Finance

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• Chinese commercial banks have flocked to buying government bonds as Beijing's stimulus push has failed to spur consumers loan demand.
• Total new yuan loans in the 11 months through to November 2024 fell over 20% to 17.1 trillion yuan ($2.33 trillion) from a year ago, according to data released by the People's Bank of China.
• Chinese sovereign bonds have seen a strong rally since December, with yields plunging to all-time lows this month.

With consumers and businesses gloomy about the prospects of the world's second-largest economy, loan growth has stalled. Beijing's stimulus push has so far not been able to spur consumer credit demand, and is yet to spark any meaningful rebound in the faltering economy.

So what do banks do with their cash? Buy government bonds.

Chinese sovereign bonds have seen a strong rally since December, with 10-year yields plunging to all-time lows this month, dropping by about 34 basis points, according to LSEG data.

"The lack of strong consumer and business loan demand has led the capital flows into the sovereign bonds market," said Edmund Goh, investment director of fixed income at abrdn in Singapore.

That said, "the biggest problem onshore is a lack of assets to invest," he added, as "there are no signs that China can get out of deflation at the moment."

[...]

"There is still a lack of quality borrowing demand as private enterprises remain cautious with approving new investments and households are also tightening purse strings," said Lynn Song, chief economist at ING.

[...]

The slowdown in loans comes as mortgages, which used to fuel credit demand, are still in the stage of bottoming, said Andy Maynard, managing director and head of equities at China Renaissance.

Chinese onshore investors have to contend with a lack of "investable asset to put money in, both in financial market and in physical market," he added.

[...]

Zong Ke [portfolio manager at Shanghai-based asset manager Wequant] said the current policy interventions are merely "efforts to prevent economic collapse and cushion against external shocks" and "simply to avoid a freefall."

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Sunac China shares and bonds plunged on Friday after a liquidation petition was filed against the developer, reigniting investor concerns about the debt crisis in the property sector despite Beijing's revival measures.

The petition, filed by a unit of state-owned asset manager China Cinda Asset Management, also deepened worries over Sunac's business recovery and repayment ability despite an offshore debt restructuring it completed in 2023.

A hearing is scheduled for March 19, the Hong Kong judiciary's website showed late on Thursday.

Many mainland developers, including China Evergrande and Country Garden, have faced or are currently facing liquidation cases in Hong Kong since the property sector was hit by a liquidity crunch in 2021.

But petitions have rarely been filed by state-owned companies and China Cinda's was made despite Beijing's pledges to stabilise the struggling property sector and the stock market. Calls to the petitioner, China Cinda (HK) Asset Management, went unanswered on Friday.

[...]

"I'm not surprised by the petition," said Alvin Cheung, associate director of Prudential Brokerage Ltd in Hong Kong. "Chinese developers are not making much money, while they have to keep repaying a lot of debt."

Sunac, which reported total borrowings of 277.4 billion yuan ($37.83 billion) as of the end of June in its interim financial results, is also working to restructure $2.1 billion of yuan-denominated bonds.

Chinese property stocks were down on Friday, with Cheung pointing to growing concerns about further defaults.

[...]

Archived version

• Economy: China's growth was fueled by its manufacturing sector. Cheap labor, abundant raw materials, and lax pollution controls earned it the title of ‘the world's factory’. But, overcapacity and over-production have flooded domestic and international markets with cheap goods with few takers. It has led to falling prices and decreased profits.

• Indusrty: China's growth was fueled by its manufacturing sector. Cheap labor, abundant raw materials, and lax pollution controls earned it the title of ‘the world's factory’. But, overcapacity and over-production have flooded domestic and international markets with cheap goods with few takers. It has led to falling prices and decreased profits.

• Real estate: Oversupply extends to sectors beyond manufacturing. About 70% of the wealth and savings of millions of Chinese households are tied up in property. Homeownership is a status symbol and is perceived as financial security. However, many real estate developers, large and small, have filed for bankruptcy in the past few years. The meltdown has wiped out the investments of thousands of Chinese citizens and put local governments under tremendous financial strain.

• Local government debt: The massive debt carried by the local governments is a ticking time bomb. In China, local government bodies are in charge of implementing Beijing's policies. To meet the national targets, local governments set up companies called local government financial vehicles (LGFVs) and borrow from Chinese banks to fund infrastructure, real estate, and other projects. The borrowings of such entities have skyrocketed over the decades, and many are now unable to service their debts. According to some estimates, local government debt is in the region of $7 trillion to $11 trillion.

The citizens are growing resentful of the establishment. The country witnessed rare public protests against the prolonged lockdowns. Unemployment and discontent among the youth are creating a generation of Chinese disillusioned with the Party and the authoritarian regime.

Finnish companies could receive loans totalling up to €437m to boost green energy initiatives and support for digitalisation under an agreement where the European Investment Fund (EIF) will provide guarantees to back lending by Helsinki-based financial services provider Nordea.

The loans to Finnish small and medium-sized enterprises (SMEs) and small mid-caps would support green and sustainable investments, including solar panels, electric cars, energy efficiency, and the adoption of digital technologies. These loans could range anywhere from €100,000 to €7.5m, depending on the types of investment involved, a Nordea spokesperson told Impact Investor.

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“China’s economy has rebounded and is on an upward trajectory, with its GDP for the year expected to pass the 130 trillion yuan mark,” Xi Jinping said in his 2025 New Year message.

On December 26, China revised upward its gross domestic product figure for 2023 by 3.4 trillion yuan, a 2.7% adjustment. That puts the size of the Chinese economy that year at 129.4 trillion yuan or $17.73 trillion. Xi’s target for the size of the economy, therefore, is easy to reach.

There is, as usual, great optimism displayed by Beijing leaders about the size of the Chinese economy. Few of the official numbers make sense, however, as reported figures are hard to reconcile with, among other things, large cash outflows from the country.

For instance, China experienced the largest outflow from its financial markets in November, as Chinese banks wired $45.7 billion offshore. The amount, announced by the State Administration of Foreign Exchange, includes repatriation of foreign investment in China and Chinese residents’ purchases of offshore securities.

[...] The Wall Street Journal in late October reported that, based on its calculations, “as much as $254 billion might have left China illicitly in the four quarters through the end of June.”

[...]

There is [...] long-standing pessimism about the Chinese economy. Everyone seems worried about, for instance, a debt crisis. There is, of course, much to fear, in part because no one really knows how much indebtedness China is carrying. Everyone can sense that the total-country-debt-to-GDP ratio is dangerously high, however. After taking into account the so-called “hidden debt” and adjusting for inflated GDP reports, the ratio could be, according to my estimate, 350%. A higher estimate—say, 400%—is also possible.

[...]

So far, the Communist Party—both during Hu Jintao’s and Xi Jinping’s rule—has not exhibited the political will necessary to enforce painful solutions. Its continual failure to resolve the debt situation has meant the government has had no option but to resort to short-term and superficial measures, such as more debt-fueled stimulus.

[...]

Evasion of currency controls [which is what Beijing is practicing] is getting harder, but it is occurring nonetheless as people do not believe what Xi and his officials say about the economy. “Weakness in the yuan and local stocks, as well as the nation’s wide interest-rate gap with the U.S., are raising the risk of a vicious cycle of capital outflows,” Bloomberg notes. The plunge in property prices—property accounts for about 70% of the wealth of the Chinese middle class—a sputtering economy, and a deep concern over Xi Jinping’s neo-Maoist policies all contribute to gloom.

“It’s a grim situation for Chinese people,” says Anne Stevenson-Yang, author of Wild Ride: A Short History of the Opening and Closing of the Chinese Economy. The pessimism is encapsulated in the phrase “Doom Loop” economy. Many now say China has a “garbage economy.”

[...]

"A financial or political crisis still is possible if China’s huge debt overwhelms the banking system or if unemployment reaches such high levels that protests erupt nationally causing a major change in government policy," [another expert adds].

[...]

China has the means to solve its problems, but Xi Jinping is determined to pursue 1950s-type solutions that only aggravate the situation. Money, therefore, will continue to flow out.

The number of foreclosed homes in China rose in 2024 from the previous year, a private-sector survey showed on Tuesday, heightening concerns about mortgage delinquencies amid a property slump and uneven economic growth.

The number of repossessed homes up for auction stood at 370,000 in 2024, up from 364,000 in 2023, the report from China Index Academy, an independent real estate research firm, said.

[...]

Total foreclosures, including commercial, residential and industrial properties, land, garages and parking spaces, totalled 768,000 units, a slight 0.9% decrease from 2023, the survey showed.

The majority of foreclosed homes were found in tier-three and tier-four cities, with a total of 63,871, according to the company. There were 45,997 foreclosed homes in tier-two cities and 6,994 in tier-one cities.

The number of foreclosures has been gradually rising since 2020 and continued to rise in 2024, the firm said in a separate report last year.

Since 2021, a severe property crisis triggered by a government-led initiative to curb indebted developers has eroded consumer wealth and household spending.

[...]

China's stock exchanges and central bank rushed to defend a tumbling yuan and falling stock markets on Monday, trying to soothe investors concerned about Donald Trump's return to the White House and Beijing's ability to revive the economy.

With two weeks before Trump begins a second U.S. presidency, his threats of big tariffs on Chinese imports have rattled the yuan, driven mainland bond yields down and got stocks off to a rough start to 2025.

China's stock exchanges asked large mutual funds to restrict their selling of stocks at the beginning of the year, three sources familiar with the matter told Reuters, underscoring the jittery mood in the market.

At least four large mutual funds received calls from the Shanghai and Shenzhen stock exchanges on Dec. 31 and Jan. 2 and 3, asking them to ensure they bought more stocks than they sold each day, the sources said.

The Shanghai and Shenzhen stock exchanges recently met with foreign institutions, both bourses said on Sunday, assuring investors they would continue to open up China's capital markets.

The People's Bank of China could issue more yuan bills in Hong Kong in January, state-owned news outlet Yicai reported on Monday, in a sign authorities want to absorb currency to dampen speculation. Financial News, a central bank publication, said the PBOC has the tools and the experience to react to yuan depreciation.

[...]

The Russian ruble tanked past 115 per USD in January, the lowest on record when excluding the immediate shock after the start of Russia’s invasion of Ukraine in the first quarter of 2022, as sanctions isolated Russia from global financial and commodity markets.

The currency was halted from domestic trading against major pairs after Western nations sanctioned the Moscow Exchange, magnifying the difficulty for companies to secure hard currency and forcing the Bank of Russia to set forex prices since June.

This added pressure as China’s weakening economy limited demand for goods from Russia’s main export partner, further denting the influx of foreign exchange. The impact on government revenues from energy exports drove Moscow to partially relax the capital controls it had to prop up the ruble, letting it depreciate to support its budget deficit. Despite this, political pressure drove the CBR [Central Bank of Russia] to cut its tightening cycle short in December, compounding pressure on the currency.

Cross posted from: https://beehaw.org/post/17809174

Archived version

One of China’s leading developers is now on the authorities’ radar for default risk. A major Hong Kong builder is asking lenders to extend loans. Another industry peer is selling an iconic but largely empty mall in Beijing.

As China’s property debt crisis enters its fifth year, there is little indication that distressed developers are finding it easier to repay debt as a slump in home sales continues. Their dollar bonds are still trading at deeply distressed levels, their debt issuance has nearly dried up, and the sector is a notable laggard in stock markets.

Alarm bells went off again in recent weeks, when the banking regulator told top insurers to report their financial exposure to China Vanke to assess how much support the country’s fourth-largest developer by sales needs to avoid default.

[...]

"While recent government policies have helped to arrest the speed of decline, it could take another one or two years for the sector to bottom,” said senior credit analyst Leonard Law at Lucror Analytics.

“Against this backdrop, we can’t rule out the possibility of some more defaults next year, albeit the overall default rate should be much lower than before.”

[...]

The [Chinese government's] rescue measures adopted so far have focused on preventing a collapse in property prices, protecting owners of unfinished apartments and using state funds to help absorb excess supply.

At the same time, policymakers chose to look on as former industry behemoths China Evergrande Group and Country Garden Holdings became defaulters.

This is why the banking regulator’s queries over insurance firms’ exposure to Vanke’s bonds and private debt have drawn much attention. The insurers conducted similar checks in March as fears grew over the builder’s repayment risks.

Separately, Vanke executives have visited several insurers in the past few weeks, urging them not to exercise put options on some private debt that will soon become open to them.

“If there is no turnaround in property sales, asset disposals remain slow in a weak property market, and financial institutions become more cautious and require additional collateral, we believe Vanke could see a liquidity shortage sooner than expected,” Jefferies Financial Group analysts, including Ms Shujin Chen, wrote in a note.

[...]

Vanke’s dollar bond due May 2025 dropped about 10 US cents in the past week to around 80 US cents on the dollar, the biggest weekly decline in more than a year. Its 2027 note also slumped to 49 US cents, signalling investor doubts about full redemption.

Vanke’s woes come at a time when capital markets continue to show weak investor confidence in the sector: mainland Chinese and Hong Kong developers have issued US$67.3 billion (S$91.3 billion) of bonds in 2024, putting the market on track for its smallest annual issuance in at least in a decade.

[...]

In another worrying development, distressed Hong Kong builder New World Development is asking banks to postpone the due dates of some bilateral loans, a move that deepens concerns over its ability to service one of the heaviest debt loads of its kind.

Controlled by the family empire of tycoon Henry Cheng, the developer had total liabilities of HK$220 billion (S$38.4 billion) at the end of June and recorded its first annual loss in two decades.

[...]

"Hong Kong developers are facing a double-whammy in the current down cycle,” said Mr Daniel Fan, credit analyst at Bloomberg Intelligence.

“China’s property market, where many of them are involved, shows no sign of a strong recovery, while Hong Kong’s market correction is still ongoing.”

The Central Bank of Russia (CBR) held its key interest rate unchanged at the record high of 21% in its December meeting, surprising markets that expected a 200bps rate hike to 23%.

The decision took place following reports that CBR Governor Nabiullina recently talked with President Putin, who called for a 'balanced' decision, and Russian business leaders, who have been vocal against high interest rates despite soaring inflation.

The central bank is independent by law, but analysts said the pressure from business had become too strong to ignore. "The pressure ... worked, and the central bank decided to stop," said economist Evgeny Kogan according to Reuters. The current rate is still the highest since the early years of Putin's rule, when Russia was recovering from the economic chaos of the 1990s.

The central bank cited low credit activity as the warrant for the pause in rate hikes, but reiterated that underlying inflation continued to rise amid higher expectations from households and business, driving the bank’s inflation forecast to rise for 2025 and 2026.

The central bank also noted that the significant weakening of the ruble, unbalanced budget spending, and the ongoing labor force crisis contributed to soaring inflation. November data showed that annual headline inflation was at 8.9%, but early forecasts from the CBR have December's print near 9.5%, translating to the highest since February 2023.

Tragic story by Krebs. It's a long read, but likely worth your time especially if you are using crypto and you self-custody.

TLDR: Two persons lost a fortune due to very basic mistakes: one uploaded a picture of his cryptocurrency seed phrase to Google, another one entered his seed phrase into a pishing website.

Archived

Britain's financial regulator is taking longer than usual to approve fast-fashion retailer Shein's IPO [Initial Public Offering] because it is checking its supply chain oversight and assessing legal risks after an advocacy group for China's Uyghur population challenged the listing, according to two sources close to the matter.

Britain's Independent Anti-Slavery Commissioner, a monitoring body of the interior ministry, has also raised concerns within government over a Shein IPO because of allegations about labour practices at its suppliers.

Singapore-headquartered Shein, which sells $5 tops and $10 dresses mostly made in China in 150 markets worldwide, filed confidentially with the Financial Conduct Authority in early June for a London listing.

[...]

The FCA (Financial Conduct Authority in the UK] is under no obligation to assess evidence presented by civil society groups, and will generally let investors take their own position, said Lorna Emson, partner at law firm Macfarlanes. If it did find compliance concerns, it would tend to address these confidentially with the company itself.

But NGO pressure is unlikely to fade.

"Regulators are being given more to think about – and are required to do so under the watchful scrutiny of the increasingly well-funded and litigious NGO and activist community," said Lucy Blake, partner at law firm Jenner & Block. NGOs are not alone in raising concern over Shein's IPO.

[...]

The Independent Anti-Slavery Commissioner wrote to the Home Office and Department for Business in June about the IPO, according to previously unreported letters obtained by Reuters through a Freedom of Information request.

"Encouraging a company like Shein to float on the UK market inadvertently implies endorsement of poor labour practices and the prioritisation of attracting business to the UK over human rights abuses," Commissioner Eleanor Lyons wrote. The Home Office and Department for Business jointly replied that the FCA decides independently on listings and the UK has rules to guard against modern slavery.

Like other retailers, Shein must comply with incoming European Union regulations on forced labour and the Uyghur Forced Labor Prevention Act in the U.S., both of which are considered stronger than Britain's Modern Slavery Act.

[...]

Worker exploitation has been rife in supply chains of retailers and brands around the world, not just in low-cost fashion but also in luxury.

[...]

Archived version

The decision, announced late on Tuesday, comes after the fund's ethics watchdog, the Council on Ethics, adopted a new, tougher interpretation of ethics standards for businesses that aid Israel's operations in the occupied Palestinian territories.

The $1.8-trillion fund has been an international leader in the environmental, social and governance (ESG) investment field. It owns 1.5% of the world's listed shares across 8,700 companies, and its size gives it influence.

It is the latest decision by a European financial entity to cut back links to Israeli companies or those with ties to the country, as pressure mounts from foreign governments to end the war in Gaza.

[...]

"The company, through its physical presence and provision of telecom services to Israeli settlements in the West Bank, is helping to facilitate the maintenance and expansion of these settlements, which are illegal under international law," the sovereign wealth fund's watchdog said in its recommendation to divest.

"By doing so the company is itself contributing to the violation of international law."

[...]

The rouble is down by 8% against the dollar over the past month. This is not a one-off event; it is part of a developing crisis that is affecting Russia’s economy.

Russia’s currency has been highly volatile since its troops invaded Ukraine in February 2022. The initial collapse, which saw the rouble lose one-third of its value by March compared with the start of the year, was due to the exodus of capital from the country following the introduction of western sanctions. Capital flowing out of Russia made the rouble more readily available on the foreign exchange market, hence causing its value to depreciate.

[...]

A volatile and weaker rouble will discourage domestic and foreign investment, as investors prefer to transact with a strong and predictable currency. It will also encourage people to move their capital out of the country, as it has since the war began, so the central bank will be forced to use its reserves to defend the rouble. But Russia is already constrained by limited foreign currency inflows and high spending demands – a vicious cycle that will further weaken its currency.

A weak rouble also raises the cost of importing goods or materials. The profit margins of import-dependent businesses will be reduced unless they pass the increased costs onto consumers – something that is relatively easy to do in Russia where there is minimal market competition.

This drives inflation for imported items like food, medical supplies, machinery and energy.

[...]

There is plenty for Putin to be concerned about. Falling export revenues, inflation and strained reserves all weaken Russia’s fiscal stability. And it looks as if western economic sanctions are now having a significant effect on Russia’s ability to counter its economic difficulties.

The administrators of Putin’s regime will argue that a weaker rouble is more favourable to them during the war. Converting stronger foreign currencies from energy exports will give the Kremlin more domestic currency to plug the government’s widening deficit.

Despite this, Russia’s currency crisis has exposed deep problems in the economy. It relies heavily on energy exports, has limited economic diversification and has a weak financial sector. Over the longer term, sanctions will also isolate Russia further and limit its economic autonomy because Putin will have no choice but to rely on doing business with a few trading partners, such as China and India.

The Russian ruble plunged nearly 7% to trade at more than 110 per USD, the lowest on record excluding the short-lived selling immediately after Russia launched its invasion of Ukraine, as more sanctions against Russia dampened the outlook for inflows of foreign capital. The US sanctioned Gazprombank, the last major financial institution without penalties, to halt the transfer of payments from foreign markets to pay for Russian gas.

The ruble remained under pressure from Moscow relaxing capital controls as a weaker currency aids the Kremlin’s ability to finance its budget. Mandatory forex conversion for export revenues fell 25% from earlier in the year, significantly reducing demand for rubles.

Russian central bank intervenes to stop currency free fall

Russia's central bank said on Wednesday [27 November] it would stop foreign currency purchases in order to ease pressure on the financial markets after the rouble weakened beyond 110 to the U.S. dollar, 119 to the euro, down by one-third since early August.

The central bank said it had decided not to buy foreign currency on the domestic market from Nov. 28 until the end of the year, but to defer these purchases until 2025.

"The decision was made to reduce the volatility of financial markets," the regulator said in a statement. Since Russia was blocked from using the dollar and euro, it has made foreign exchange interventions using Chinese yuan.

Russia published new economic data on Wednesday highlighting the latest signs of overheating in an economy retooled for the purpose of fighting the war in Ukraine, which has sucked workers out of the labour force.

[Edit typo.]

• IPO freeze, economic issues lead to rise in redemption requests
• Founders responsible for redemption; startups risk failure
• 14,000 startups at risk of refund requests, law firm estimates
• Startups' predicament challenges China's self-sufficiency drive
• Redemption rights offer protection, investor says

Chinese startups are increasingly struggling with demands from early-stage venture capitalists to return their investment or face lawsuits, after failing to provide an exit via a market listing within an agreed time frame, industry executives said.

Startups worldwide often agree redemption rights allowing private equity and venture capital investors to ask for their money back along with a premium if targets such as an initial public offering are not met.

In China, however, a near freezing of the IPO market this year and declining sources of capital in an economy hobbled by a property crisis and struggling for growth has given rise to reimbursement requests, threatening many startups' existence, executives said.

The situation conflicts with the government's resolve to foster innovation and achieve technological self-reliance in systemically important industries to insulate the country from the impact of geopolitics.

One in three people would rather deep clean their bathroom – deep clean with rubber gloves and everything – rather than check their savings,” according to AJ Coyne, chief marketing officer at online bank Monzo. While this might sound like marketing hyperbole, it reflects a profound truth about our relationship with financial information: many of us actively avoid looking at our bank balances when we fear bad news.

This trait is so common that behavioural economists have given it a name: the “ostrich effect”. Like the myth of ostriches burying their heads in the sand, we often prefer uncertainty to confronting potentially negative financial information.

Research examining millions of banking logins reveals clear patterns in how people interact with their financial information. A 2009 study found that people systematically avoid checking their financial information when they suspect bad news.

This avoidance has real consequences for how people manage their money. In our ongoing research, we found clear evidence that people who don’t regularly check their accounts show much more volatile spending patterns, particularly around payday. When people receive their salary, those who infrequently check their accounts tend to spend significantly more on discretionary purchases compared to regular account checkers.

Russia's central bank on Thursday said it planned to set a surcharge for banks when issuing new loans to large firms with a high debt burden, as the regulator looks to limit credit risks for Russian companies contending with interest rates at 21%.

[...]

Russian Railways, a key cog in Russia's industrial machine, is one of several firms planning to reduce investments next year. The state-owned monopoly expects its interest payment costs to hit $7 billion next year, suggesting a rise of around $4 billion, a company document seen by Reuters showed last week.

The central bank said the measures would apply to companies with debt over 100 billion roubles ($987 million), an interest coverage ratio of less than 3% and whose consolidated debt exceeds 2% of the Russian banking sector's capital.

It did not specify how much the surcharge would be.

[At the time of the publication of this article on 21 November, $1 stood at 101.2955 roubles.]

If former president and Republican nominee Donald Trump is elected next week, economists are betting that inflation will go up. Research firm Capital Economics plans to actually raise its interest-rate forecast in such a scenario because its economist Thomas Ryan suspects the Federal Reserve’s reaction will be to pull back on slashing rates.

[...]

We’re a little less than a week away from the presidential election, and the housing world is still at a standstill. The two candidates have plans, or concepts of plans, for housing. But inflation plays a key role: It can push prices higher even while real estate serves as a hedge against it. The Consumer Price Index rose just 2.4% in September from a year earlier, and that’s very close to the Fed’s target. Not to mention, the central bank entered into a cutting cycle that same month, slashing its key interest rate by 50 basis points. So you might think the worst is behind us, but it might not be.

In June, 16 Nobel Prize–winning economists signed a letter expressing their concern that Trump’s proposals could reignite inflation. Earlier this month, 68% of economists surveyed [...] said inflation would likely be higher under a Trump presidency. On the other hand, 12% said the same for a Kamala Harris presidency.

[....]

That isn’t to say everything would be perfect if Harris were president—it won’t be, and housing will still be pretty stuck; maybe there’ll be a small recovery. Mortgage rates might come down a bit too. However, the expectation of another Trump presidency is already taking effect, and may only worsen if he is elected.

[...]

cross-posted from: https://feddit.org/post/4321125

Russian Central Bank Governor Elvira Nabiullinawarned comments, made to a group of State Duma lawmakers, come a week after the Central Bank hiked its key rate to a record-high 21%, taking it even further than the emergency rate of 20% initially introduced after the February 2022 invasion of Ukraine.

“With high inflation, economic growth cannot be sustainable,” the Central Bank head told Russian lawmakers. “It’s a dangerous illusion to think that increased inflation can be reliably kept within a certain zone.”

“That’s why we’re not planning to take any shortcuts as we move toward our 4% target,” she added, defending the regulator’s tight monetary policy as an “inevitable reaction to what’s happening in the economy.”

[...]

Seasonally adjusted price growth in September rose to 9.8% year-on-year from 7.5% in August. Core inflation, meanwhile, increased to 9.1% from 7.7% over the same period.

[...]

Russia has faced volatile prices since President Vladimir Putin sent troops into Ukraine in February 2022, triggering a barrage of Western sanctions and strict countermeasures in a bid to stabilize the economy. So, too, has defense spending soared as Moscow ramps up arms production for the war in Ukraine.

Russia’s draft budget for 2025, passed by lawmakers in its first reading last week, allocates around one-third of total state spending — or 6.3% of GDP — to the military, a figure unprecedented since the days of the Cold War.

Given that so much of the current spending is driven by the state, which is less responsive to higher borrowing costs, analysts fear that raising interest rates may not be an effective measure against inflation.

[...]

Analysts have cautioned that Russia may be entering a period of “inflation without growth,” while also warning the economy is inching closer toward stagflation — when the economy grows slowly and prices shoot up.

cross-posted from: https://feddit.org/post/4262252

A combination of good high-speed internet coverage, high digital literacy rates, large rural populations and fast-growing fintech industries had put the Nordic neighbours on a fast track to a future without cash.

[...]

But Russia’s invasion of Ukraine in 2022 and a subsequent rise in cross-border hybrid warfare and cyber-attacks blamed on pro-Russia groups have prompted a rethink.

[...]

The Swedish government has since completely overhauled its defence and preparedness strategy, joining Nato, starting a new form of national service and reactivating its psychological defence agency to combat disinformation from Russia and other adversaries. Norway has tightened controls on its previously porous border with Russia.

[...]

[Norway's] justice and public security ministry said it “recommends everyone keep some cash on hand due to the vulnerabilities of digital payment solutions to cyber-attacks”. It said the government took preparedness seriously “given the increasing global instability with war, digital threats, and climate change. As a result, they’ve ensured that the right to pay with cash is strengthened”.

[...]

Biased media coverage imposes on African nations a significant cost burden, particularly during electoral periods, ultimately deterring foreign direct investment (FDI) in a continent known for its low default rates and high returns in strategic sectors, research by the 'Africa No Filter' and 'Africa Practice' finds.

The study used academic estimates indicating that media sentiment can influence borrowing interest rates by up to 10%, with a 10% improvement leading to a 1% decrease in rates.

• Negative narratives dominate the discourse around African elections compared to non-African countries with similar risk profiles. Fir example, 88% of media articles about Kenya during its election period were reported as negative, compared to only 48% for Malaysia, which affects Kenya's ability to attract foreign investments​.
• African countries consistently face higher bond yields, with Egypt having an average bond yield of 15%, compared to Thailand’s 2.5%
• Improved media sentiment could reduce borrowing interest rates by up to 1%, translating to potential savings of $4.2 billion annually across the continent. This amount could fund the education of over 12 million children, provide immunizations for more than 73 million children, or ensure clean drinking water for two-thirds of Nigeria’s population.

The report emphasises that while Eurobond debt servicing constitutes only 6% of Africa’s financing portfolio, further exploration into other financial inflows is essential to fully understand the extent of the ‘prejudice premium’ affecting African nations.

The findings underline the need for a recalibration of global media representations of Africa, urging for more accurate portrayals that reflect the continent’s diverse realities. The study serves as a clarion call for stakeholders in both media and finance to work collaboratively towards fostering a more equitable representation of Africa. By addressing these biases, substantial investment can be unlocked.