Category Archives: Global economy

UK and New Zealand sign free trade deal

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Government claims it will boost bilateral trade by 60% but critics call its benefits ‘economically marginal’

Britain and New Zealand have signed a free trade deal, which the UK government said would boost bilateral trade by 60% by eliminating tariffs, cutting red tape and enabling freer movement of professional workers.

Most business leaders welcomed the deal, which was agreed in principle in October and follows on the heels of a similar agreement with Australia, but the National Farmers’ Union (NFU) said it would lead to unfair competition in their sector.

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What sanctions have been imposed on Russia over Ukraine invasion?

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We look at different economic measures deployed around world to counter aggression from Putin

Countries around the world have imposed an unprecedented array of economic and other sanctions on Russia after Vladimir Putin’s invasion of Ukraine, targeting its finance, energy and military-industrial sectors as well as individuals and sporting events.

Here are some of the measures adopted by the US, EU and UK, with countries including Japan, Taiwan, Australia and New Zealand all taking similar steps:

The EU, US, UK and Canada have agreed to prevent the Russian central bank from deploying its €640bn (£540bn) of international reserves “in ways that undermine the impact of our sanctions”.

The EU has banned all transactions with the institution. The US has done the same, and added the Russian finance ministry and national wealth fund. The Russian state has, in effect, been banned from raising sovereign debt; shares of Russian state-owned entities may no longer be listed on EU stock exchanges.

A range of Russian banks – their names have not yet been announced – are also being cut out of the Swift international payments system by the EU, US, UK and Canada. Brussels has said this will “stop them from operating worldwide, and effectively block Russian exports and imports”.

The US has placed Russia’s top 10 financial institutions, representing about 80% of the country’s banking sector, under restrictions, including cutting off the biggest – Sberbank, which accounts for about 30% of Russian banking – and its subsidiaries from conducting transactions through the US system.

The assets of many other Russian banks, including VTB, the country’s second largest, Bank Rossiya and Promsvyazbank, have also been hit with strict asset freezes and/or new business restrictions in the EU, UK, US and elsewhere.

The foreign assets of the Russian president, his foreign minister, Sergei Lavrov, and the defence minister, Sergei Shoigu, have been frozen in the EU, US and UK, as have those of the FSB security head, Alexander Bortnikov, the armed forces chief, Valery Gerasimov, and members of the Kremlin’s security council. The EU has imposed sanctions on all 351 members of Russia’s parliament, the Duma; the US and UK are punishing selected members as are Australia, Japan and New Zealand.

More than a dozen billionaire oligarchs with ties to Putin’s regime, including Andrey Patrushev (oil company Rosneft), Petr Fradkov (Promsvyazbank), Yury Slyusar (United Aircraft), Boris Rotenberg (gas pipeline company SMP), Denis Bortnikov (VTB bank) and Kirill Shamalov, ex-husband of Putin’s daughter Katarina, are on asset freeze and travel ban lists around the world. The US is also sanctioning top state-owned bank executives from VTB and Sberbank. Canada and Australia have also imposed sanctions on multiple oligarchs.

The UK has imposed a £50,000 limit on bank accounts held by Russian nationals in the UK), and the EU a limit of €100,000 in EU banks.

Russian airlines and private jets have been progressively banned from UK and EU airspace and the US is considering similar action but has yet to make a final decision. Aeroflot has said it will cancel all flights to European destinations; multiple European airlines have said they are halting routes to Russia.

The US has in effect banned the Russian energy company Gazprom, the oil pipeline company Transneft, and the power company RusHydro, as well as the country’s biggest freight, rail and telecoms companies, from its credit markets.

The EU has introduced a ban on exports of aircraft and aviation parts to Russia, as well as exports of hi-tech goods including semiconductors, computers, telecoms and information security equipment and sensors. UK and EU-based companies are also banned from exporting to a wide range of Russian defence, naval, transport and communications companies, including the infamous Internet Research Agency troll farm in St Petersburg.

The Uefa Champions League final has been removed from St Petersburg to Paris.

Fifa and Uefa have suspended Russian clubs and national teams from all competitions.

The Formula One grand prix and all World Cup skiing events in Russia have been cancelled.

Russia has been banned from taking part in the Eurovision song contest.

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Moscow braces for rouble to crash at least 25% as new sanctions hit

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Russian currency expected to plunge in first day’s trading since Swift ban and ECB says state-owned Sberbank subsidiaries are set to collapse

Moscow is bracing for economic panic when markets open on Monday morning, with the value of the rouble expected to plummet at least 25% after the US and European Union announced unprecedented sanctions over the weekend.

Those measures targeted the Russian central bank, which has intervened to prop up the value of the rouble following Vladimir Putin’s order to invade Ukraine. They also marked the first time Russian banks have been excluded from the Swift international payments system.

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Russian central bank buys up roubles to avert stock market collapse

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Bank scrambles to prevent invasion of Ukraine sending Russia’s financial system into meltdown as currency hits all-time low

The Russian central bank has purchased millions of roubles to prevent the collapse of the Moscow stock exchange and prop up the currency after it plunged to an all-time low of 89.60 against the dollar.

In a scramble to prevent the invasion of Ukraine pushing Russia’s financial system into meltdown, officials in Moscow closed the stock exchange while the Bank of Russia mounted a rescue operation to put a floor under the skidding rouble.

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Energy prices surge as Russian invasion of Ukraine stokes fears of global shortages

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European stock markets tumble as crisis fuels near-40% rise in gas price and pushes oil to $105 per barrel

Global markets were thrown into turmoil on Thursday as the arrival of war on European soil sent prices of commodities such as oil, gas and wheat surging, while stock market plunged.

The ramifications of a potentially prolonged conflict involving Europe’s primary supplier of gas sent a chill through markets, affecting prices across a phalanx of asset classes and investments.

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Why a swift economic victory against Russia looks unlikely

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Analysis: country has positioned itself to blunt western sanctions and has a few retaliatory ones of its own

Be ready for a long haul. That was the subtext of Boris Johnson’s message to MPs as he committed to toughening up sanctions against Russia.

The warning to prepare for a “protracted struggle” was both timely and appropriate. There will be no quick knockout blow because Vladimir Putin has had time to prepare and is well dug-in.

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Europe could see out winter on gas reserves if Russian imports stop, says German analysis

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Economic institute says current levels of gas enough for six weeks if mild temperatures continue

Europe could heat its citizens’ homes and power its industry on existing gas reserves for the remaining months of a relatively mild winter even if the standoff with Moscow over Ukraine were to escalate to a total stop on Russian gas imports, a leading German economic institute has said.

Unusually low gas reserves have raised alarm among several European governments in recent months, with storage tanks across the continent on average at only 31% capacity at the start of this week – roughly half as full as in 2020.

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Ukraine crisis: sanctions against Russia come at a cost to the west

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Analysis: The west will adopt step-by-step approach, leaving toughest sanctions as last resort

After all the tough talk of the past month, the sanctions imposed on Russia by the west are unlikely to lose Vladimir Putin much sleep. The response to Boris Johnson’s announcement that five of the less important Russian banks and three individuals would be targeted was: is that it?

The most dramatic news was Germany’s decision to halt approval of the Nord Stream 2 gas pipeline from Russia to western Europe. That will have an impact, but may end up affecting Germany more than it does Russia.

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The rise in global inflation – the hit to living standards across the world

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Analysis: From Pakistan to the US, Australia to Germany, the cost of living is rising to new highs and causing new hardships

After decades lurking in the shadows, inflation is back. On Amazon, you can find fridge magnets printed with words spoken 40 years ago by Ronald Reagan, before the election that swept him into the White House.

“Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.”

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‘No light at the end of the tunnel’: Americans join Hong Kong’s business exodus

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Worsening Sino-US ties, strict Covid rules and the crackdown on dissent have dented the territory’s fabled allure as a business hub, say expats

In July 2018, Tara Joseph, president of the American Chamber of Commerce in Hong Kong, wrote an article in the best-known local English-language newspaper, the South China Morning Post, stressing to Americans the territory’s unique position as an Asian business hub.

“The US is forgetting the differences between Hong Kong and China. Let’s remind them,” she wrote. “Hong Kong continues to have a robust and hearty infrastructure of values, practices and institutions that could not contrast more starkly with those of the mainland system.”

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We can afford to reverse poverty and climate breakdown. What we can’t afford is the alternative | Kevin Watkins

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Our global finance system is failing to rise to the challenges we face. It’s time it was reimagined – and grounded in our shared humanity

“The peoples of the Earth,” Henry Morgenthau said, “are inseparably linked by a deep underlying community of purpose.”

In July 1944, Morgenthau, the US Treasury secretary, was closing the Bretton Woods conference with a reflection on extreme nationalism and the failures of cooperation that had led to war. Cautioning against the pursuit of national interest through “the plan-less, senseless rivalry that divided us”, he outlined an accord for new institutions grounded in an appeal to shared humanity.

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IMF warns China over cost of Covid lockdowns

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Hardline approach to pandemic risks damaging global economy, says Kristalina Georgieva

China, the world’s second largest economy, should review its zero-tolerance approach to the pandemic or risk damaging the global recovery, according to the head of International Monetary Fund.

Kristalina Georgieva said Beijing should reassess the use of lockdowns to limit the spread of the highly contagious Omicron variant since it became clear the harm to human health was less severe than the Delta variant.

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Brexit changes will add to soaring costs in 2022, warn UK manufacturers

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Make UK says two-thirds of companies fear customs delays and red tape from new rules will further hamper supply chains

Manufacturers have warned that Brexit will add to soaring costs facing British industry, amid concerns that customs delays and red tape will rank among the biggest challenges for firms this year.

Make UK, the industry body representing 20,000 manufacturing firms of all sizes from across the country, said that while optimism among its members had grown, it was being undermined by the after-effects of the UK’s departure from the EU.

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Tesla criticised for opening showroom in Xinjiang despite human rights abuses

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Elon Musk and Tesla must consider human rights in the Chinese region or risk being complicit, says Human Rights Watch

Tesla has opened a new showroom in the capital of Xinjiang, a region at the heart of years-long campaign by Chinese authorities of repression and assimilation against the Uyghur people.

Tesla announced the opening in Urumqi with a Weibo post on 31 December saying: “On the last day of 2021, we meet in Xinjiang. In 2022 let us together launch Xinjiang on its electric journey!”

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NI peace architect accuses Boris Johnson of ‘casual political vandalism’

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Jonathan Powell says PM and Brexit ministers risking fragile peace in Northern Ireland and ‘don’t seem to care’

One of the architects of the Northern Ireland peace deal has said Boris Johnson and the former Brexit minister Lord Frost have risked “all the work” the previous generation of politicians put into the Belfast Good Friday agreement by putting their hard ideological beliefs ahead of people.

Jonathan Powell, Tony Blair’s former chief of staff and chief negotiator on Northern Ireland, said he was concerned that neither the prime minister nor the recently resigned Brexit minister seemed to understand or care about the fragility of the political settlement in Northern Ireland in 1998.

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‘There is no money left’: Covid crisis leaves Sri Lanka on brink of bankruptcy

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Half a million people have sunk into poverty since the pandemic struck, with rising costs forcing many to cut back on food

Sri Lanka is facing a deepening financial and humanitarian crisis with fears it could go bankrupt in 2022 as inflation rises to record levels, food prices rocket and its coffers run dry.

The meltdown faced by the government, led by the strongman president Gotabaya Rajapaksa, is in part caused by the immediate impact of the Covid crisis and the loss of tourism but is compounded by high government spending and tax cuts eroding state revenues, vast debt repayments to China and foreign exchange reserves at their lowest levels in a decade. Inflation has meanwhile been spurred by the government printing money to pay off domestic loans and foreign bonds.

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From economic miracle to mirage – will China’s GDP ever overtake the US?

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Analysis: issues of governance, rising debt, Covid and property market turmoil will delay Beijing’s quest to become the global economy’s No 1

“The east is rising, the west is declining”, according to the narrative propagated by the Chinese Communist party (CCP). Many outside China take its “inevitable rise” as read. On the way to becoming a “modern socialist country” by 2035, and rich, powerful, and dominant by 2049, the centenary of the People’s Republic, China wants to claim bragging rights as its GDP surpasses the United States, and project its power based on its expanding economic heft.

There is, however, a critical flaw in this narrative. China’s economy may fail to overtake the US as it succumbs to the proverbial middle-income trap. This is where the relative development progress of countries in relation to richer nations stalls, and is normally characterised by difficult economic adjustment and often by unpredictable political consequences.

Historically, China’s growth miracle has been remarkable. In the 30 years to 1990. The money GDP (the market value of goods and services produced in an economy) for China and the US in American dollar terms grew more or less in tandem at just over 6% and 8% per annum, respectively. . But in the next three decades, China’s GDP growth doubled to over 13%, while America’s halved to 4.5%. That pushed China’s GDP up from 5% of American GDP to 66%.

Yet, China’s growth spurt is now over, and the huge disparity in GDP growth has been eliminated. In the last few quarters, China’s GDP has been growing at half the rate of the US. Although that discrepancy is probably unsustainable, America’s $9tn GDP margin over China means that comparable rates of GDP growth in the future will sustain and even widen the margin. A Japanese thinktank has recently extended the date when it expects China to overtake the US, from 2029 to 2033. Deferrals like this are now a feature, and there will be more.


The issue though is less about the maths and more about why China is at a turning point.

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Asia’s factory workers at the sharp end of the west’s supply chain crisis

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Migrant workers ate and slept in factories swarming with Covid, sealed off from outside world

For weeks, Hoang Thi Quynh* worked and slept inside a garment factory in Tien Giang province, in southern Vietnam. She would start her shift at 7.15am and then, after a day spent sewing sportswear garments, enter an empty hall of the factory complex and settle down for the night.

Each worker had a tent, set one or two metres apart, containing a foil mat, pillow, blanket and a box to store their belongings. No workers were permitted to meet anyone from outside the factory; even speaking to a visitor over the gates was forbidden.

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China unveils package to boost economy amid IMF growth warning

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Beijing to increase business lending and build more affordable housing as post-Covid recovery falters

China’s politburo has signalled measures to kickstart the faltering economy as the crisis gripping the country’s debt-laden property sector continued to play havoc with growth forecasts.

Amid a warning from the International Monetary Fund (IMF) that a slowdown in the world’s second-biggest economy could hurt the global recovery from Covid-19, President Xi Jinping’s senior leadership committee rubber-stamped a plan from the central bank on Monday for more targeted lending to businesses. They also outlined support for the housing market.

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‘Critical lifeline’ of migrant cash expected to near £600bn in total

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Sum sent back home from former residents of low-income countries surpasses overseas aid and rich nations’ direct investment

Migrants from low- and middle-income countries are expected to send almost £600bn to support friends and relatives by the end of the year, after global economic growth spurred a 7.3% rebound in remittance payments.

The increase in cross-border payments, especially from migrants based in Europe and the US, reversed a 1.7% fall in remittance payments last year, the World Bank said.

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