World

The Saudi capital was bedecked with Chinese flags ahead of President Xi Jinping’s visit on Wednesday that is likely to focus on energy ties but also follows months of tensions with the United States.

The red-and-gold Chinese emblem alternated with the green flag of Saudi Arabia along major roads in Riyadh, while Xi was pictured on the front pages of newspapers that highlighted the trip’s potential economic benefits.

China, the world’s second-biggest economy, is the top customer for oil from Saudi Arabia, the leading exporter of crude, and both sides appear keen to expand their relationship at a time of economic turmoil and geopolitical realignment.

The three-day trip — only Xi’s third overseas journey since the coronavirus pandemic began, and his first to Saudi Arabia since 2016 — comes after US President Joe Biden’s visit in July, when he pleaded in vain for higher oil production.

It will feature bilateral meetings with Saudi King Salman and Crown Prince Mohammed bin Salman, the de facto ruler, as well as a summit with the six-member Gulf Cooperation Council and a wider China-Arab summit.

The programme represents the “largest-scale diplomatic activity between China and the Arab world since the founding of the PRC”, or People’s Republic of China, foreign ministry spokeswoman Mao Ning said on Wednesday.

The official Saudi Press Agency said the kingdom accounted for more than 20 percent of Chinese investment in the Arab world between 2005 and 2020, “making it the biggest Arab country to receive Chinese investments during that period”. 

Oil markets are expected to be a top agenda item for talks between China and Saudi Arabia, especially given the turbulence the markets have experienced since Russia invaded Ukraine in February.

The G7 and European Union on Friday agreed to a $60-per-barrel price cap on Russian oil in an attempt to deny the Kremlin war resources, injecting further uncertainty into the markets.

On Sunday, the OPEC+ oil cartel led jointly by Saudi Arabia and Russia opted to keep in place production cuts of two million barrels per day approved in October.

Saudi and Chinese officials have provided scant information about the agenda, though Ali Shihabi, a Saudi analyst close to the government, said he expected “a number of agreements to be signed”.

Beyond energy, analysts say leaders from the two countries will likely discuss potential deals that could see Chinese firms become more deeply involved in mega-projects that are central to Prince Mohammed’s vision of diversifying the Saudi economy away from oil.

They include a futuristic $500 billion megacity known as NEOM, a so-called cognitive city that will depend heavily on facial recognition and surveillance technology.

– Tensions with Washington –

The OPEC+ production cuts approved in October represented the latest blow to the longtime partnership between Saudi Arabia and the United States, which said they amounted to “aligning with Russia” on the war in Ukraine. 

Xi’s visit is expected to be closely watched in Washington, which entered into what is often described as an oil-for-security partnership with Saudi Arabia towards the end of World War II.

While the Biden administration has smarted over the production cuts, Riyadh has at times accused the United States of failing to hold up the security end of the bargain, notably after strikes in September 2019 claimed by Yemen’s Huthi rebels temporarily halved the kingdom’s crude output.

China and Saudi Arabia already work together on arms sales and production. 

Yet analysts say Beijing cannot provide the same security assurances Washington does — nor does it wish to. 

Nevertheless, if the Saudis are “looking to extract more security guarantees from the US… signalling that they have the opportunity of strengthening ties with China is something that suits them well,” said Torbjorn Soltvedt, of the risk intelligence firm Verisk Maplecroft.

The GCC-China summit will be held in Riyadh on Friday, the bloc said in a statement. 

Turkey said Wednesday it has started requesting proof of insurance from tankers loaded with Russian crude oil after Western powers imposed a price cap to punish the Kremlin for its war on Ukraine.

But a Turkish official denied that the measure was slowing the passage of oil ships to world markets through the Bosphorus and Dardanelle straits.

The European Union and the Group of Seven leading industrialised nations agreed last week to block Western insurers from covering ships that intend to sell Russian oil for more than $60 a barrel.

Australia has also joined the new sanctions aimed at depriving Russia of one of its main sources of revenue.

The TankerTracker.com industry monitor said early Wednesday that Russian seaborne crude oil exports had halved in the past 48 hours.

One source told AFP that Turkish officials began requesting proof of insurance from tankers passing from Russia at the start of the month.

“We want to be sure about the coverage because they have started to cancel it,” an official source told AFP on condition of anonymity.

An unnamed Turkish official told the Anadolu state news agency that “the majority of international insurers” no longer provide coverage for Russian crude.

“God forbid, if an accident happens in the straits, who would cover the damages that can reach billions of dollars? Who would be responsible?” the Turkish official asked.

But the official also rejected Western media reports suggesting that Turkey’s new rules have created a logjam of Russian ships in the two straits.

The official said there were no “significant” changes to marine traffic and that Turkey could take extra measures to “prevent congestion”.

A 1936 treaty guarantees the freedom of navigation to merchant vessels passing through Turkey’s two straits.

But it also gives Turkey the right to regulate security — a provision it is now using to make sure the oil ships are insured against spillage and other accidents.

The Financial Times reported that Russia has assembled a separate “shadow fleet” of more than 100 vessels that try to circumnavigate the Western sanctions regime.

These ships are reportedly using non-Western insurers and selling oil at higher prices to countries that have not subscribed to the new sanctions.

The Financial Times said Turkey was waving through these ships but holding up the ones with Western insurance coverage.

Turkish officials did not immediately respond to the report.

The hugely popular “Call of Duty” game franchise will become available on Nintendo’s Switch console if the acquisition of its developer goes ahead, a Microsoft executive said Wednesday.

The US tech giant is in the process of buying the game maker Activision Blizzard, but the huge $69-billion purchase has yet to be finalised while it is examined by antitrust authorities.

“Microsoft is committed to helping bring more games to more people — however they choose to play,” Xbox head Phil Spencer tweeted, in what analysts called an attempt to show competition would not be affected by the acquisition deal.

“Call of Duty” is a blazingly successful first-person shooter franchise with hordes of devotees that play it on Microsoft’s Xbox consoles or Sony’s PlayStation.

The games are also available on PC and mobile, as well as Nintendo’s older Wii and DS consoles.

Spencer said Microsoft had “entered into a 10-year commitment to bring Call of Duty to Nintendo following the merger of Microsoft and Activision Blizzard King”.

New titles in the series will also continue to be sold on Steam, a platform for downloading games, as soon as they are released on Xbox “after we have closed the merger”, he added.

Serkan Toto of consulting agency Kantan Games told AFP that the timing of the announcement was “clearly a publicity stunt” linked to ongoing negotiations over the Activision purchase.

Nintendo’s Switch, which was launched in 2017, had more than 110 million users in the past year.

“So if Activision was really interested in bringing ‘Call of Duty’ to a Nintendo platform, to the Nintendo Switch, they could have done it three or four years ago,” Toto said.

Earlier this week, Microsoft president Brad Smith wrote in a Wall Street Journal article that the company had offered to strike a new contract with Sony in a similar 10-year deal. However, Spencer told Bloomberg that Sony has so far rebuffed the offer.

Most stocks suffered more selling Wednesday while oil held losses on growing fears Federal Reserve monetary tightening will tip the US economy into recession.

The drop followed another day deep in the red for New York’s three main indexes after the heads of Wall Street’s leading banks warned of tough times ahead in 2023.

JPMorgan Chase chief Jamie Dimon tipped a “mild to hard recession” and Goldman Sachs’ David Solomon said jobs and pay would be hit, while Morgan Stanley and Bank of America were also uneasy about the outlook.

The comments added to the downbeat mood that has coursed through trading floors at the start of the week, after forecast-beating reports on jobs and the giant US services sector fanned worries the Fed will have to push interest rates higher than hoped.

Markets had been rising healthily ahead of Friday’s employment figures after a weaker-than-expected inflation reading for October suggested the almost year-long tightening campaign was finally affecting prices.

“Any hopes that the Fed would turn more dovish in the months ahead have been dashed significantly as the vast US services industry is where sticky inflation hangs out,” said SPI Asset Management’s Stephen Innes.

He added that the latest readings suggest rates will go above five percent before the Fed stops hiking, while several observers have suggested they will not be reduced until 2024.

Hong Kong, Tokyo, Shanghai, Sydney, Seoul, Singapore, Mumbai, Bangkok, Manila and Jakarta all dropped. London opened slightly higher, Paris was flat and Frankfurt slipped.

And Lauren Goodwin, at New York Life Investments, saw further pain ahead for markets.

“We have not yet seen the bottom on equity prices,” she said, according to Bloomberg News. “While this phase of equity market volatility is likely to end in the next few months, earnings have not yet adapted to a recessionary environment.”

The sombre outlook overshadowed China’s moves to wind back some of its harsh Covid rules that traders hope will kickstart the world’s number two economy, which has been battered this year by months of lockdowns and other containment measures.

In a sign of the impact the zero-Covid strategy has had, data Wednesday showed that imports and exports and imports plunged far more than expected in November.

On Wednesday officials announced for the first time a nationwide loosening of restrictions, including a reduction in mandatory PCR tests and allowing some positive cases to quarantine at home.

But while the country edges back to normality, Zhiwei Zhang, of Pinpoint Asset Management, warned that it would take time.

“The zero-Covid policy has been loosened, but mobility has not recovered much on the national level,” he said. “I expect exports will stay weak in the next few months as China goes through a bumpy reopening process.

“As global demand weakens in 2023, China will have to rely more on domestic demand.”

And other observers said the recent rally fuelled by the reopening may have gone too far and traders were now taking a step back as they contemplate a likely spike in infections in the country.

Oil prices remained stuck at lows not seen for around a year as demand expectations tumble.

Brent on Tuesday sank below $80 for the first time since January, while WTI was at its lowest since December, having plunged from the 14-year highs of around $140 touched in March after Russia invaded Ukraine. Both contracts were only slightly higher in Asian trade.

“The crude demand outlook is getting crushed as we are in a slowdown basically across all the major economies,” said OANDA’s Edward Moya.

“Supplies seem plentiful over the near term and that has everyone hesitating on what was one of the easiest trades of the year.”

– Key figures around 0820 GMT –

Tokyo – Nikkei 225: DOWN 0.7 percent at 27,686.40 (close)

Hong Kong – Hang Seng Index: DOWN 3.2 percent at 18,814.82 (close)

Shanghai – Composite: DOWN 0.4 percent at 3,199.62 (close)

London – FTSE 100: UP 0.5 percent at 7,558.09

Euro/dollar: DOWN at $1.0458 from $1.0470 on Tuesday

Dollar/yen: UP at 137.48 yen from 137.04 yen

Pound/dollar: DOWN at $1.2126 from $1.2133

Euro/pound: DOWN at 86.20 pence from 86.26 pence

West Texas Intermediate: UP 0.2 percent at $74.38 per barrel

Brent North Sea crude: UP 0.3 percent at $79.59 per barrel

New York – Dow: DOWN 1.0 percent at 33,596.34 (close)

China announced Wednesday a nationwide loosening of its hardline Covid restrictions that had hammered the world’s second biggest economy and ignited rare protests against the ruling Communist Party.

The new rules are a major relaxation of President Xi Jinping’s signature zero-Covid policy, three years into the pandemic and long after the rest of the world had largely learnt to live with the virus.

However, with vaccination rates remaining low among China’s elderly and a health system still regarded as ill-prepared for a wave of infections, Xi has not abandoned travel curbs and heavy testing completely.

Under the new guidelines announced by the National Health Commission, the frequency and scope of PCR testing — long a tedious mainstay of life in zero-Covid China — will be reduced.

Lockdowns — a major source of public anger — will also be limited to as small a scope as is feasible, and authorities are required to free areas that show no positive cases after five days.

People with non-severe Covid infections can isolate at home instead of centralised government facilities.

And people will no longer be required to show a green health code on their phone to enter public buildings and spaces, except for “nursing homes, medical institutions, kindergartens, middle and high schools”.

China will also accelerate the vaccination of the elderly, the health commission said, long seen as a major obstacle to the relaxation zero-Covid.

– ‘It’s about time’ –

Until recently, Xi and the Chinese propaganda apparatus had hailed zero-Covid as a triumph of communist rule that had kept deaths low compared with democratic countries such as the United States.

But rare demonstrations against the strategy broke out across China late last month, with people railing against the restrictions.

The protests expanded into calls for more political freedoms, with some even calling for Xi to resign, turning into the most widespread opposition to communist rule since the 1989 democracy uprising that the military crushed.

All the while, a stream of data showed the massive impacts of zero-Covid on China’s economy — with spill on effects for the world.

The government released data just before Wednesday’s announcement stating imports in November had fallen 10.6 percent year-on-year, the biggest drop since May 2020. 

Exports fell 8.7 percent over the same period.

Authorities quickly cracked down on the demonstrations, sending security forces into the streets and deploying its high-tech surveillance system against protesters.

However they also began easing restrictions, with some Chinese cities tentatively rolling back mass testing and curbs on movement.

And once dominated by coverage of the dangers of the virus and scenes of pandemic chaos abroad, China’s state-run media dramatically shifted tone to support a moving away from zero-Covid.

There were immediate signs of relief in China following Wednesday’s announcement.

“It’s about time to open up, its been three years already, we should open up fully,” one Beijing resident who asked to remain anonymous told AFP. 

“People need to work and eat, you can’t just tell people not to leave their homes anymore,” they added.

“If people are worried now, they should stay home and avoid coming out, other people need to work and get on with life.”

Searches on the country’s biggest travel app, Ctrip, for flight tickets ahead of next month’s Chinese New Year hit a three-year-high, state-run media outlet The Paper reported.

Analysts at Japanese firm Nomura said they projected China’s GDP would rebound next year in the wake of the relaxations.

But, they warned, China “does not appear to be well prepared for a massive wave of Covid infections”. 

“It may have to pay for its procrastination on embracing a ‘living with Covid’ approach,” they said in an email.

China announced Wednesday a nationwide loosening of Covid restrictions following protests against the hardline strategy that grew into calls for greater political freedoms.

Anger over China’s zero-Covid policy — which involved mass lockdowns, constant testing and quarantines even for people who are not infected — stoked unrest not seen since the 1989 pro-democracy protests.

Under the new guidelines announced by the National Health Commission, the frequency and scope of PCR testing — long a tedious mainstay of life in zero-Covid China — will be reduced.

Lockdowns will also be scaled down and people with non-severe Covid cases can isolate at home instead of centralised government facilities.

And people will no longer be required to show a green health code on their phone to enter public buildings and spaces, except for “nursing homes, medical institutions, kindergartens, middle and high schools”.

The new rules scrap the forced quarantines for people with no symptoms or with mild cases.

“Asymptomatic infected persons and mild cases who are eligible for home isolation are generally isolated at home, or they can voluntarily choose centralised isolation for treatment,” the new rules read.

“Mass PCR testing only carried out in schools, hospitals, nursing homes and high-risk work units; scope and frequency of PCR testing to be further reduced,” they added. 

“People travelling across provinces do not need to provide a 48h test result and do not need to test upon arrival.”

China will also accelerate the vaccination of the elderly, the NHC said, long seen as a major obstacle to the relaxation of Beijing’s no-tolerance approach to Covid.

Rare demonstrations against the ruling Communist Party’s zero-Covid strategy broke out across China late last month.

They expanded into calls for more political freedoms, with some even calling for President Xi Jinping to resign.

Authorities cracked down on subsequent efforts to protest while easing a number of restrictions, with some Chinese cities tentatively rolling back mass testing and curbs on movement.

The capital Beijing, where many businesses have fully reopened, said this week that commuters were no longer required to show a negative virus test taken within 48 hours to use public transport.

Financial hub Shanghai — which underwent a brutal two-month lockdown this year — announced the same rules, with residents able to enter outdoor venues such as parks and tourist attractions without a recent test.

And once dominated by doom and gloom coverage of the dangers of the virus and scenes of pandemic chaos abroad, China’s tightly controlled media dramatically shifted tone to support a tentative moving away from zero-Covid.

The prevalent Omicron strain is “not at all like last year’s Delta variant”, Guangzhou-based medicine professor Chong Yutian said in an article published by the Communist Party-run China Youth Daily.

“After infection with the Omicron variant, the vast majority will have no or light symptoms, and very few will go on to have severe symptoms, this is already widely known,” he assured readers.

But analysts at Japanese firm Nomura on Monday calculated that 53 cities — home to nearly a third of China’s population — still had some restrictions in place.

Wednesday’s announcement came hours after the government released further data showing the crippling economic impacts of zero-Covid.

Imports and exports plunged in November to levels not seen since early 2020.

Imports in November fell 10.6 percent year-on-year, the biggest drop since May 2020, according to the General Administration of Customs. Exports fell 8.7 percent over the same period.