US Business

US lawmakers on Thursday asked executives of major banks to reconsider attendance at a major conference next week in Hong Kong, saying their presence legitimizes China’s clampdown in the city.

Heads of some 30 big financial institutions are expected for the conference in Hong Kong, which is keen to show it is open for business after isolation under one of the world’s strictest Covid policies.

But the event also comes after China cracked down during the pandemic on the city’s pro-democracy movement, arresting activists and effectively shutting down independent media after imposing a draconian national security law in 2020.

“Business as usual in Hong Kong is the wrong choice for these companies,” said Senator Jeff Merkley and Representative Jim McGovern, Democrats who head the bipartisan Congressional-Executive Commission on China, which assesses human rights.

“Their presence only serves to legitimize the swift dismantling of Hong Kong’s autonomy, free press and the rule of law by Hong Kong authorities acting along with the Chinese Communist Party,” they said in a statement.

The lawmakers warned US financial executives they could draw “pertinent congressional concern” if they expand investments that further harm Hong Kong’s autonomy.

The lawmakers also accused Hong Kong’s Beijing-appointed leader, John Lee, of refusing to cooperate with US-led sanctions on Russia over its invasion of Ukraine.

The event will include panel talks featuring the CEOs of Goldman Sachs, Morgan Stanley and Citigroup.

Top executives from HSBC, Standard Chartered, JPMorgan Chase and BlackRock will also attend.

China promised to allow a separate system in Hong Kong before Britain returned the territory in 1997 but President Xi Jinping has solidified control after massive and sometimes violent protests against Beijing’s role.

EU chief Charles Michel called on Thursday for closer ties with Central Asia on his first official visit to Kazakhstan, the main economic powerhouse in a region where Russia’s influence has come under question.

In a first European Union-Central Asia summit, Michel met the leaders of the region’s five countries — Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and Turkmenistan. 

He described the gathering as “much more than just a policy dialogue between two regions”.

“It’s a powerful symbol of our reinforced cooperation and a strong signal of the EU’s commitment to this region,” he said. 

Michel’s visit to the Kazakh capital Astana comes eight months into Russia’s invasion of Ukraine, which has made Moscow’s former Soviet neighbours nervous and intensified the Kremlin’s clash with the West.

In a joint statement, Michel and the Central Asian leaders said they agreed to “continue building a strong diversified and forward-looking partnership underpinned by shared values and mutual interests”.

Michel’s visit comes two weeks after Astana hosted several summits attended by Russia — as well as by China and Turkey, which are also seeking to strengthen their influence in the region. 

“Central Asia and Europe are coming closer together and becoming more and more connected,” Michel had told a press conference with Kazakh President Kassym-Jomart Tokayev in Astana.

The head of the EU Council said Kazakhstan was a “crucial partner” and the EU hoped to “develop our cooperation”.

He singled out Kazakhstan as a major trading partner for the EU and called for investment in transport infrastructure in the country, which has looked to reduce  dependence on Moscow since the latter sent troops to Ukraine. 

– ‘Geopolitical balance’ –

Since the start of Moscow’s invasion in February and the subsequent Western sanctions slapped on Russia, “Central Asian countries have been trying to strike a geopolitical balance,” Kazakh political analyst Dosym Satpayev told AFP. 

The traditional allies of Moscow have trod a fine line on the Kremlin’s attack on Ukraine, neither condemning nor openly supporting it.

Tokayev even clashed with Russian President Vladimir Putin publicly in June, refusing to recognise the self-declared separatist republics controlled by pro-Moscow rebels in eastern Ukraine. 

Russia has since claimed to have annexed the regions.

“The European Union has a very good opportunity to strengthen its position in Central Asia,” Satpayev said, 

He said this was especially true in Kazakhstan — the only country in the region that has signed an enhanced partnership and cooperation agreement with the EU — and neighbouring Uzbekistan, where Michel is expected on Friday.

Meanwhile Astana is seeking new routes for  oil exports, around three quarters of which transit Russia.

In early July, Tokayev pledged greater energy cooperation with the EU.

In a joint statement on Thursday, Tokayev and Michel said they discussed how to avoid “unintended negative impact on Kazakhstan’s economy” of EU sanctions against Russia, imposed over the Ukraine conflict.

They also discussed relocating to Kazakhstan “European manufacturing companies”, whose products are not subject to sanctions.

Since the outbreak of war in Ukraine, Russia has twice halted Kazakh oil exports, citing technical and security reasons. 

Rich in hydrocarbons and minerals, Kazakhstan lies at the heart of China’s massive new silk road project. 

Like Beijing, Turkey is also advancing its interest in the region, highlighting ethno-linguistic and religious ties to Central Asia. 

The German government is reviewing a possible sale of a local chip factory to a Chinese-owned firm, sources said Thursday, despite the reported concerns of intelligence agencies.

Government officials speaking on condition of anonymity told AFP that they were assessing the potential impact of a takeover of Dortmund-based Elmos by Sweden’s Silex, a unit of Chinese company Sai MicroElectronics.

“There is an ongoing investment review procedure,” one official said. “The checks have begun, are continuing and are not finished.”

The overture by the Chinese firm comes ahead of Chancellor Olaf Scholz’s visit to China next week as the first European Union leader to make the trip since November 2019.

And it coincides with growing fears within his coalition government and among intelligence officials about the risks of critical infrastructure and intellectual property falling into foreign hands.

Business daily Handelsblatt had reported earlier that Berlin intends to green-light the deal, possibly as early as next week.

In contrast with other recent controversial acquisitions, the chancellery and the economy ministry are in agreement on Elmos and inclined to approve the takeover as the company’s technology is not state of the art, according to the report.

However the domestic security watchdog, the Office for the Protection of the Constitution, warned against the sale, saying that Chinese control of key production capacity was enough to allow Beijing to apply pressure on Germany, Handelsblatt reported.

The Office could not immediately be reached for comment.

– Security concerns –

Elmos, which primarily builds components for the automobile industry, said late last year it intended to sell the production facility at its headquarters.

Silex is seeking to buy the site and its supplies for 85 million euros (dollars), which would allow Elmos to shed its own production activities and sell its chips to manufacturing contractors.

Germany’s coalition government on Wednesday allowed a Chinese firm to buy a reduced stake in a Hamburg port terminal, after Scholz resisted calls to ban the disputed sale outright over security concerns.

Under a tenuous compromise agreed by Scholz’s cabinet, Chinese shipping giant Cosco has the go-ahead to buy a stake “below 25 percent” in the Tollerort container terminal owned by HHLA.

Germany, along with EU partners, has in recent years taken a closer look at Chinese investment in sensitive technologies and other areas, and reserves the right to veto acquisitions.

The issue has gained urgency in light of the breakdown in ties with Russia over the Ukraine war due to the once heavy dependence of Europe’s top economy on Moscow’s energy supplies.

The European Central Bank announced another jumbo interest rate hike on Thursday and said further increases would follow to combat soaring inflation, even as its president, Christine Lagarde, warned a eurozone recession was looming.

The ECB’s 25-member governing council repeated last month’s unprecedented move and opted for another bumper increase of 75 basis points, leaving its three main rates sitting in a range of between 1.5 and 2.25 percent.

“We will have further rate increases in the future,” Lagarde said. “There is still ground to cover.”

The Frankfurt institution is under pressure to rein in record-high inflation, mainly driven by surging food and especially energy prices in the wake of Russia’s war in Ukraine.

Eurozone inflation stood at 9.9 percent in September, nearly five times the ECB’s two-percent target.

Inflation “remains far too high” in the 19-nation currency club, Lagarde said.

Like other central banks, the ECB is fighting back with a series of rate hikes intended to dampen demand by making credit more expensive for households and businesses.

But higher borrowing costs also weigh on economic activity, and the eurozone outlook has deteriorated significantly.

“The likelihood of recession (is) looming much more on the horizon,” Lagarde told a press conference.

And inflation could go “higher than expected if there are increases in the prices of energy and food commodities”, she added.

“Obviously we’re concerned, particularly about those who have low income,” Lagarde said.

– Political grumbling –

Moscow’s move to curb gas supplies to Europe has triggered an energy crisis on the continent, fuelling fears of power shortages and sky-high heating bills this winter. 

If Russia completely cuts off gas flows to Europe, the eurozone economy could shrink by nearly one percent in 2023, ECB vice-president Luis de Guindos recently warned.

That scenario has become more likely after Russia in late August shut down the crucial Nord Stream 1 pipeline to Europe’s economic powerhouse Germany.

As European governments race to unveil multi-billion-euro support measures to help citizens through a cost-of-living crisis this winter, the ECB’s monetary policy tightening has come under scrutiny.

Italian Prime Minister Giorgia Meloni this week criticised the ECB’s “rash choice” to aggressively hike rates, saying it created “further difficulties for member states that have elevated public debt”.

French President Emmanuel Macron expressed “concern” that the ECB was “shattering demand” in Europe.

But Lagarde hit back at the criticism.

“The decision that we made today is the most appropriate in order to restore price stability, which… is critically important for not just the stability of prices but also for the economy to actually prosper and recover,” she said.

The former French finance minister also warned governments against adding to their debt pile as they try to shield citizens from price shocks.

“Governments should pursue fiscal policies that show they are committed to gradually bringing down high public debt ratios,” Lagarde said, stressing that policymakers should pick measures which are “temporary and targeted at the most vulnerable”.

– Excess liquidity –

Also in focus on Thursday were the ECB’s efforts to bring other monetary policy levers in line with its inflation-busting efforts, including unwinding its massive balance sheet.

The governing council moved to reduce the benefits gained by eurozone banks from super-cheap loans issued at ultra-low rates during the pandemic.

The interest rate for so-called TLTRO III loans would rise, the ECB said, and lenders will be offered “additional voluntary early repayment dates”.

Lenders are currently able to make an easy profit by parking their excess TLTRO cash at the ECB and pocketing the new, higher deposit rate.

This is not considered a good look at a time when many consumers and companies are struggling, and the ECB had signalled it wanted to make the loan scheme less generous.

Lagarde was also grilled by reporters on how the ECB intends to shrink its five-trillion-euro bond portfolio, after years of hoovering up government and corporate debt to keep credit flowing.

Given the economic uncertainty and the risk of rattling financial markets, analysts believe the start of any “quantitative tightening” — letting the bonds mature or actively selling them — is some way off.

Lagarde said the topic would be discussed at the next meeting in December.

The European Central Bank on Thursday rolled out another bumper rate hike to combat soaring inflation, despite growing concern that the eurozone is hurtling towards a painful recession.

The ECB’s 25-member governing council repeated last month’s unprecedented move and opted for another increase of 75 basis points, leaving its three main rates sitting in a range of between 1.5 and 2.25 percent.

The hike was widely expected and comes as the Frankfurt institution faces pressure to rein in record-high inflation, mainly driven by skyrocketing energy costs in the wake of Russia’s war in Ukraine.

Eurozone inflation stood at 9.9 percent in September, nearly five times the ECB’s two-percent target.

In its statement, the ECB warned that inflation “remains far too high” in the 19-nation currency club, blaming “soaring energy and food prices, supply bottlenecks and the post-pandemic recovery in demand”.

Like other central banks, the ECB is fighting back with a series of rate hikes intended to dampen demand by making credit more expensive for households and businesses.

But higher borrowing costs also dampen economic activity, and signs are multiplying that the eurozone outlook has deteriorated.

In its determination to bring down price pressures, the ECB “has turned a blind eye on recession risks”, said ING economist Carsten Brzeski.

– Political grumbling –

Moscow’s move to curb gas supplies to Europe has triggered an energy crisis on the continent, fuelling fears of power shortages and sky-high heating bills this winter. 

If Russia completely cuts off gas flows to Europe, the eurozone economy could shrink by nearly one percent in 2023, ECB vice-president Luis de Guindos has warned.

That scenario has become more likely after Russia in late August shut down the crucial Nord Stream 1 pipeline to Europe’s economic powerhouse Germany.

The German economy is already forecast to shrink by 0.4 percent next year.

As European governments race to unveil multi-billion-euro support measures to help citizens through a cost-of-living crisis this winter, the ECB’s monetary policy tightening has come under increased scrutiny.

Italian Prime Minister Giorgia Meloni this week slammed the ECB’s “rash choice” to aggressively hike rates, saying it created “further difficulties for member states that have elevated public debt”.

French President Emmanuel Macron has expressed “concern” that the ECB was “shattering demand” in Europe.

ECB president Christine Lagarde will likely be quizzed about the political grumbling at her 1245 GMT press conference in Frankfurt.

Lagarde can also expect questions on how the ECB plans to bring other monetary policy levers in line with its inflation-busting efforts, including unwinding its massive balance sheet.

– Excess liquidity –

The governing council on Thursday already moved to limit the benefits gained by eurozone banks from super-cheap loans issued at ultra-low rates during the pandemic.

The interest rate for so-called TLTRO III loans would rise, the bank said, and lenders will be offered “additional voluntary early repayment dates”.

As an unintended consequence of the ECB’s rate hikes, lenders are currently able to make an easy profit by parking their excess TLTRO cash at the ECB and pocketing the new, higher deposit rate.

This is not considered a good look at a time when many consumers and companies are struggling, and the ECB had signalled it wanted to make the loan scheme less generous.

“The optics are bad against the backdrop of a historical shock to households’ income, and political pressure cannot be ignored,” said Pictet Wealth Management economist Frederik Ducrozet.

The ECB is also considering how best to shrink its five-trillion-euros bond portfolio, after years of hoovering up government and corporate debt to drive up stubbornly low inflation.

But the statement made no mention of any decisions on the issue.

Given the economic uncertainty and the risk of rattling financial markets, analysts say the start of any “quantitative tightening” — letting the bonds mature or actively selling them — is some way off.

Country climate pledges leave the world on track to heat by as much as 2.6 degrees Celsius this century, the United Nations said on Wednesday, warning that emissions must fall 45 percent this decade to limit disastrous global warming.

The United Nations Environment Programme, in its annual Emissions Gap report, found that updated national promises since last year’s COP26 summit in Glasgow would only shave less than one percent off global greenhouse gas emissions by 2030.

The world has warmed nearly 1.2C since the start of the Industrial Revolution and already faces increasingly ferocious climate-enhanced weather extremes like heatwaves, storms and floods.

The Emissions Gap report examines the difference between the planet-heating pollution that will still be released under countries’ decarbonisation plans and what science says is needed to keep to the Paris Agreement goal of limiting warming to between 1.5-2.0C.

A day after the UN’s climate change agency said governments were still doing “nowhere near” enough to keep global heating to 1.5C, UNEP found progress on emissions cutting had been “woefully inadequate”.

It said that additional pledges made since the COP26 summit in Glasgow last year would not even cut emissions by one percent by 2030. 

Failure left the world “hurtling towards” a temperature rise far in excess of the Paris goals, it added. 

“It’s another year squandered in terms of actually doing something about the problem,” the report’s lead author, Anne Olhoff, told AFP.

“That’s not to say that all nations have not taken this seriously. But from a global perspective, it’s definitely very far from adequate.”

The report found that in order for temperature rises to be capped at 2C, emissions would need to fall 30 percent faster by 2030 than envisioned under countries’ most up-to-date plans. 

To limit heating to 1.5C, the gap is 45 percent.

Under the 2015 Paris deal, countries are required to submit ever deeper emission cutting plans, known as Nationally Determined Contributions, or NDCs. 

UNEP found that “unconditional” NDCs — which countries plan regardless of external support — would probably lead to Earth’s average temperature rising by 2.6C by 2100. Scientists warn that level would be catastrophic for humanity and for nature. 

Conditional NDCs — which rely on international funding to achieve — would probably lead to a 2.4C temperature rise this century, it said. 

All told, current plans are likely to see a five- to 10-percent reduction in emissions by 2030 — a far cry from the drop of nearly 50 percent required for 1.5C. 

– ‘Missed opportunity’ –

UNEP said that in 2020, carbon pollution fell more than seven percent, largely thanks to Covid-19 lockdowns and travel restrictions. A fall of that magnitude is needed every year this decade to stay on track for 1.5C. 

But it said greenhouse gas emissions in 2021 could end up being the highest on record — some 52.8 billion tonnes — because countries threw themselves into fossil-fuelled pandemic recoveries.

“We see a full bounce-back in emissions after Covid,” said Olhoff. 

“It’s a missed opportunity in terms of utilising these unprecedented recovery funds to accelerate a green transition.”

Separately, the International Energy Agency said on Thursday it believed global energy emissions would peak in 2025 as surging oil and gas prices spurred a drive to renewables.

But UNEP said that while the switch to greener tech in the power sector was accelerating, several industries were lagging behind in the push towards net-zero emissions.  

For example, in the food sector, which is responsible for around a third of emissions, dietary changes and cutting food loss could help reduce the sector’s footprint by more than 30 percent by 2050.

– ‘Avoid as much damage as possible’ – 

Olhoff said the financial sector was “part of the problem rather than part of the solution” to climate change, with hundreds of billions funnelled annually to fossil fuel projects. 

UNEP suggested the introduction of an effective carbon price under a global cap and trade system that would push investors to consider the environmental impact of their portfolios.

It also called for central banks to make more funds available and help create global low-carbon technology markets.

UN Secretary General Antonio Guterres said Thursday’s report showed the world “cannot afford any more greenwashing”.

“Commitments to net zero are worth zero without the plans, policies and actions to back it up,” he said in a video message. 

Last year the Intergovernmental Panel on Climate Change said that the world was likely to reach and even exceed 1.5C within decades, no matter how quickly emissions fall in the short term. 

Olhoff said that for every year that passed without significant emissions cuts, 1.5C was getting “less realistic and less feasible”.

But she insisted that governments needed to accelerate the green transition to avoid as much damage as possible. 

“The more we learn, it’s absolutely clear that we should aim to get (temperature rises) as low as possible,” Olhoff said. 

“Even if that means 1.6C instead of 1.5C, that’s definitely better than 2C degrees, just as 1.7C is worse than 1.6C.”

Israel and Lebanon Thursday separately signed a US-brokered maritime border deal which paves the way for lucrative offshore gas extraction by the neighbours that remain technically at war.  

The agreement is set to go into effect after two exchanges of letters — one between Lebanon and the United States, the other between Israel and the US, expected from 3:00pm local time (1200 GMT). 

Hailed in advance by US President Joe Biden as a “historic breakthrough”, it comes as Western powers clamour to open up new gas production and reduce vulnerability to supply cuts from Russia. 

The deal, signed separately by Lebanon’s President Michel Aoun in Beirut and Israel’s Prime Minister Yair Lapid in Jerusalem, comes as Lebanon hopes to extract itself from what the World Bank calls one of the worst economic crises in modern world history.

It also comes as Lapid seeks to lock in a major achievement days ahead of a general election on November 1.

The exchange of letters is due to take place in the southern Lebanese town of Naqura, in the presence of US mediator Amos Hochstein and the United Nations’s special coordinator for Lebanon Joanna Wronecka.

Before signing it, Lapid had claimed on Thursday morning that Lebanon’s intention to ink the deal amounted to a de-facto recognition of the Jewish state.

– Delicate dance –

“It is not every day that an enemy state recognises the State of Israel, in a written agreement, in front of the entire international community,” he said, shortly before signing it in cabinet.

Aoun denied Lapid’s assertion, countering that “demarcating the southern maritime border is technical work that has no political implications”.

The deal comes as political parties in Israel — including Lapid’s centrist Yesh Atid – jockey for position in what will be the fifth general election in less than four years.

Veteran right-winger and longtime premier Benjamin Netanyahu has his sights set on a comeback and he dismissed the maritime deal as an “illegal ploy” early this month.

London-listed Energean on Wednesday said it began producing gas from Karish, an offshore field at the heart of the border agreement, a day after Israel gave the green light. 

Lebanon meanwhile will have full rights to operate and explore the so-called Qana or Sidon reservoir, parts of which falls in Israel’s territorial waters, with the Jewish state receiving some revenues.

– No quick fix –

With demand for gas rising worldwide because of the energy crisis sparked by Russia’s invasion of Ukraine, Lebanon hopes that exploiting the offshore field will help ease its financial and economic crisis.

But analysts caution that it will take time for production to start in Lebanese waters, meaning no quick return for a country that is desperately short of foreign exchange reserves. 

Exploration has so far only been tentative — a 2012 seismic study of a limited offshore area by the British firm Spectrum estimated recoverable gas reserves in Lebanon at 25.4 trillion cubic feet, although authorities in Lebanon have announced higher estimates. 

The maritime border deal could not be signed by Lebanon without the consent of Hezbollah, a powerful Shiite faction backed by Israel’s arch nemesis Iran.

Hezbollah had threatened over the summer to attack Israel if the Jewish state began extracting gas from the Karish field before reaching an agreement.

Israel and Hezbollah fought a 34-day war in 2006 and the Shiite movement is the only faction to have kept its weapons after the end of Lebanon’s 1975-1990 civil war.

Hezbollah’s leader Hasan Nasrallah is due to deliver a speech at 4:00pm on Thursday.