of more pressing pipelines, de-risking projects, and reiterated the bank’s role in helping countries mobilize their domestic resources.

    “We also need to play a very important role in overall debt issues,” Kimura said, highlighting that many countries have taken more debt following the pandemic.

    In July, the United Nations reported that global public debt rose to a colossal record of $92 trillion in 2022.

    “So this is a limitation for different countries to take more debt for their sustainable development and climate change,” Kimura said.

    Kimura highlighted that the ADB is currently working on a capital adequacy framework, which if approved, could offer a “huge increase in lending capacity for the next decade and beyond.”

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  • India’s G20 presidency risks ringing hollow as Ukraine war dashes hopes of consensus

    India’s G20 presidency risks ringing hollow as Ukraine war dashes hopes of consensus

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    US President Joe Biden, right, and Narendra Modi, India’s prime minister, at an arrival ceremony during a state visit on the South Lawn of the White House in Washington, DC, US, on Thursday, June 22, 2023.

    Bloomberg | Bloomberg | Getty Images

    Indian Prime Minister Narendra Modi has turned the normally sedate rotating presidency of the Group of 20 nations into a branding vehicle to burnish India’s geopolitical importance — underscoring India’s emergence as a key voice on the world stage.

    The country’s diplomats now face a race against time to broker tangible multilateral outcomes at this weekend’s G20 leaders’ summit in New Delhi that will mark the end of India’s year-long presidency of the bloc of leading industrialized and developing economies.

    India has so far not been able to foster consensus for a joint communique from the previous G20 meetings in other major tracks that it has convened. Member states haven’t been able to agree on binding action due largely to Russia’s and China’s objections to the language referring to the Ukraine crisis.

    In a banner year for Indian diplomacy that also saw the world’s most populous nation take on the rotating presidency of Shanghai Cooperation Organization, India risks having little to show for its efforts that may in turn undercut the country’s credibility and Modi’s domestic messaging.

    One of the risks is that by elevating India’s presidency of the G20 so much, there are now expectations for India to deliver some concrete breakthroughs.

    Manjari Chatterjee Miller

    Council on Foreign Relations

    “What is different about India’s presidency of the G20 and what I’m amazed by is how the Modi government has turned the G20 into a nonstop advertisement for both India and his leadership,” said Manjari Chatterjee Miller, a senior fellow for India, Pakistan and South Asia at the Council on Foreign Relations in Washington, D.C.

    “One of the risks is that by elevating India’s presidency of the G20 so much, there are now expectations for India to deliver some concrete breakthroughs,” she told CNBC in an email. “India has been trying to use the G20 to bring the Global South together and offer itself as a bridge between the Global South and the West. But there remains the problem of Russia and China.”

    With Russian President Vladimir Putin and his Chinese counterpart Xi Jinping sitting out the Sept. 9-10 meeting, the prospect for any real breakthrough appears dim.

    Putin has not been known to have traveled out of Russia since the International Criminal Court issued an arrest warrant in March against him and his allies for war crimes in Ukraine.

    Russia-Ukraine impasse

    Indeed, the specter of Russia’s Ukraine invasion has loomed large over G20 meetings for the various tracks that India has convened.

    India had hoped to forge consensus on a range of issues from a regulatory framework for cryptocurrencies to the resolution of crippling debt issues for developing countries.

    Other areas include reforms in multilateral banks as part of its agenda to foster progress on sustainable development, as well as the admission of the African Union as a member of the G20.

    Despite its neutral position on the Ukraine crisis, New Delhi has not been able to broker a single joint statement in any of the key discussion tracks since India took over the G20 presidency in December 2022. Instead, it has only managed non-binding chair’s summary and outcome documents.

    In fact, Russia disassociated itself from the status of the outcome document in a June meeting on development issues in Varanasi, due to references to the Ukraine war. China said the meeting outcome should not include any reference to the Ukraine crisis.

    “The original language was accepted by Russia at the Bali G20 — and Indian diplomats in fact, played a major part in getting Russian acceptance on that,” Pramit Pal Chaudhuri, Eurasia Group’s head for its South Asia practice, told CNBC in a telephone interview from New Delhi.

    “But since then, Russia has hardened its position and joined by China to say that we don’t accept the original body language, which is taken from the UN Security Council resolution,” he added.

    “Last I heard, India is still struggling to get an agreement on what type of language would be acceptable to all 20 countries,” Chaudhuri said. “If they fail to bridge that gap, then we may see the failure to issue a joint statement, and there probably won’t be an action plan afterwards.”

    [Modi] is trying to portray this as a great recognition that India has arrived under his under his prime ministership.

    Pramit Pal Chaudhuri

    Eurasia Group

    Russia’s Foreign Minister Sergei Lavrov — who is due to represent Russia at G20 leaders’ summit in place of Putin — reportedly warned there will be no general declaration at the meeting in New Delhi if Russia’s position is not reflected.

    The Kremlin insists that its invasion of Ukraine is a “special military operation” in an existential war against the West that’s determined to take down Russia.

    Domestic setback?

    This could well be a setback for Modi’s government, which has convened more than 200 G20 meetings in more than two dozens cities across India.

    “It’s actually quite brilliant and one has to give him and the BJP credit for making an event that is usually elitist and esoteric, and a rotating presidency that is routine into something the whole country can understand and be proud of,” CFR’s Miller said, referring to Modi’s ruling Bharatiya Janata Party.

    More than just lining streets with banners and signs that injected plenty of visibility to the various G20 meetings, Modi has also used these meetings to clean up host cities, promote local products and more.

    “At the national level, [Modi] is trying to portray this as a great recognition that India has arrived under his under his prime ministership,” Eurasia Group’s Chaudhuri said. “I think the messaging has been strong, but the reception is harder to work out, it’s harder to quantify.”

    The biggest risk for Modi is the lack of tangible multilateral accomplishment out of the G20 presidency after all that has been done and invested, possibly with an eye on boosting the legacy and standing of his Hindu nationalist BJP after a decade in power and ahead of national elections next year.

    There are 'critical differences' in views among BRICS members, analyst says

    Underscoring that wariness, India’s Foreign Minister Subrahmanyam Jaishankar was quick to tout the “unanimous support” from G20 member states, for two outcomes that India proposed at the Varanasi G20 ministerial meeting on developmental issues. He even labeled it the “biggest achievement” of India’s G20 presidency so far — despite Russia and China abstaining.

    “There may be a sort of backlash, or a degree of cynicism may set among voters who say — we have heard a lot — we seem to have spent a lot of money, but nothing really seems to have happened here,” Chaudhuri added.

    Still, Modi could point to other evidence of India’s place as a key global player in a year that saw New Delhi emerge as a strategic U.S. ally in its Indo-Pacific strategy aimed at checking China’s might.

    India walked the diplomatic tightrope even as China pushed for an expansion of BRICS alliance of developing nations to build support for a broad coalition aimed at challenging U.S. dominance over the global political and economic system.

    The Quad is going beyond military exercises — and China is watching

    “India will continue to maintain healthy diplomatic relations with Russia amid an increasing reliance on that country’s energy imports,” Sumedha Dasgupta, a senior analyst with the Economist Intelligence Unit, told CNBC. Moscow is India’s leading source of crude oil.

    “Simultaneously, India will develop stronger diplomatic bonds with the US and its allies through means such as the Quad, co-operation on critical technology and defense, which will over time amount to a gradual geopolitical shift,” she said in an email.

    ‘Happy coincidence’

    Underscoring India’s strategic importance, Biden hosted Modi in June in the Indian prime minister’s first state visit to the U.S.

    Warming India-U.S. ties contrast with India’s continued standoff with China.

    India — along with Malaysia, the Philippines, Vietnam and Taiwan — sharply rebuked China last week for a new national map that Beijing claims contested territories as its own.

    As the U.S. ramps up efforts to limit the transfers of strategic technology to China on grounds of national security, India stands to gain from American companies looking to diversify their supply chains — at China’s expense.

    State Bank of India discusses India's economy in light of global inflation

    In January, India’s commerce minister told CNBC that Apple was manufacturing its latest iPhone 14 in the country and aimed to produce 25% of all iPhones in the country.

    Apple’s efforts to move its assembly of products from China became more urgent in the last few years years as U.S.-China trade tensions intensified, and supply chain disruptions caused by Beijing’s zero-Covid policy unraveled. 

    This development serves to buttress India’s burgeoning economic clout, the basis of its greater confidence and assertiveness geopolitically.

    It’s a happy coincidence for the moment, I think, for India to showcase itself as an improved economy; as an improved place for international investors … and as an alternative to China.

    Pravin Krishna

    Johns Hopkins University’s School of Advanced International Studies

    The International Monetary Fund expects India to be the world’s fastest growing major economy this year.

    In the last decade in power, Modi’s BJP has liberalized foreign direct investment policies, invested in infrastructure, pushed for digitalization in the world’s fifth-largest economy, along with several other neo-liberal economic policies.

    “All of of these things are coming together at the right time, alongside the G20,” said Pravin Krishna, a professor of international economics at Johns Hopkins University’s School of Advanced International Studies.

    “So it’s a happy coincidence for the moment, I think, for India to showcase itself as an improved economy; as an improved place for international investors; as an improved platform, potentially for manufacturing; and as an alternative to China, which India has been aspiring to be for a number of years,” he added.

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  • India to launch mission to study the sun — just days after successful moon landing

    India to launch mission to study the sun — just days after successful moon landing

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    The sun setting in the Netherlands.

    Nurphoto | Nurphoto | Getty Images

    Days after India’s successful moon mission, the country is now setting its sights on the sun. 

    According to the Indian Space Research Organization (ISRO), the Aditya-L1 spacecraft will be launched from the Sriharikota Spaceport on Sept. 2 in a bid to study the sun and its effect on space weather. 

    Aditya, which refers to the sun in Hindi, is to be placed in a halo orbit around the Lagrangian point 1 of the Sun-Earth system, where the sun can be observed without any obstructions, an ISRO report stated.  

    Lagrange points are positions in space where gravitational forces of two large masses produce “enhanced regions of attraction and repulsion,” according to NASA. The resulting force can be used to remain in position and reduce fuel consumption — and can be likened to “parking spots” for spacecraft.

    The launch will mark India’s first space-based observatory to study the sun, and would offer a “major advantage of continuously viewing the sun without any occultation or eclipses,” the ISRO report stated.

    The mission would also allow for the study of solar wind, which could potentially cause disturbances on Earth, such as disrupting communications and navigation systems.

    India’s government had put forth a $46 million budget for the mission back in 2019, but has not published any updates since.

    On Wednesday, India became the fourth country to land on the moon, doing so with the relatively low starting budget of $75 million. 

    While a first attempt for India, other countries have successfully placed orbiters to study the sun. NASA’s Parker Solar Probe in 2021 which was sent to the sun’s corona to sample particles and magnetic fields, as well as the European Space Agency’s Solar Orbiter which was launched the year before. 

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  • A worldwide lithium shortage could come as soon as 2025

    A worldwide lithium shortage could come as soon as 2025

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    A bulldozer moving lithium ore at the Sigma Lithium Xuxa mine near Itinga, Minas Gerais state, Brazil.

    Bloomberg | Bloomberg | Getty Images

    The world could face a shortage for lithium as demand for the metal ramps up, with some analysts forecasting that it could come as soon as 2025. Others, however, see a longer time frame before that shortfall hits.

    BMI, a Fitch Solutions research unit, was among those that predict a lithium supply deficit by 2025. In a recently published report, BMI largely attributed the deficit to China’s lithium demand exceeding that of its supply.

    “We expect an average of 20.4% year-on-year annual growth for China’s lithium demand for EVs alone over 2023-2032,” the report stated. 

    In contrast, China’s lithium supply will only grow 6% over the same period, BMI said, adding that rate cannot satiate even one third of forecasted demand. 

    China is the world’s third largest producer of lithium, which is an integral element in electric vehicle batteries. 

    The world produced 540,000 metric tons of lithium in 2021, and by 2030 the World Economic Forum projects that global demand will reach over 3 million metric tons.

    The global battery supply chain may find lithium in shortfall again approaching the end of this decade.

    Rystad Energy

    Vice President Susan Zou

    According to forecasts by S&P Global Commodity Insights, EV sales are set to reach 13.8 million in 2023, but will subsequently proceed to skyrocket to over 30 million by 2030.

    “We do fundamentally believe in a shortage for the lithium industry. We forecast supply growth of course, but demand is set to grow at a much faster pace,” said Corinne Blanchard, Deutsche Bank’s director of lithium and clean tech equity research. 

    By the end of 2025, Blanchard sees a “modest deficit” of around 40,000 to 60,000 tonnes of lithium carbonate equivalent, but forecasts a wider deficit amounting to 768,000 tonnes by the end of 2030.

    2030 deficit?

    Other analysts don’t see a deficit coming so soon, but still predicted a shortfall by the end of the decade.

    While more lithium mines and mining exploration projects coming online could support burgeoning demand, that would only extend the runway for a few more years, according to Rystad Energy’s estimates.

    According to the energy research firm, hundreds of lithium projects are currently under exploration, but the complexity in geology and time-consuming permitting process still pose challenges.

    There are currently only 101 lithium mines in the world, according to Refinitiv data.

    Rystad Energy Vice President Susan Zou estimates that total lithium mine supply will increase by 30% and 40% year on year in 2023 and 2024, and that miners would continue to develop both existing and greenfield projects amid a “global push to electrify transportations.”

    While that could point to a global lithium surplus next year, shortages could start to plague supply chains in 2028. 

    “In the next couple of years, though the lithium supply may stay adequate at a world-level, regional supply imbalance is still inevitable,” Zou added, noting regional mining and processing capacities in the U.S. and Europe might not be able to keep up with demand for EV batteries. 

    “The global battery supply chain may find lithium in shortfall again approaching the end of this decade when the supply growth might not keep pace with that of the demand,” she said.

    In that scenario, Zou said lithium prices could spike to their historic 2022 highs, which in turn would increase battery production costs. 

    Lithium carbonate prices surged to a record high of almost 600,000 yuan per ton in November 2022, more than 12 times January 2021 prices.

    Wood Mackenzie similarly forecasts that the overall lithium market will see a supply surplus in the coming years. However, continued demand growth and very few projects entering production in the early 2030s could mean the market is likely to experience another supply deficit, said the consultancy’s vice president of metals and mining research, Robin Griffin. 

    “The main risks [are] likely to come from delays in commissioning of new projects and delays in permitting of new assets,” he said.

    Lithium mines generally take “10 years or longer” from first discovery to full-fledged lithium operation, Piedmont Lithium’s chief commercial officer, Austin Devaney, told CNBC via e-mail.

    “We believe there will eventually be enough lithium to support the demands of electrification. But in the near term, we expect to see the impact of supply constraints on lithium pricing for many years, if not longer,” he said.

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  • Dubai luxury home prices soar by almost 50%, with Tokyo’s up 26%. Here’s where other cities stand

    Dubai luxury home prices soar by almost 50%, with Tokyo’s up 26%. Here’s where other cities stand

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    High-rise tower buildings along the central Sheikh Zayed Road in Dubai on July 3, 2023.

    Karim Sahib | Afp | Getty Images

    Dubai’s luxury home prices surged by nearly 50% in the year up until June, maintaining its top ranking for the eighth consecutive quarter, according to a new report by Knight Frank.

    According to data released Wednesday from the property consultancy firm, prices in Dubai have skyrocketed 225% since hitting a pandemic low during the third quarter of 2020. The Emirate kept its crown in the ranking for the eighth consecutive quarter.

    Taking second and third places were Tokyo, which saw an annual 26.2% rise, and Manila, which climbed 19.9%. 

    Other noteworthy increases were China’s Shanghai, which added 6.7%, and Singapore, which rose 4.2%.

    “The influx of expatriates to Singapore, driven by the thriving financial and professional services sector, has impacted the rental market more than the sales market,” the report observed, noting that the discrepancy is partly owed to taxation for purchases by foreign buyers. 

    Ever since the end of April, foreigners purchasing residential property in Singapore have to pay 60% additional buyer’s stamp duty, double the 30% from before. 

    Hong Kong’s prices slipped 1.5% over the past year as a result of a surge in unsold inventory from newly developed projects. In an effort to stimulate demand, the Hong Kong government raised its mortgage loan-to-value ratio to 70% for residential properties valued at 15 million Hong Kong dollars ($1.9 million) or less.

    However, Knight Frank’s analysts said that while the change is likely to be welcomed by buyers, the move’s ability to “significantly boost” growth is still uncertain.

    Other slumps include New York, which dropped 3.9%, and San Francisco which recorded a 11.1% plunge. Germany’s Frankfurt was at the bottom of the list with a 15.1% dive.

    Across the board, average annual prices added 1.5% across the 46 markets under the Knight Frank Prime Global Cities Index.

    “Global housing markets are still under pressure from the shift to higher interest rates,” Knight Frank’s Global Head of Research Liam Bailey said. 

    However, he noted that the results from the index are an affirmation that prices are supported by strong underlying demand, weak supply following the disruption to new building projects during the pandemic, as well as the return of workers to cities.

    “As uncertainty over the direction of inflation appears to have reduced in recent months – price adjustments in many markets are likely to be less pronounced than was expected even three months ago,” Bailey added.

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  • Emerging economies group BRICS invites 6 new members, including Saudi Arabia and Iran

    Emerging economies group BRICS invites 6 new members, including Saudi Arabia and Iran

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    BRICS officials during the last day of the bloc’s 15th summit in South Africa.

    Bloomberg | Bloomberg | Getty Images

    The BRICS economic coalition of emerging markets on Thursday extended membership invitations to six nations, South African President and current BRICS Chair Cyril Ramaphosa said.

    The BRICS alliance — which is composed of Brazil, Russia, India, China and South Africa — is set to invite Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates to join, Ramaphosa said in a speech published on the X social media platform, previously known as Twitter.

    Their membership would take effect from Jan. 1, 2024.

    South Africa is presently hosting the 15th BRICS summit, where the group’s expansion was a key point of the meeting agenda. Russian President Vladimir Putin was unable to attend in person, likely on account of an International Criminal Court warrant that would have theoretically obliged the host country — an ICC signatory — to proceed with his arrest.

    “BRICS is a diverse group of nations,” Ramaphosa said. “It is an equal partnership of countries that have differing views but a shared vision for a better world. As the five #BRICS members, we have reached agreement on the guiding principles, standards, criteria and procedures of the #BRICS expansion process.”

    A combined 23 countries have formally applied for BRICS membership, including the six that Ramaphosa said were hereby invited. Other major African players, such as Nigeria and Ghana, have expressed informal interest.

    China’s president, Xi Jinping, said Thursday that the expansion is a “new starting point for BRICs cooperation.”

    “It will bring new vigor to the BRICS cooperation mechanism, further strengthening a force for world peace and development,” he said at a press briefing, in comments officially translated by a summit interpreter.

    Putin thanked Ramaphosa’s “unique diplomatic mastery as we negotiated all the positions, including when it comes to BRICS expansion,” noting the talks proved to be “challenging work,” according to an official summit translation.

    Ramaphosa hinted at the possibility of future additions.

    “We value the interest of other countries to form a partnership with BRICS. We have tasked our foreign ministers to further develop the BRICS country model and a list of prospective partner countries and report by the next summit,” he said during a press briefing of BRICS officials Thursday.

    “The relevance of the BRICS is demonstrated by the growing interest of other countries to join our group,” said Brazilian leader Luiz Inácio Lula da Silva. “Now the BRICS is going up to 37% of the world’s GDP in terms of its purchasing power, and 46% in terms of the world population. BRICS will continue [being] open to new members.”

    India’s prime minister, Narendra Modi, said, the “expansion and modernization of BRICS is a message that all institutions in the world need to mould themselves according to changing times.”

    The UAE welcomed the membership announcement.

    “We respect the vision of the BRICS leadership and appreciate the inclusion of the UAE as a member to this important group. We look forward to a continued commitment of cooperation for the prosperity, dignity and benefit of all nations and people around the world,” UAE President Mohammed bin Zayed said on X in the wake of the announcement.

    Mohammad Jamshidi, deputy chief of staff for political affairs to the Iranian president, called Tehran’s BRICS membership “a strategic victory for Iran’s foreign policy” in a post on X.

    Currency clout

    Gustavo de Carvalho, policy analyst and senior researcher at the South African Institute of International Affairs, said on X that the prospective new members will not only increase the visibility of the BRICS bloc, but also provide an opportunity for coalition participants to trade with one another in local currencies.

    Brazil’s da Silva on Thursday noted the BRICS group continues to study the possibility of a bloc currency, which could “increase our options for [a] means of payment and reduce our vulnerabilities,” according to an official summit translation.

    Brazil and India seem lukewarm about the enlargement of BRICS, strategist says

    “It’s still uncertain what will happen to the group dynamics, but clearly it brings a new space for trade within the Global South. Much of the arguments in the communique reflected the collective voice on need for change of international institutions, especially international financial institutions like the World Bank, IMF [International Monetary Fund] and WTO [World Trade Organization],” de Carvalho noted.

    BRICS nations have struck different tones on their relationship with the West. Commercial and diplomatic tensions have risen between China and the U.S., while Russia is under a spate of Western sanctions for its invasion of Ukraine.

    CNBC Politics

    Read more of CNBC’s politics coverage:

    “We are concerned about ongoing conflicts in many parts of the world. We stress our commitment to the peaceful resolution of differences and disputes through dialogue and inclusive consultation,” Ramaphosa said during the Thursday press briefing, without naming the conflicts in question.

    The new BRICS members bring their own challenges. Iran contends with U.S. sanctions over its nuclear program, while fresh clashes in Ethiopia have raised concerns over internal stability. Egypt has faced economic pressures, and Argentina recently sharply devalued its national currency — the peso — and jacked up interest rates following the shock primary election win by far-right libertarian Javier Milei. The UAE and Saudi Arabia are both actively pursuing growth in nonoil sectors, even as Riyadh faces ongoing Western criticism of its human rights record.

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  • Russia, expansion and Western relations in the spotlight as leaders gather for pivotal BRICS summit

    Russia, expansion and Western relations in the spotlight as leaders gather for pivotal BRICS summit

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    South African police officers walk in front of an event banner outside the venue for the BRICS summit at the Sandton Convention Center in the Sandton district of Johannesburg, South Africa, on Monday, Aug. 21, 2023.

    Michele Spatari | Bloomberg | Getty Images

    Leaders from five developing nations accounting for nearly half the world’s population are gathering in Johannesburg Tuesday for the 15th BRICS Summit with expansion of the emerging market grouping, the war in Ukraine and relations with the West all high on the agenda.

    Hosted by South African President Cyril Ramaphosa, the current BRICS chair, the meeting will convene Chinese President Xi Jinping, Brazilian President Luiz Inácio Lula da Silva, Indian Prime Minister Narendra Modi and Russian Foreign Minister Sergei Lavrov.

    Russian President Vladimir Putin will join virtually as he is currently subject to an arrest warrant from the International Criminal Court for war crimes. As an ICC signatory, South Africa would have been required to honor the warrant had Putin arrived in the country.

    Russian President Vladimir Putin attends a BRICS+ meeting during the BRICS summit via a video link in the Moscow region, Russia June 24, 2022. 

    Mikhail Metzel | Sputnik | Reuters

    Ramaphosa invited 67 leaders from across Africa, Latin America, the Middle East, Asia and the Caribbean to attend the summit, but no Western leaders received an invitation. The U.N. secretary-general, chair of the African Union Commission and president of the New Development Bank were also invited along with over a dozen other dignitaries and a host of business leaders.

    Expansion

    A central focus of the summit will be the possible expansion of BRICS, with more than 40 countries expressing interest in joining, including major economic hubs and emerging geopolitical powers such as Nigeria, Saudi Arabia and Iran.

    A total of 23 countries have formally applied to become new BRICS members, including Saudi Arabia, Iran, the UAE, Argentina, Indonesia, Egypt and Ethiopia, while major African players such as Nigeria and Ghana have informally expressed interest but so far stopped short of a formal application.

    However, the informal nature of many expressions of interest so far highlights the straddling of a perceived global divide that many countries are attempting to navigate.

    Gustavo de Carvalho, policy analyst and senior researcher at the South African Institute of International Affairs, said final decisions on new members are unlikely to emerge from this week’s two-day summit, but the aim will be to establish a clear process, criteria and timeframe for applications and admittance.

    Speaking to CNBC via telephone from Johannesburg on Monday, de Carvalho noted that there are differing views on expansion among the existing members of the collaborative but amorphous bloc.

    “India historically has been the country that mostly worries about the idea of expansion, and particularly with the fears that this would be used as increasing the Chinese influence within BRICS, and Russia is in a space where it’s very isolated in the international community so it became much more vocal in accepting the issue of the expansion,” de Carvalho explained.

    He added that while Brazil for some time seemed neutral around the idea of expansion, the Lula administration has voiced some concern around potentially diluting the group to the point that it loses its effectiveness in providing a unified voice.

    In a televised national address on Sunday, Ramaphosa explicitly supported expansion for the first time, particularly for fellow African nations that have long been part of “BRICS+” discussions among emerging economies.

    In light of the punitive Western economic sanctions against Russia in response to its invasion of Ukraine, particularly the freezing of Russian assets, de Carvalho said other BRICS and affiliated countries were keen to reduce their risk exposure in the international financial system, and to find ways to collectively shore up their respective currencies and liquidity positions.

    ‘We have witnessed the world dividing into three camps’

    Russian and Chinese officials have struck an increasingly anti-Western tone in their characterizations of what the BRICS bloc represents over the past year, as they look to build support for a broad coalition to challenge U.S. dominance over the global political and economic system.

    Xi Jinping, China’s president, delivers a speech during a pre-BRICS summit state visit at the Union Buildings in Pretoria, South Africa, on Tuesday, Aug. 22, 2023. Xi, in an op-ed published in several South African media outlets, said his country and South Africa, as natural members of the Global South, should push for developing countries to have more sway in international affairs. Photographer: Michele Spatari/Bloomberg via Getty Images

    Michele Spatari | Bloomberg | Getty Images

    Though some analysts have suggested the BRICS may take a significant anti-Western turn, South Africa, India and Brazil have signaled intention to maintain closer ties with traditional Western partners, which de Carvalho said highlights the continued independence of constituent countries to prioritize their own interests with regards to diplomacy and international trade.

    Some reports have cited Chinese officials as openly aiming to position BRICS as a direct geopolitical rival to the G7. Yet in his televised address on Sunday, Ramaphosa insisted South Africa would “not be drawn into a contest between global powers” and sought to retain its independence in a world “increasingly polarized into competing camps.”

    The BRICS group operates on consensus and tends to collaborate on certain aspects of its various economies where interests align, rather than seeking to form a unilateral “alliance,” de Carvalho noted. In this vein, he said Ramaphosa’s speech was particularly important in differentiating Pretoria’s desire for a positive relationship with the West from the notion of a collective anti-Western shift.

    There are 'critical differences' in views among BRICS members, analyst says

    Bilateral deals and cooperation is common among BRICS members, but de Carvalho challenged the idea that there is a unanimous desire to compete with the G7.

    He argued that the aim instead is to represent the voice of five nations that cumulatively account for around 40% of the global population, based on the belief that “international politics should not be entirely controlled by a group of the seven most important industrialized economies,” of which India and China could well be members.

    “It’s not really about changing the global order, I think it’s much more perception of the fact that the global order has already changed but our voice is still not nearly close enough to what we believe that we should be influencing global decisions,” de Carvalho said.

    “So this is not just these countries in the global south whining about the role of the West that I think has much more to do with their own perception of capabilities and influence that they feel that they already have.”

    He added that the BRICS members do not always agree and do not see the group as a “panacea,” but simply a “vehicle to become more influential in global discussions.”

    “So for me, it’s not that BRICS would ever replace G7, but I wouldn’t be surprised if, for instance, and I think it would be potentially in a couple of years, a really good move is to start having meetings between BRICS and the G7.”

    BRICS is an 'interesting coalition' of the 'global east,' think tank says

    Yet Steven Gruzd, head of the African governance and diplomacy programme at the SAIIA, told CNBC on Monday that BRICS “already is a rival to the G7” insofar the bloc has established itself as one of the pre-eminent voices of the emerging economies.

    “The G7 contains the rich Western economies, while BRICS contains the two most populous countries and the leading countries on three continents. Both blocs are seeking influence and support on the global stage. Whether the rivalry becomes geopolitical remains to be seen,” Gruzd said.

    “We have witnessed the world dividing into three camps due to the Russian invasion of Ukraine – pro-West, pro-Russia-and-China and non-aligned. In my view, these splits are set to continue and widen, especially as the non-aligned face enormous pressure to join the other camps.”

    BRICS: How an acronym from Goldman Sachs morphed into a strategic economic bloc

    ‘What BRICS is and what it is not’

    Though much of the narratives surrounding BRICS focus on the growing Chinese and Russian influence across emerging economies, de Carvalho suggested there is a mistaken assumption that China has “unlimited influence” within the other BRICS societies, which is “definitely not the case.”

    “I think very clear that the competition and tension with India plays a major role within the BRICS dynamics and especially when it comes to some of the Indian fears of increased influence of China within the group and so on,” he said.

    Evidence of the freedom of BRICS countries to chart their own courses on global issues has been highlighted in responses to Russia’s war in Ukraine, which de Carvalho said provided an opportunity in particular for other BRICS countries to “potentially serve as a bridge or a conduit for dialog.”

    China and Russia will use the BRICS summit as a 'messaging body,' says think tank

    South Africa and China have separately held talks with Moscow and Kyiv in a bid to bring both sides of the conflict to the negotiating table, while India and Brazil have condemned the aggression but also pushed for a negotiated settlement rather than aligning with the West behind Ukraine. Separately, India has cooperated with Washington in opposing what they see as Chinese aggression in the Indo-Pacific.

    “It is often useful to reflect on what BRICS is not: BRICS is not an alliance. None of the countries within BRICS see it as an alliance, like NATO, or any other kind of global alliance,” de Carvalho insisted.

    “I think my hope for this summit is that we start getting more nuanced discussions around what BRICS is and what BRICS is not, and I think that can only be helpful for the international community more globally, because it does get a much better sense of what this institution is and how can we engage with that.”

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  • Geopolitical risks are a top global threat to businesses, survey finds

    Geopolitical risks are a top global threat to businesses, survey finds

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    A Chinese and US national flag hang on a fence at an international school in Beijing on December 6, 2018. (Photo by Fred DUFOUR / AFP) (Photo by FRED DUFOUR/AFP via Getty Images)

    Fred Dufour | Afp | Getty Images

    Businesses see geopolitical tensions as the biggest threat to the global economy right now, according to the latest survey by Oxford Economics.

    The finding “confirms” that perceptions of economic risks have shifted significantly for businesses, said Jamie Thompson, head of macro scenarios and author of the survey.

    related investing news

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    “Geopolitical tensions are now the main focus of concern, both in the near term and the medium term,” he noted.

    Around 36% of businesses polled view geopolitical tensions as top risks currently — such as those related to issues over Taiwan, South Korea, and Russia-NATO.

    In contrast, a similar survey in April found that nearly half the respondents viewed either a marked tightening in credit supply or a full-blown financial crisis as the top risk in the near term.

    The latest third quarter 2023 Global Risk Survey covered 127 businesses from July 6-27 this year.

    Geopolitical trends will lead to consolidation in European finance, tech and defense: Advisory firm

    The findings come amid fraught relations between Washington and Beijing, as bilateral ties hit their lowest in years. Tensions escalated after the U.S. shot down a suspected Chinese surveillance balloon which flew over American air space.

    Regarding Taiwan, China has insisted the issue was an internal affair and warned the U.S. it’s a red line that must not be crossed. Beijing considers the democratically self-ruled island part of its territory.

    Last week, the Biden administration announced a weapons aid package to Taiwan that’s worth up to $345 million, according to Reuters. The move is seen as likely to anger China.

    Meanwhile, Russia’s invasion of Ukraine has strained the Kremlin’s relations with the North Atlantic Treaty Organization. NATO’s expansion has long been a point of contention for Russian President Vladimir Putin, who claims Kyiv’s accession would pose a threat to Moscow’s national security.

    Inflation concerns ease

    While businesses continue to see high inflation as a “significant near-term risk,” they appear more confident that the problem will eventually moderate, noted the survey.

    “Respondents’ expectation for world consumer price inflation stands at 3.7% in 2024, 0.2ppts below our latest baseline forecast,” said Thompson.

    “Expected inflation over the medium term has fallen significantly, unwinding the rises seen over the past two years,” he added.

    If China goes into Taiwan, then the U.S. should disrupt Chinese operations in Cuba: Rep. Salazar

    The survey also highlighted easing concerns over banking system related risks. But the issues remain elevated.

    Around 30% of respondents still view either a marked tightening in credit supply or a full-blown financial crisis as among the top risks for the near term in the latest survey.

    Some investors, such as Kevin O’Leary, have predicted the ongoing cycle of U.S. Federal Reserve rate hikes could lead to more regional U.S. bank failures.

    Regional banks such as First Republic, Silicon Valley Bank and Signature Bank have folded since March.

    Those institutions were destabilized by the Fed’s monetary tightening cycle that has seen 11 rate hikes since March 2022.

    Risks ahead

    Geopolitical risks continue to factor prominently for businesses as a major concern for the next five years. Over 60% of those polled see it as a “very significant risk” to the world economy.

    “As reported last quarter, more than three-fifths of respondents view geopolitical risks as a very significant risk to the global economy over the medium term,” said Thompson.

    “An intensification of geopolitical tensions could potentially trigger significant deglobalization of trade and the financial system,” he added. 

    Falling inflation has more to do with post-pandemic effects than Fed hikes: Lazard's Peter Orszag

    Deglobalization is the third most cited risk in the latest survey, viewed as “a very significant risk” by 23% of respondents.

    Around 25% view early policy rate cuts as among the top upside risks. On China, businesses see “less chance of a China-driven upturn.”

    China’s reopening as the top global upside has almost halved over the past three months, down 10% in the latest survey compared with 19% in April.

    The International Monetary Fund recently noted China’s post-Covid economic recovery was losing steam and taking a toll on the world economy.

    “Continued weakness in the [Chinese] real estate sector is weighing on investment, foreign demand remains weak, and rising and elevated youth unemployment, at 20.8% in May 2023, indicates labor market weakness,” the IMF said in a report.

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  • China June new home prices flat in weakest showing this year

    China June new home prices flat in weakest showing this year

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    High-rise buildings in downtown Shanghai, China, on March 12, 2018. China cut its benchmark reference rate for mortgages by an unexpectedly wide margin on Friday, its second cut this year as Beijing seeks to revive the ailing housing sector to prop up the economy.

    Johannes Eisele | Afp | Getty Images

    China’s new home prices were unchanged in June, the weakest result this year, data showed on Saturday, increasing pressure on policymakers for more stimulus as economic recovery falters.

    The flat result from a month earlier, with rises slowing nationwide, was below May’s 0.1% gain, according to Reuters calculations based on National Bureau of Statistics (NBS) data. Prices were also unchanged from a year earlier, retreating from a 0.1% increase in May.

    The property sector, accounting for one-fourth of activity in the world’s second-biggest economy, slumped sharply last year as developers defaulted on debts and suspended construction of presold housing projects.

    The central and local governments and regulators have announced a slew of policies over the past year to prop up the sector.

    Measures have ranged from extended financial support for developers to multi-pronged incentives for home buyers. But the uncertain economic outlook and persistent weakness in the sector have dented confidence and home demand, dampening hopes for any quick revival.

    Weakness in home prices and falling exports are adding to pressure on policymakers to take do more to prop up the real estate and revive sluggish demand.

    Markets widely expect more stimulus around a meeting of the ruling Communist Party’s Politburo late this month, setting the tone for economic policies in the second half of the year.

    “The property market is in dire need of strong policies to boost confidence as small-scale policies can no longer rescue the dwindling sentiment,” said analyst Chen Xiao at property data provider Zhuge House Hunter.

    Policies such as boosting employment and incomes must strengthened to support home buying, Chen said.

    Thirty-one of the 70 cities monitored by NBS recorded month-on-month rises in new home prices, down from 46 in May. Prices were flat after rising in May in tier-one cities including Beijing and tier-two cities. They fell 0.1% in tier-three cities.

    There is room for “marginal optimisation” of property polices considering profound changes in supply and demand in the real estate market, Zou Lan, a senior official at the People’s Bank of China (PBOC), said on Friday.

    “PBOC officials hinted at further property policy easing in the press conference on Friday, and we expect the July Politburo meeting to emphasise the need to stabilise the property market,” Goldman Sachs economists wrote in a research note.

    The central bank on Monday extended until the end of 2024 some policies in a November rescue package for the cash-strapped sector. But the uncertain economic outlook and weakness in the sector have dented confidence, dampening hopes of any quick revival.

    A quarterly PBOC survey showed 16.5% of households believe housing prices will fall in the third quarter, down from the previous quarter, when 14.4% of households expected a decline.

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  • Singapore avoids technical recession as economy grows 0.7% year-on-year in second quarter

    Singapore avoids technical recession as economy grows 0.7% year-on-year in second quarter

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    Exterior of the Singapore Exchange building.

    Bryan van der Beek | Bloomberg | Getty Images

    Singapore’s economy avoided a technical recession in the second quarter, growing 0.7% year-on-year and 0.3% quarter-on-quarter, advanced estimates showed.

    Economists polled by Reuters expected to see growth of 0.3% quarter-on-quarter and 0.6% year-on-year.

    In the first quarter, Singapore’s economy contracted by 0.4% quarter-on-quarter on a seasonally adjusted basis and saw marginal growth of 0.4% year-on-year.

    The latest data comes after the Monetary Authority of Singapore, the city-state’s central bank and financial regulator, warned of an “uncertain” growth outlook earlier this month.

    “The near-term outlook remains uncertain with downside risks,” the MAS said in an annual review. “Should latent vulnerabilities in the global financial system emerge in the coming months, consumer and investor confidence could take a further hit, with adverse implications for the broader economy,” it said.

    In its annual review, MAS estimated the gross domestic product for 2023 to ease to a range of 0.5% to 2.5%, lower than the growth of 3.6% in 2022.

    The Singapore dollar slightly strengthened against the U.S. dollar after the GDP release and traded at $1.321 against the greenback.

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    Singapore’s manufacturing sector noticeably led declines in overall growth, contracting 7.5% from a year ago, a further decline from the contraction of 5.3% in the previous quarter.

    “The weak performance of the sector was due to output declines across all manufacturing clusters, except for the transport engineering cluster,” Singapore’s Ministry of Trade and Industry said.

    Singapore’s latest industrial production readings spurred concerns that the economy could enter a technical recession. The figures fell for a second month in May dropping 10.8% year-on-year, while its non-oil domestic exports plunged by 14.7% in May.

    ‘Pockets of resilience’

    HSBC economist Yun Liu noted that Singapore is likely to avoid a recession throughout the year, adding that “there are still pockets of resilience” in the economy.

    Pointing to a steady recovery in visitors to Singapore, Liu said in HSBC’s third-quarter outlook report, “The ripples will mostly come from travel and tourism sectors,” adding that the resumption of Chinese tourists has yet to reach 2019 levels.

    Monthly statistics from its tourism agency showed Singapore has consistently welcomed over 1 million arrivals since March this year.

    “While the return of Chinese tourists is only back to 30% of the equivalent level (2019 levels), Singapore is, nonetheless, the champion in restoring direct flights with China,” Liu said. “This paves the way for an acceleration in Chinese tourists in the coming months, supporting Singapore’s services sectors.”

    “Singapore is well position to lead the region with a swift recovery,” said Liu.

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  • Yellen says ‘direct’ and ‘productive’ Beijing talks a step forward in putting U.S.-China ties on ‘surer footing’

    Yellen says ‘direct’ and ‘productive’ Beijing talks a step forward in putting U.S.-China ties on ‘surer footing’

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    U.S. Treasury Secretary Janet Yellen addresses journalists in a press conference July 9 capping her four-day Beijing visit. She said “direct, substantive and productive” talks have set relations between the world’s two largest economies on a “surer footing.”

    Pedro Pardo | Afp | Getty Images

    U.S. Treasury Secretary Janet Yellen said 10 hours of meetings with Chinese officials in two days were “direct, substantive and productive” and a step forward in helping to set relations between the world’s two largest economies on a “surer footing.”

    Yellen’s Beijing trip comes at a time when Washington is considering curbs on U.S. investment in China amid an escalating global battle for technological supremacy. She is the second member of U.S. President Joe Biden’s cabinet to visit Beijing in recent weeks amid efforts to stabilize ties between the two powers.

    “The U.S. and China have significant disagreements. Those disagreements need to be communicated clearly and directly,” Yellen said in prepared remarks. “But President [Joe] Biden and I do not see the relationship between the U.S. and China through the frame of great power conflict.”

    “We believe that the world is big enough for both of our countries to thrive. Both nations have an obligation to responsibly manage this relationship: to find a way to live together and share in global prosperity,” she added.

    In comments at a press conference capping her four-day Beijing visit, Yellen said she told her Chinese counterparts that any curbs on U.S. outbound investments would be “transparent” and “very narrowly targeted.”

    Otherwise, she added, Chinese officials can raise their concerns and U.S. will in some cases, address unintended consequences.

    “Broadly speaking, I believe that my bilateral meetings – which totaled about 10 hours over two days – served as a step forward in our effort to put the U.S.-China relationship on surer footing,” Yellen concluded.

    Just days before Yellen’s visit, Beijing had slapped export curbs on chipmaking metals and its compounds — which China’s Ministry of Commerce claimed to have given the U.S. and Europe advance notice. In October, the U.S. launched sweeping rules aimed at cutting off exports of key chips and semiconductor tools to China. 

    Diversifying, not decoupling

    Yellen said she “made clear that the United States is not seeking to decouple from China,” in her discussions with Chinese Premier Li Qiang, Vice Premier He Lifeng and other senior officials.

    “There is an important distinction between decoupling, on the one hand, and on the other hand, diversifying critical supply chains or taking targeted national security actions,” she said.

    “We know that a decoupling of the world’s two largest economies would be disastrous for both countries and destabilizing for the world,” she added. “And it would be virtually impossible to undertake.”

    China and the U.S. are finding 'strategic space' to operate despite being rivals: CBRC chief advisor

    China Vice Premier He said Saturday talks with Yellen were “constructive,” according to a Chinese government readout.

    “Noting that the overstretching of national security does no good to the normal economic and trade exchanges, the Chinese side expressed concerns over the sanctions and restrictions imposed by the United States on China,” the same statement said.

    “The two sides agreed to strengthen communication and cooperation on addressing global challenges, and continue maintaining exchanges and interactions,” the statement added.

    Tricky balance

    Yellen’s task in Beijing was a tricky one. While she expressed her worries on “a recent uptick in coercive actions against American firms,” she also sought to seek Chinese cooperation on issues ranging from debt distress in emerging markets and developing countries to climate change. 

    These are principles she laid out in an April speech where she stressed the importance of fairness in the U.S. economic competition with China.

    U.S. Treasury Secretary Yellen visiting Beijing to meet with Chinese leadership

    Then, she had outlined three economic priorities for the U.S.-China relationship: securing national security interests and protecting human rights, fostering mutually beneficial growth and cooperating on global challenges like climate change and debt distress.

    “I believe that if China were to support existing multilateral climate institutions like the Green Climate Fund and the Climate Investment Funds alongside us and other donor governments, we could have a greater impact than we do today,” Yellen said ahead of a Friday climate finance roundtable in Beijing.

    Yellen’s visit is part of ongoing efforts to stabilize U.S.-China relations after months of escalating tensions. Her visit came just weeks after Secretary of State Antony Blinken’s visit last month.

    “My objective during this trip has been to establish and deepen relationships with the new economic leadership team in place in Beijing. Our discussions are part of a broader concerted effort to stabilize the relationship, reduce the risk of misunderstanding, and discuss areas of cooperation,” Yellen said Saturday.

    These efforts could pave the way for a meeting between Biden and Chinese President Xi Jinping on the sidelines of the G20 leaders’ summit in New Delhi in September and the APEC leaders’ summit in San Francisco in November. Both leaders last met in Bali last year.

    “No one visit will solve our challenges overnight,” Yellen said. “But I expect that this trip will help build a resilient and productive channel of communication with China’s new economic team.”

    Read more about China from CNBC Pro

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  • Sri Lanka’s central bank says more rate cuts are needed for economy to ‘bounce back’

    Sri Lanka’s central bank says more rate cuts are needed for economy to ‘bounce back’

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    Debt-ridden Sri Lanka may need to cut interest rates again to further boost growth in its economy, according to the head of its central bank.

    Nandalal Weerasinghe, governor of the Central Bank of Sri Lanka, told CNBC Friday that there will be more rate cuts to come, even after the central bank lowered its policy rate for a second consecutive month from 12% to 11% on Thursday.

    Asked if additional rate cuts will be needed, the governor answered: “Of course.” He pointed to falling inflation rates in the Sri Lankan economy.

    “We should need further reduction in interest rates on the basis of forward-looking inflation, forward-looking output gap. This shows we made the right decision,” Weerasinghe told CNBC’s “Squawk Box Asia.”

    A laborer carrying a sack of onions at a market in Colombo on July 4, 2023.

    Ishara S. Kodikara | Afp | Getty Images

    Sri Lanka negotiated a nearly $3 billion bailout from the International Monetary Fund last year, after thousands of protesters drove out the president from power, raiding his official residence and office on outrage over the government’s economic mismanagement.

    Stocks listed in its capital Colombo jumped earlier in the week after parliament approved a domestic debt restructuring plan last weekend.

    Colombo’s CSE All Share Index jumped by about 8% this week after parliament passed the plan required for the IMF’s bailout package.

    Sri Lanka’s total debt has exceeded $83 billion, the Associated Press reported, including foreign debt of $41.5 billion and $42.1 billion of domestic debt.

    China will continue to support Sri Lanka in debt restructuring, Sri Lanka minister says

    Prices in Sri Lanka rose 12% in June, the latest government data showed – a steep decline from the recent peak inflation rate of nearly 70% seen in September last year.

    The central bank governor was optimistic about the economy’s path forward. He predicted inflation could fall to single-digit figures and the economy could turn from contraction to growth by next year.

    “If you look at the future, forward-looking inflation, we see very clearly, end-of-July inflation will be 7% by single digit and by end of the year, [inflation] will be low single-digit,” he said.

    Weerasinghe said further policy support from the central bank could help economic revival in the nation.

    “We hope that [rate cuts] can be some sort of support for the recovery for the second half of the year. And obviously for the next full year, we expect the country to bounce back to positive territory,” he said.  

    The Sri Lankan economy contracted by 11.5% year-on-year in the first quarter of 2023, gross domestic product figures released last month showed.

    The economy’s GDP has stayed in negative territory since the first quarter of 2022.

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  • Turkey’s inflation rate cools despite steep lira plunge

    Turkey’s inflation rate cools despite steep lira plunge

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    Ayhan Altun | Moment Open | Getty Images

    Turkey’s monthly inflation rate for June came in lower than expected, despite the continued collapse of the lira currency following the re-election of President Recep Tayyip Erdogan.

    Turkey’s consumer price index rose 3.92% month-on-month, official data showed Wednesday. The reading was lower than Reuters’ forecast of 4.84% and compares against a 0.04% increase in May.

    The largest gains were attributed to tobacco and alcoholic beverage prices, which jumped 11.13%, while restaurant and hotel prices inched up 4.31%.

    On a year-on-year basis, inflation rose 38.21%, also slightly lower than Reuters’ forecasts of 39.47%.

    While June was the eighth consecutive month of price growth deceleration, Conotoxia’s Market Analyst Bartosz Sawicki told CNBC that there is “little reason for optimism.”

    “The lira freefall starts to take its toll once again as it reignites cost pressures,” he said. Meanwhile, BlueBay Asset Management’s Senior EM Sovereign Strategist Timothy Ash said the country could have seen even higher numbers.

    “Could have been much worse given the 25% odd FX correction seen [through] post elections and worries about FX pass [through],” Ash said via an e-mailed statement.

    Ash added that the central bank will need to “work very hard to bring inflation meaningfully down from here.”

    Last October saw Turkey’s inflation rate soar to 85%. The Turkish lira was last trading at 26.09 against the dollar.

    “With Simsek there is at least a chance of managing [through] this all without a broader systemic crisis, but there is absolutely no room for a policy error at this stage,” Ash continued.

    Erdogan had named former economy chief Mehmet Simsek as his new treasury and economy minister, who was known for his market friendly policies. 

    Alongside that appointment was Turkey’s new central bank governor, former Wall Street banker Hafize Gaye Erkan. 

    Last month, the central bank lifted the country’s key interest rate from 8.5% to 15%, and affirmed that there will be further gradual monetary tightening until the inflation situation in the country improves.

    However, the lira’s demise is not the only source of inflationary pressures, said Contoxia’s Sawicki.

    “Inflation expectations refuse to grind lower in the permanently profoundly negative real interest rates and an overheated economy,” he said in an e-mail.

    Turkey’s introduction of a minimum wage hike, as well a possible overhaul of tax rates which were postponed due to the elections should contribute to the return of the annual inflation rate toward the 50% mark in the second part of the year, he forecasts.

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  • Australia’s central bank leaves its key rate unchanged, says inflation ‘passed its peak’

    Australia’s central bank leaves its key rate unchanged, says inflation ‘passed its peak’

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    An aerial view of the central business district and Sydney Opera House on February 17, 2023.

    David Gray | Getty Images News | Getty Images

    Australia’s central bank held its official cash rate steady at 4.10% in a closely watched decision Tuesday.

    Economists were split on expectations ahead of the decision, with 16 out of 31 respondents surveyed by Reuters forecasting a hike of 25 basis points and 15 expecting the central bank to hold.

    Stocks cheered the move as the central bank said “inflation in Australia has passed its peak.” The S&P/ASX 200 pared earlier gains and rose 0.21%.

    The Australia Bureau of Statistics’ monthly inflation indicator showed some cooling in the rise of prices at 5.6% for the month of May, led by housing prices, food and non-alcoholic beverages.

    Australia’s monthly inflation indicator peaked at 8.4% in December. The economy’s consumer price index rose 7% in the first quarter of 2023.

    The decision comes after the central bank raised its cash rate by 25 basis points last month — a move it described as a “finely balanced” decision, according to minutes from its June meeting.

    It added that inflation risks have “shifted somewhat to the upside.” The RBA added that the inflation rate’s return to the central bank’s price stability target range of 2 to 3% was “already drawn out.”

    Tuesday’s decision will revolve around similar discussions that took place in the RBA’s June meeting, Commonwealth Bank of Australia’s senior economist Belinda Allen said ahead of the decision.

    “The recent data flow has been mixed and we think this affords the RBA some time to slow its hiking cycle,” said Allen, adding that the second-quarter CPI print will be closely watched ahead of the central bank’s next meeting in August.

    This is breaking news. Please check back for updates.

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  • A U.S. recession is coming this year, HSBC warns — with Europe to follow in 2024

    A U.S. recession is coming this year, HSBC warns — with Europe to follow in 2024

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    Hong Kong observation wheel, and the Hong Kong and Shanghai Bank, HSBC building, Victoria harbor, Hong Kong, China.

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    The U.S. will enter a downturn in the fourth quarter, followed by a “year of contraction and a European recession in 2024,” according to HSBC Asset Management.

    In its mid-year outlook, the British banking giant’s asset manager said recession warnings are “flashing red” for many economies, while fiscal and monetary policies are out of sync with stock and bond markets.

    Global Chief Strategist Joseph Little said while some parts of the economy have remained resilient thus far, the balance of risks “points to high recession risk now,” with Europe lagging the U.S. but the macro trajectory generally “aligned.”

    “We are already in a mild profit recession, and corporate defaults have started to creep up too,” Little said in the report seen by CNBC.

    “The silver lining is that we expect high inflation to moderate relatively quickly. That will create an opportunity for policymakers to cut rates.”

    Despite the hawkish tone adopted by central bankers and the apparent stickiness of inflation, particularly at the core level, HSBC Asset Management expects the U.S. Federal Reserve to cut interest rates before the end of 2023, with the European Central Bank and the Bank of England following suit next year.

    The Fed paused its monetary tightening cycle at its June meeting, leaving its Fed funds rate target range at between 5% and 5.25%, but signaled that two further hikes can be expected this year. Market pricing narrowly anticipates the Fed funds rates to be a quarter percentage point higher in December of this year, according to CME Group’s FedWatch tool.

    HSBC’s Little acknowledged that central bankers will not be able to cut rates if inflation remains significantly above target — as it is in many major economies — and said it is therefore important that the recession “doesn’t come too early” and cause disinflation.

    “The coming recession scenario will be more like the early 1990s recession, with our central scenario being a 1-2% drawdown in GDP,” Little added.

    HSBC expects the recession in Western economies to result in a “difficult, choppy outlook for markets” for two reasons.

    “First, we have the rapid tightening of financial conditions that’s caused a downturn in the credit cycle. Second, markets do not appear to be pricing a particularly pessimistic view of the world,” Little said.

    Higher interest rates are taking their toll on business activity, economist says

    “We think the incoming news flow over the next six months could be tough to digest for a market that’s pricing a ‘soft landing’.”

    Little suggested that this recession will not be sufficient to “purge” all inflation pressures from the system, and therefore developed economies face a regime of “somewhat higher inflation and interest rates over time.”

    “As a result, we take a cautious overall view on risk and cyclicality in portfolios. Interest rate exposure is appealing — particularly the Treasury curve — the front end and mid part of the curve,” Little said, adding that the firm sees “some value” in European bonds too.

    “In credit, we are selective and focus on higher quality credits in investment grade over speculative investment grade credits. We are cautious on developed market stocks.”

    Backing China and India

    As China emerges from several years of stringent Covid-19 lockdown measures, HSBC believes that high levels of domestic household savings should continue to support domestic demand, while problems in the property sector are bottoming out and government fiscal efforts should create jobs.

    Little also suggested that comparatively low inflation — consumer prices rose by a two-year monthly low of 0.1% in May as the economy struggles to get back firing on all cylinders — means further monetary policy easing is possible and GDP growth “should easily exceed” the government’s modest 5% target this year.

    HSBC remains overweight on Chinese stocks for this reason, and Little said the “diversification of Chinese equities shouldn’t be underestimated.”

    China will continue to be a strong driving force for the global economy, premier says

    “For example, value is outperforming growth in China and Asia. That’s the opposite of developed stock markets,” he added.

    Along with China, Little noted that India is the “main macro growth story in 2023” as the economy has recovered strongly from the pandemic on the back of resurgent consumer spending and a robust services sector.

    “In India, recent upward growth surprises and downward surprises on inflation are creating something of a ‘Goldilocks’ economic mix,” Little said.

    “Improved corporate and bank balance sheets have also been boosted by government subsidies. All the while, the structural, long run investment story for India remains intact.”

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  • Goldman joins Wall Street banks in cutting China’s growth outlook as post-Covid bounce fades

    Goldman joins Wall Street banks in cutting China’s growth outlook as post-Covid bounce fades

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    Aerial photo shows the traffic flow on a viaduct in Nanjing, East China’s Jiangsu Province, June 16, 2023. (Photo by Costfoto/NurPhoto via Getty Images)

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    Goldman Sachs became the latest Wall Street bank to downgrade its growth forecast for China, as the world’s second-largest economy stutters and loses momentum after its coronavirus reopening.

    The investment bank cut its full-year gross domestic product forecast for 2023 from 6% to 5.4%, noting further turbulence ahead for the economy. The recovery from its stringent Covid-19 lockdown measures continue to disappoint through soft economic data, as well as mounting pressure on its property sector.

    While the firm sees further stimulus to come, it notes that the measures will not be enough to overcome the greater problems that it faces: weakened sentiment.

    Read more about China from CNBC Pro

    “With continued challenges from the property market, pervasive pessimism among consumers and private entrepreneurs, and only moderate policy easing to partially offset the strong growth headwinds, we mark down our 2023 real GDP forecast,” economists led by Chief China Economist Hui Shan said in research note Sunday.

    The latest revision from Goldman Sachs follows the likes of UBS, Bank of America and JPMorgan who have all downgraded their China full-year GDP estimates.

    Goldman Sachs’ economists added that there are a slew of macroeconomic issues facing the nation.

    “With the reopening boost quickly fading, medium-term challenges such as demographics, the multi-year property downturn, local government implicit debt problems, and geopolitical tensions may start to become more important in China’s growth outlook,” they said.

    It also sees further weakness in the Chinese yuan against the U.S. dollar due to rate differentials with the People’s Bank of China expected to ease its monetary policy further while the Federal Reserve is hinting at more rate hikes to come.

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    UBS also sees continued weakness in China’s economy ahead, particularly focusing on the second quarter of the year.

    “Q2 [second quarter] sequential growth may slow to only 1-2% quarter-on-quarter saar [seasonally adjusted annual rate], weaker than our earlier expectation of 4.5%,” UBS Investment Bank’s Chief China economist Wang Tao said in a Friday note.

    Wang noted that uncertainty in China’s property sector remains a central risk to its forecast and could bring its growth outlook even lower.

    “Risks to our forecast is slightly biased towards the downside, mainly from uncertainties in property market and path of property policy support ahead, as well as weaker external demand,” she said.

    China's youth unemployment hit another record high in May

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