By David Lawder

WASHINGTON -The United States will vigorously defend its economic interests and values against the negative impacts of China’s economic policies as Beijing doubles down on its state-centered economic system, U.S. Trade Representative Katherine Tai said Wednesday.

Tai told the House Ways and Means Committee that Washington’s talks with Beijing about its unmet purchase commitments under a Phase 1 trade deal and broader non-market policies had been “unduly difficult” and new tools were needed.

“Going forward, our strategy will expand beyond only pressing China for change and needs to include vigorously defending our values and economic interests from the negative impacts of China’s economic policies and practices,” she said.

Washington “cannot stop pushing China for change,” she added, but it could no longer wait for China to change policies, adding that tariffs on $300 billion to $400 billion in Chinese imports has not pushed Beijing to make fundamental changes.

China only met about 60% of its Phase 1 deal commitments to increase U.S. purchases by $200 billion during 2020 and 2021 compared with 2017 levels and improve protections for U.S. intellectual property and grant more Chinese market access to U.S. financial services and agricultural biotechnology.

In addition to “continuing to create pressure for China to change,” Tai said the United States needed to take steps, such as passing legislation in Congress to promote investments in innovation, semiconductors and the return home of manufacturing supply chains.

“That is the plan that we need to pursue going forward,” she said, echoing comments to Reuters last week.

In Beijing, a spokeswoman of the commerce ministry said cooperation between the two countries was the only correct choice and they maintained normal communications.

“We hope the U.S. could adopt a practical and reasonable trade policy on China, and work together with China to push forward a healthy and stable development of bilateral trade ties,” Shu Jueting told a regular news conference on Thursday.

Tai has long said trade laws needed to be updated to tackle the challenges of China’s massive industrial subsidies, but gave no details of specific changes she sought.

Regarding the Biden administration’s proposed Indo-Pacific Economic Framework, a series of negotiations with countries in the region aimed at countering China’s influence, Tai said it would not reduce tariffs but would include “meaningful economic outcomes” aimed at setting new, market-based standards for digital commerce, the environment and labor.

(Reporting by Andrea Shalal, David Lawder and Michael Martina; Additional reporting by Beijing Newsroom; Editing by Nick Macfie and Clarence Fernandez)

By William Schomberg and Andy Bruce

LONDON -Britain’s economy grew more quickly than previously thought in late 2021 but the increase was largely due to COVID-related activity in the health sector, which masked the inflation hit to household incomes and a gloomy picture for the private sector.

Gross domestic product in the world’s fifth-biggest economy increased by 1.3% in the fourth quarter, when the Omicron wave of coronavirus cases mounted, official data showed on Thursday.

That was stronger than a preliminary estimate of growth of 1.0% from the previous three-month period.

But the largest contributors to the increase came from health and social work including more visits to doctors, a large increase in coronavirus testing and tracing and an extension of the COVID-19 vaccination programme.

Paul Dales, an economist with consultancy Capital Economics, said the upward revision to GDP was not as encouraging as it looked at first glance.

“A lot of it appears to be due to inventories while consumer spending was revised down,” he said. “The latter suggests the squeeze on real incomes is starting to bite, although the fall in the saving rate is providing a cushion.”

Households dipped into their lockdown savings to finance their spending. The saving ratio fell to 6.8% of disposable income from 7.5% in third second quarter, heading back towards its level of 6.0% immediately before the pandemic.

Last week, finance minister Rishi Sunak announced tax cuts to help soften the hit to consumers from surging energy prices which have risen further after Russia’s invasion of Ukraine.

While fourth-quarter growth pick-up represented an acceleration from the economy’s 0.9% expansion in the third quarter, it was well below its 5.6% expansion in the April-June period when it was rebounding from COVID-19 lockdowns.

HOUSEHOLDS HIT

Investors expect the recovery to slow in 2022 as inflation heads for almost 9% and households face the biggest fall in living standards since at least the 1950s, according to forecasts by the government’s fiscal watchdog.

Thursday’s data showed household disposable income, adjusted for inflation, fell by 0.2% in the July-September period, revised down from an originally reported 0.5% increase, and it fell again by 0.1% in the fourth quarter.

The dip in the third quarter reflected the increased impact of inflation on household budgets and a downward revision of pension contributions, the Office for National Statistics said.

Household incomes as a share of all income in Britain’s economy, which includes business and government income, fell to 72.2%, its lowest since records began in 1987.

Real household disposable spending in the fourth quarter rose by 0.5%, weaker than an original estimate of 1.2% growth.

Samuel Tombs, an economist with Pantheon Macroeconomics, said the data showed companies were also struggling.

White Britain’s economic output at the end of 2021 was only 0.1% below where it was at the end of 2019, excluding government expenditure and investment it was 2.9% below its pre-pandemic level, he said.

Britain’s balance of payments deficit in the fourth quarter narrowed to 7.3 billion pounds ($9.59 billion), helped by the first surplus since 2011 in the balance of British investment income abroad and foreign investment income in the country.

Economists polled by Reuters had expected a deficit of 17.6 billion pounds.

The ONS said the investment account surplus was driven by higher income from British assets in the oil sector abroad and a change in the schedule of dividend payments at home.

As a share of GDP, the overall current account deficit narrowed to 1.2% from 4.9% in the third quarter.

($1 = 0.7611 pounds)

(Writing by William Schomberg, editing by Andy Bruce and Tomasz Janowski)

ISTANBUL – The World Bank said on Wednesday it had approved a loan of $341.27 million as part of a project to support Turkey’s agricultural sector and encourage the use of “climate-smart technologies.”

The project aims to improve collection and use of information on 14 million hectares of soil and land, enhance disease surveillance in animals and help reduce carbon emissions, the World Bank said.

Agricultural expansion in Turkey is creating significant environmental and climate pressure due to the inefficient use of land, water and energy, while accounting for more than 13% of Turkey’s greenhouse gas emissions, it said.

“We hope this partnership will contribute to putting the agriculture sector on a more competitive and sustainable growth path and help Turkey achieve net zero carbon emissions by 2053,” said Auguste Kouame, World Bank Country Director for Turkey.

Turkey ratified the Paris climate agreement late last year, and has said it aims to achieve net zero carbon emissions by 2053.

(Reporting by Nevzat Devranoglu Writing by Ali Kucukgocmen; Editing by Mark Potter)

FRANKFURT – German drugmaker Bayer said it would invest around 2 billion euros ($2.23 billion) at pharmaceutical manufacturing sites over the next three years, mainly to bolster production of biotechnology drugs as well as cell and gene therapies.

The sites to be upgraded include Berkeley, California, as well as Berlin, Leverkusen and Bergkamen in Germany.

In addition, Bayer will transfer a manufacturing plant in Sao Paulo Cancioneiro, Brazil, as well as parts of the infrastructure and services at the German sites in Bergkamen, Wuppertal and Berlin to new operators.

($1 = 0.8956 euros)

(Reporting by Ludwig Burger, Editing by Miranda Murray)

By Susanna Twidale and Nora Buli

LONDON/OSLO -Europe’s plans to build stocks and ensure gas supplies for next winter could be upended if exports from Russia are halted in a standoff over payment terms, risking curbs on industrial use, analysts warned.

Russia typically provides Europe with around 40% of its gas but the possibility of supply disruption since Moscow’s invasion of Ukraine has increased over the past week, with G7 nations rejecting a demand for payment in roubles.

The European Commission says gas held in storage typically accounts for around a quarter of that used in Europe over the winter months, where it is a major heating fuel.

In a bid to shore up supplies for next winter it has proposed legislation compelling gas storage operators to fill sites to at least 80% of capacity by Nov. 1.

But with stores currently only around a quarter full, and below the five-year average for the time of year of just under 34%, the task looks incredibly difficult to meet without Russian supplies.

“The target of 80% by Nov. 1 is achievable as long as at least some Russian gas continues to flow,” said Jack Sharples, a Research Fellow at the Oxford Institute of Energy Studies. “But I think that in terms of doing it without Russian gas, it’s just not feasible.”

Germany, Europe’s largest gas consumer which relies on Russia for around half of its needs, has set a target of 90% by November. It’s gas stocks are currently 26% full.

But in an unprecedented move, the country on Wednesday also triggered an emergency plan that could see the government ration power if Russia gas supplies are disrupted or halted.

The European Commission said immediate supply emergencies would take priority over refilling storage, with targets not applicable if it declares an EU-wide or regional gas supply emergency – which it can do if at least two countries have already issued their own declarations.

“If Russian flows stop tomorrow and then don’t restart until next winter or for the whole year or more, then storage will not be able to fill to the 80% level,” said Kateryna Filippenko, Principal Analyst, Global Gas Supply at Wood Mackenzie.

“Most likely in the EU storage will end up somewhere slightly over half, maybe around 54%.”

This, Filippenko said, could pose problems for industry as Europe would seek to shield vulnerable consumers by curbing industrial gas use, potentially by as much as a fifth.

The storage plan is further complicated by Russian state-owned gas company Gazprom’s control over several northwest European storage sites, where stocks are at the lowest in at least 5 years.

In Germany, a third of gas storage belongs to Gazprom.

“We think Gazprom is unlikely to try to fully refill these sites given progressively lower contractual demand for Russian supply and little appetite for Gazprom to sell on the spot market,” said Leon Izbicki, Associate, European Natural Gas at Energy Aspects.

If faced with the risk of shortages, German law allows Trading Hub Europe (THE), a gas market hub overseen by the country’s energy regulator, to use storage facilities that are empty or below stipulated filling levels to store its own purchases.

“Market managers such as THE are likely to take this space under the ‘use it or lose it’ principle…and fill this capacity,” Izbicki said

The European Commission has also proposed that from 2023 all gas storage sites should be 90% full by November 1.

The EU is aiming to cut its dependency on Russian gas by two-thirds this year and end all Russian fossil fuel imports by 2027.

(Reporting by Susanna Twidale and Nora Buli; Editing by Kirsten Donovan)

LONDON -Russia has managed to avoid defaulting on its international debt so far despite unprecedented Western sanctions. But the task is getting harder and Moscow’s threats to cut Europe’s gas supply seems to be upping the ante further.

Would a default really make any difference at this stage though, and what would it entail?

WHAT HAPPENS WHEN A COUNTRY DEFAULTS?

If Russia fails to make any of its upcoming bond payments within their pre-defined timeframes, or pays in roubles where dollars, euros or another currency is specified, it will constitute a default.

Such an event would have been unthinkable before the Feb. 24 invasion of Ukraine, which Moscow describes as a “special military operation”, and subsequent sanctions that have frozen hundreds of billions of dollars worth of its reserves.

Russia is already locked out of the international borrowing markets due to the West’s sanctions, but a default would mean it couldn’t regain access until creditors are fully repaid and any legal cases stemming from the default are settled.

Defaults in other countries such as Argentina have seen aggressive creditors go after physical assets such as a navy vessel and the country’s presidential aircraft. Russia’s state-owned energy giants own some of Europe’s key gas infrastructure so it would raise plenty of questions.

It could also create a host of headaches if countries or companies that would normally trade with Russia have self-imposed rules that prohibit transacting with an entity in default.

If sanctions are removed at some point in the future Russia’s reputation in financial markets would still be tarnished. That would depress Russia’s credit ratings and push up the borrowing rates paid by the Russian government and companies.

WHAT HAS HAPPENED SO FAR?

By continuing to make its debt payments this month, Russia so far has swerved its first default of any kind since a 1998 financial crisis, and its first on the international market debt since the 1917 Bolshevik revolution when the new government refused to recognise Tsar-era borrowings.

This week Moscow has upped the stakes by offering to make a $2 billion bond payment due next week – its biggest of the year – in roubles rather than the intended dollars.

As long as Russia doesn’t force anyone who doesn’t want roubles to take them, it wouldn’t usually count as a default, but it is walking a tightrope. That the main rating agencies have had to withdraw their Russia ratings, and therefore won’t call a default whatever happens, complicates things.

THE NEXT TEST

Another $447 million international bond payment is due on Thursday, but even if Russia remains willing to pay complications are about to stack up.

Western sanctions ban transactions with Russia’s finance ministry, central bank or national wealth fund, although the temporary general license 9A https://home.treasury.gov/system/files/126/russia_gl9a.pdf issued by the U.S. Office of Foreign Assets Control (OFAC) on March 2 makes an exception for the purposes of “the receipt of interest, dividend, or maturity payments in connection with debt or equity.”

That license expires on May 25, however, after which Russia will have almost $2 billion worth of external sovereign bond payments to make before the end of the year.

Analysts say after next Monday’s $2 billion payment, the next crucial test will come on May 27 – the first payment due after the current OFAC licence expires.

Russia could be forced to make the payment in roubles, and into bank accounts in Russia, which the finance ministry has said would be its fallback option.

That would constitute a default, however, as the legal terms of that bond state it must be paid back in dollars.

Russia has a total of 15 international bonds outstanding with a face value of around $40 billion. Prior to the Ukraine crisis roughly $20 billion was held by investment funds and money managers outside Russia.

(Reporting by Marc Jones and Tommy Reggiori Wilkes; Editing by Leslie Adler)

By Anshuman Daga

SINGAPORE -GoTo Group, Indonesia’s biggest tech firm, said it plans to raise $1.1 billion in an initial public offering (IPO), pricing the deal in the top half of its indicative range and making it one of Asia’s biggest IPOs so far this year.

GoTo, formed last year by the merger of ride-hailing-to-payments firm Gojek and e-commerce leader Tokopedia, surprised some investors and analysts when it launched its IPO process earlier this month, braving turbulence in global equity markets.

“We are pleased with the investor response, which has remained resilient, despite global macro and market volatility,” Andre Soelistyo, GoTo Group’s CEO, said in a statement on Thursday.

GoTo’s offering attracted strong institutional demand in the book-building process despite a weak investor appetite for tech stocks that has battered shares of the company’s Southeast Asian peers, such as Sea Ltd and Grab Holdings.

GoTo is backed by the likes of SoftBank Group Corp, Alibaba Group and Singapore sovereign wealth fund GIC.

It priced its IPO at 338 rupiah per share, representing a projected market value of about $28 billion, which would make it the country’s fourth most valuable listed company.

Reuters reported last week that GoTo had received enough investor orders for its IPO to raise at least $1.1 billion, within its targeted price band. [L2N2VS03I]

The firm had set an indicative price range of 316 rupiah to 346 rupiah per share.

It is selling 46.7 billion Series A shares, comprising newly issued and treasury shares, thereby raising 15.8 trillion rupiah ($1.1 billion) in total. The IPO will be open from April 1-7 and the listing will take place on April 11 with the stock code GOTO.

($1 = 14,340.0000 rupiah)

(Reporting by Anshuman Daga; Editing by Jacqueline Wong, Jane Wardell and Bradley Perrett)

BEIJING -Activity in Chinese manufacturing and services simultaneously contracted in March for the first time since the height of the country’s COVID-19 outbreak in 2020, adding to the urgency for more policy intervention to stabilise the economy.

The official manufacturing Purchasing Managers’ Index (PMI) fell to 49.5 from 50.2 in February, the National Bureau of Statistics (NBS) said on Thursday, while the non-manufacturing PMI eased to 48.4 from 51.6 in February.

The last time both PMI indexes simultaneously were below the 50-point mark that separates contraction from growth was in February 2020, when authorities were racing to arrest the spread of the coronavirus, first detected in the central Chinese city of Wuhan.

The world’s second-largest economy revved up in January-February, with some key indicators blowing past expectations, but is now at risk of slowing sharply as authorities restrict production and mobility in COVID-hit cities, including Shanghai and Shenzhen.

“Recently, clusters of epidemic outbreaks have occurred in many places in China, and coupled with a significant increase in global geopolitical instability, production and operation of Chinese enterprises have been affected,” said Zhao Qinghe, senior NBS statistician.

Shanghai’s COVID-19 lockdown roiled auto production in recent days as two major suppliers joined Tesla in shutting plants to comply with measures to control the spread of the coronavirus.

“PMI weakened as the Omicron outbreaks in many Chinese cities led to lockdowns and disruption of industrial production,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“As the Shanghai lockdown only happened in late March, economic activities will likely slow further in April.”

The sub-index for production fell below the 50-point mark for the first time since October, to 49.5, indicating a contraction. The gauge for new orders was also in negative territory.

“Due to the epidemic outbreaks, some companies in some areas temporarily reduced production or stopped production, which also affected the normal production and operation of both upstream and downstream companies,” Zhao said.

Some companies also saw the cancellation or reduction of overseas orders due to geopolitical uncertainties, Zhao said.

Weakening production and demand sped up the contraction in factory jobs, with the employment sub-index slipping to 48.6 in March, the lowest since February 2021.

WORST SINCE WUHAN

“The PMIs probably understate the hit to activity last month,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

“The services index remained above the low of 45.2 that it hit last August during the Delta wave. That’s probably because the survey was conducted prior to the worst disruptions.”

To cushion the impact of new COVID-19 lockdowns, authorities have unveiled steps to support business, including rent exemptions for some small services-sector firms.

On Wednesday, the government said it will roll out policies to stabilise the economy as soon as possible amid increased pressures.

The central bank, which kept its benchmark interest rate for corporate and household lending unchanged in March, is expected to cut rates and lower reserve requirements for banks as downward economic pressures build, analysts say.

China’s official composite PMI, which combined manufacturing and services, stood at 48.8 in March versus 51.2 in February.

The composite PMI was at its second-lowest reading on record since February 2020, when the initial COVID outbreak sent the index plummeting to 28.9.

“This suggests that the economy is contracting at its fastest pace since the height of the initial COVID-19 outbreak in February 2020,” said Evans-Pritchard.

(Reporting by Ellen Zhang, Stella Qiu and Ryan Woo; Editing by Sam Holmes and Bradley Perrett)

By Kate Abnett and Susanna Twidale

BRUSSELS/LONDON -Fears of a Russian gas supply crunch prompted some European countries on Wednesday to ask people to consume less energy in a move that could potentially yield big results.

Despite months of soaring energy prices and tight supplies most governments have avoided taking a step they fear could be unpopular but with concerns growing that Russia could turn off the taps, the message in some capitals is starting to shift.

“Every kilowatt-hour counts,” German Economy Minister Robert Habeck said on Wednesday as Germany declared an “early warning” of a possible gas supply emergency.

The International Energy Agency (IEA) in Paris agrees that when done on a large scale, small behavioural changes can significantly reduce gas and oil demand.

It estimates that turning down thermostats in buildings across the European Union by 2 Celsius would save 20 billion cubic metres of gas, worth about $28 billion at current prices.

That’s also about 13% of the 155 billion cubic metres the 27-nation bloc buys each year from Russia, which is in turn about 40% of the EU’s total gas consumption.

The Dutch government followed Germany on Wednesday saying it would launch a campaign this weekend asking citizens and businesses to use less gas while France’s regulator asked citizens to collectively try to reduce their consumption.

Simone Tagliapietra, senior fellow at think-tank Bruegel, said governments should have urged citizens to curb energy use months ago to help manage the supply crunch but politicians resisted because such a message “smells of austerity”.

“Each billion cubic metre of gas we don’t consume, it’s important. That gas is very expensive, and we need now to start filling up the storage ahead of next winter,” he said.

IT’S YOUR CHOICE

Rather than calling on consumers to cut their energy use, governments have so far mostly been looking for ways to cap utility bills and find alternative sources of fuel.

Sweden, France, Itay, Germany and Britain also announced measures to make petrol cheaper this month after crude hit its highest price since 2008, drawing criticism from campaigners who say the measures are fossil fuel subsidies.

But since Russia invaded Ukraine last month, Brussels has declared a mission to cut the EU’s Russian gas imports by two-thirds this year and to end the use of Russian gas by 2027.

Cutting demand could reduce the impact of any supply crunch if Russia were to cut exports, which has become more of a worry since Moscow said last week that countries should start paying for gas in roubles.

A detailed EU plan to wean itself off Russian fossil fuels is due in May, but a blueprint published this month showed Brussels would boost non-Russian gas imports, expand renewable energy faster, swap millions of gas boilers for heat pumps and renovate buildings to use less energy.

Those solutions will take time, however, and the European Commission has already suggested that consumers could help dent demand immediately.

“Your choices in how much energy you consume co-decide how strong we are in our reaction to Russia,” EU climate policy chief Frans Timmermans said.

Temporarily cutting demand would also help countries build up gas storage for next winter and provide a stop-gap while governments secure lasting options to replace Russian fuel – such as building wind and solar farms, renovating buildings, or securing more non-Russian gas.

“There are tracks for immediate energy savings measures that remain unexplored,” said Adeline Rochet, policy expert at climate think-tank E3G.

If they stick, energy-saving habits such as turning off lights and appliances or using less air conditioning where convenient, could also help bring down carbon dioxide emissions.

MOVE TO THE SLOW LANE

Christina Demski, an expert on consumer energy behaviour at Cardiff University’s School of Psychology, said soaring energy bills and a desire to show solidarity with Ukraine may mean Europeans are receptive to such messages.

“People are more likely to make a behavioural change if you are asking to do something that reflects their values,” she said, adding that requests to change behaviour should not target vulnerable households who lack the flexibility to adapt their consumption, or who are already struggling with bills.

Only a few countries have broached the idea of ways to reduce oil consumption, despite the fact Russia, which calls its action in Ukraine a special military operation, providing 27% of the EU’s oil imports.

Denmark is looking at a proposal to temporarily reduce highway speed limits. Ireland’s transport minister Eamon Ryan, who also the environment portfolio, suggested driving slower could save fuel when announcing a cut in petrol duty this month.

The IEA last week published options it said could lower oil demand in advanced economies by 2.7 million barrels per day (bpd) within four months, equivalent to the combined demand of every car in China.

Most options would require consumers to change their behaviour.

Lowering speed limits by 10 km per hour in advanced economies could save 290,000 bpd from cars and 140,000 bpd from trucks. Working from home three days a week would cut 500,000 bpd while fuel-saving practices such as car-sharing could save 470,000 bpd, the IEA said.

Some governments are resistant. Britain, which is no longer an EU member, rejected the IEA’s ideas. The country plans to replace the 8% of oil imports it gets from Russia with alternative supplies this year.

“There is absolutely no need to apply this guidance in the UK,” a government spokesperson said.

(Reporting by Kate Abnett and Susanna Twidale; Additional reporting by Padraic Halpin and Jacob Gronholt-Pedersen; Editing by David Clarke)