SHANGHAI -China said on Friday it will maintain yuan flexibility and foreign exchange market stability, vowing to actively prevent and defuse risks from external shocks.

The trend of foreigners investing in China, and allocating yuan assets will not change, China’s foreign exchange regulator said. Meanwhile, China expects a reasonable current account surplus this year, despite an expected slowdown in exports.

The comments come amid signs of heavy foreign outflows from Chinese markets since Russia launched war on Ukraine, as investors reckoned Beijing’s friendship with Moscow could become a handicap the longer the conflict lasts.

The growing policy divergence between a hawkish U.S. Federal Reserve, and a dovish People’s Bank of China could also lead to money outflows.

The State Administration of Foreign Exchange (SAFE) said on Friday it will strengthen macro-prudential management of cross-border capital flows, and ward off risks of external shocks.

China will continue to maintain yuan flexibility, step up monitoring cross-border capital flows, enrich the policy toolbox, and appropriately guide expectations, it said.

“China’s financial market is increasingly open, and Chinese bonds and stocks have sound investment value,” SAFE said.

“There’s still big room for foreign investors to increase allocation (to China assets), which is good for long-term, steady capital inflows.”

In terms of current account, China’s export growth will likely slow from a high base, as the pandemic’s impact on global trade activities becomes muted.

But China’s current account surplus will remain at a reasonable level, SAFE said.

(Reporting by Shanghai and Beijing Newsroom; editing by Philippa Fletcher and Toby Chopra)

By Jarrett Renshaw, Vera Eckert and Joseph Nasr

BRUSSELS/BERLIN -The United States will work to supply 15 billion cubic metres (bcm) of liquefied natural gas (LNG) to the European Union this year to help wean it off Russian gas supplies, the transatlantic partners said on Friday.

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 due to Russia’s invasion of Ukraine. Russia supplies around 40% of Europe’s gas needs.

Concerns over security of supply were reinforced this week after Russia ordered the switch of gas contract payments to roubles, raising the risk of a supply squeeze and even higher prices.

U.S. LNG plants are producing at full capacity and analysts say most of any additional U.S. gas sent to Europe would have to come from exports that would have gone elsewhere and already high European gas prices would have to rise further to attract those cargoes to the 27-nation bloc.

LNG under contract cannot be easily redirected.

“It normally takes two to three years to build a new production facility, so this deal may be more about the re-direction of existing supplies than new capacity,” said Alex Froley, gas and LNG analyst at ICIS.

Senior U.S. administration officials did not specify what amount or percentage of the extra LNG supply would come from the United States.

Even if the 15 bcm is achievable, “it still falls well short of replacing Russian gas imports, which amounted to around 155 bcm in 2021,” analysts at ING Bank said.

GERMAN RELIANCE ON RUSSIA

U.S. President Joe Biden and European Commission President Ursula von der Leyen also announced a plan to form a task force to reduce Europe’s reliance on Russian fossil fuels.

The Commission will also work with EU countries to ensure they are able to receive about 50 bcm of additional LNG until at least 2030, the factsheet provided by the White House said.

It was unclear whether it referred to amounts additional to last year’s 22 bcm of U.S. exports to the EU.

The EU has already stepped up efforts to secure more LNG after talks with supplier countries, resulting in record deliveries of 10 bcm of LNG in more than 120 vessels in January.

Meanwhile, Germany, the EU’s biggest importer of Russian gas, said it has made “significant progress” towards reducing its exposure to imports of Russian gas, oil and coal.

However, Economy Minister Robert Habeck also said it could take until the summer of 2024 for Europe’s largest economy to wean itself off of Russian gas.

German utilities on Thursday said their country needed an early warning system to tackle gas shortages as Putin’s demand for gas payments in roubles left companies and EU nations scrambling to understand the ramifications.

Some countries, such as Italy, said they would continue to pay in euros. The CEO of Poland’s PGNiG, said the company – which has a contract with Gazprom until the end of this year – could not simply switch to paying in roubles.

Russia’s demand for payment in roubles for gas still needs to be backed by a concrete mechanism.

A spokesman for Germany’s Uniper said on Friday: “We have not received any official notification or request to process the settlement in roubles.”

The German economy minister said the government will consult with its partners about Putin’s demand for payment in roubles.

(Reporting by Jarrett Renshaw in Brussels, Joseph Nasr in Berlin, Vera Eckert in Frankfurt, Nina Chestney and Marwa Rashad in London; writing by Philip Blenkinsop and Nina Chestney; editing by Barbara Lewis and Jason Neely)

By Joshua Schneyer

– Nearly a year after COVID vaccines became freely available in the U.S., one fourth of American adults remain unvaccinated, and a picture of the economic cost of vaccine hesitancy is emerging. It points to financial risk for individuals, companies and publicly funded programs.

Vaccine hesitancy likely already accounts for tens of billions of dollars in preventable U.S. hospitalization costs and up to hundreds of thousands of preventable deaths, say public health experts.

For individuals forgoing vaccination, the risks can include layoffs and ineligibility to collect unemployment, higher insurance premiums, growing out-of-pocket medical costs or loss of academic scholarships.

For employers, vaccine hesitancy can contribute to short-staffed workplaces. For taxpayers, it could mean a financial drain on programs such as Medicare, which provides healthcare for seniors.

Some employers are looking to pass along a risk premium to unvaccinated workers, not unlike how smokers can be required to pay higher health premiums. One airline said it will charge unvaccinated workers $200 extra a month in insurance.

“When the vaccines emerged it seemed like everyone wanted one and the big question was how long it would take to meet the demand,” said Kosali Simon, a professor of health economics at Indiana University. “It didn’t occur to me that, a year later, we’d be studying the cost of people not wanting the vaccines.”

Alicia Royce, a 38-year-old special education teacher in Coachella, California, opted out of getting the COVID vaccine or having her two vaccine-eligible children get it. Royce’s parents got the shots, but she has been concerned by issues including reports of adverse reactions.

The decision puts Royce in a delicate spot. Her school, like others in California, began a vaccine mandate for staff last year. For now, Royce has a religious exemption and gets tested for COVID twice a week before entering the classroom. The situation has prompted her family to plan a move to Alabama, where schools have not imposed mandates, after the school year.

“I’ll get paid less,” said Royce, who expects to take a $40,000-a-year pay cut. “But I’m moving for my own personal freedom to choose.”

PREVENTABLE CARE, BILLIONS IN COSTS

As the pandemic enters its third year, the number of U.S. patients hospitalized with COVID is near a 17-month low. Most Americans are vaccinated, and the country is regaining a semblance of normalcy, even as authorities predict a coming uptick in infections from the BA.2 sub-variant.

Yet as millions return to offices, public transportation and other social settings, Centers for Disease Control and Prevention figures show nearly 25% of U.S. adults haven’t been fully vaccinated, and the latest data suggests many holdouts won’t be easily swayed: The number of people seeking a first COVID vaccine in the U.S. has fallen to 14-month lows.

Vaccines have proven to be a powerful tool against the virus. CDC figures from 2021’s Delta wave found that unvaccinated Americans had four times greater risk of being infected, and nearly 13 times higher risk of death from COVID. The disparities were even greater for those who received booster shots, who were 53 times less likely to die from COVID. Less than half of the country’s vaccinated population has so far received a booster.

In a December study, the nonprofit Kaiser Family Foundation, which tracks U.S. health policy and outcomes, estimated that between June and November of 2021, unvaccinated American adults accounted for $13.8 billion in “preventable” COVID hospitalization costs nationwide.

Kaiser estimated that over that six-month period, which included the Delta wave, vaccinations could have averted 59% of COVID hospitalizations among U.S. adults. Kaiser tallied 690,000 vaccine-preventable hospitalizations, at an average cost of $20,000. And it estimated vaccinations could have prevented 163,000 U.S. deaths over the same period.

If vaccine hesitancy accounted for half of the more than 1 million new U.S. COVID hospitalizations since December, the added cost of preventable hospital stays could amount to another $10 billion, Reuters found.

One thing is clear: As U.S. insurance providers and hospital networks reckon with vaccine hesitancy, it’s likely that patients hospitalized for COVID will end up shouldering a bigger portion of the bill.

“These hospitalizations are not only devastating for patients and their families but could also put patients on the hook for thousands of dollars,” Krutika Amin, a Kaiser associate director and one of the December study’s co-authors, told Reuters. Unlike earlier in the pandemic, Amin said, most private health insurers have stopped waiving cost-sharing or deductibles for COVID patients who end up hospitalized.

For some insurance plans, the cost to a hospitalized COVID patient can exceed $8,000 just for “in-network” services, she added. The expenses could balloon for the uninsured and those turning to out-of-network care.

Now that Americans have the choice to protect themselves with vaccines, insurance companies are requiring patients to bear more of these costs, but “many people do not have enough money to pay,” Amin said.

More recent data – covering the Omicron wave – underscores the risk for the unvaccinated. During January in New York State, unvaccinated adults were more than 13 times as likely to be hospitalized with COVID than fully vaccinated adults, state health department figues show.

POLITICAL FLASHPOINT

The U.S. has spent billions to get vaccine shots into arms, including more than $19.3 billion to help develop vaccines, federal reports show.

Still, the United States has one of the largest COVID vaccine holdout rates among highly developed countries, as some question the need for getting the shots or bristle at government or workplace mandates.

“The subset of the population that is really anti-COVID vaccine, ready to quit jobs or test in order to go to work, is now pretty hardened,” said Julie Downs, a social psychology professor at Carnegie Mellon University.

COVID vaccines have become a political flashpoint, and vaccination rates vary widely by region: In Vermont, public health data shows 84% of those 18 and up are fully vaccinated, while the rate is just above 60% in Alabama.

Nearly 76% of people in the United States have had at least one dose of a COVID vaccine, CDC data shows, but the fully vaccinated figure – across all age-groups – stands at 64%. The Food and Drug Administration hasn’t yet approved a COVID vaccine for children under 5.

Perhaps the biggest financial risk vaccine holdouts have faced is getting laid off from their jobs, said Kaiser’s Amin.

New York City, which requires city workers to be vaccinated, fired more than 1,400 of them last month who hadn’t received a vaccine shot by the city’s deadline, while around 9,000 other workers remained in the process of seeking exemptions to the requirement, city figures show. The vast majority of the city’s 370,000-person workforce is vaccinated.

A Kaiser Family Foundation nationwide survey in October found that about a quarter of workers said their employer required proof of vaccination. Only 1% of workers surveyed — and 5% of unvaccinated workers — reported having left a job due to a workplace vaccine mandate.

A tiny minority of healthcare workers across the country have been fired or placed on work leave because they chose to remain unvaccinated, but the dismissals still amount to thousands of layoffs, according to a report from Fierce Healthcare, which tracks the trend.

NO-VAX TAX

Giant employers including J.P. Morgan and Bank of America have informed their U.S. employees they can expect to pay more – or receive fewer perks through company wellness programs – if they don’t provide proof of vaccination.

Other companies have extended an insurance premium surcharge for unvaccinated spouses or family members of employees if they want to be insured as a dependent under an employee’s health plan.

And after global life insurance providers were hit with a higher-than-expected $5.5 billion in claims during the first nine months of 2021, insurers will be looking to calibrate premiums more closely to COVID mortality risks going forward, Reuters reported.

Vaccination status and other health risks – such as obesity or smoking — are metrics life insurers can probe when customers seek coverage. Under the U.S. Affordable Care Act, individuals seeking health insurance can’t be denied for pre-existing conditions, including COVID, or charged more for not being vaccinated. But companies who cover some of employees’ health insurance costs can pass along higher costs to unvaccinated employees.

Delta Airlines said last year it would charge employees who didn’t vaccinate an extra $200 a month for health insurance. The airline said the extra charge reflected the higher risk of COVID hospitalization for those employees, and noted that employee hospitalizations for COVID had cost $50,000 each so far, on average.

University students also can face financial consequences for opting out. At least 500 U.S. colleges have vaccine mandates, some barring enrollment or in-person schooling for those who don’t comply, or requiring them to undergo frequent COVID testing.

Cait Corrigan said she enrolled in a master’s program in theology at Boston University this year and was offered an academic scholarship. Corrigan, who has led public-activism efforts against vaccine mandates, said she got a religious exemption to the school’s vaccine mandate, but the school required that she take regular nasal swab tests to attend. Corrigan said she declined to submit to nasal tests for “medical reasons.”

The university suspended her and withdrew funding, she said. “It was a big loss.” Boston University didn’t respond to a request for comment.

Now in New York, Corrigan says she is campaigning for a congressional seat as a Republican. Her platform: “medical freedom.”

(Reporting by Joshua Schneyer. Editing by Ronnie Greene)

By Paul Lienert, Nick Carey and Norihiko Shirouzu

DETROIT/BEIJING – A year ago Tesla dismissed the alternative path of electric car battery swapping as “riddled with problems and not suitable for widescale use”. It seems Beijing disagrees.

In fact, China is pushing hard for swappable batteries for electric vehicles (EVs) as a supplement to regular vehicle charging, with the government throwing its weight behind several companies advancing the technology.

Four companies – automakers Nio and Geely, battery swap developer Aulton and state-owned oil producer Sinopec – say they plan to establish a total of 24,000 swap stations across the country by 2025, up from about 1,400 today.

Battery swapping allows drivers to replace depleted packs quickly with fully charged ones, rather than plugging the vehicle into a charging point. Swapping could help mitigate the growing strains placed on power grids as millions of drivers juice up, yet specialists caution it can only take off in a big way if batteries become standardized industry-wide.

If China is successful in making swapping successful on a large scale, though, the shift could undermine the business models of global brands like Tesla, Volkswagen and General Motors, whose EVs are designed for and powered by their own proprietary batteries and, in Tesla’s case, its own charging network.

Even slight changes of fortune in the country can have significant consequences for these carmakers, whose futures rely on achieving success in the world’s largest car market.

The Chinese swapping plans, announced piecemeal in recent weeks and months but not widely known outside the domestic auto sector, are part of Beijing’s broader plan to make 25% of car sales fully electric by 2025, or more than 6 million passenger vehicles based on current forecasts. Estimates vary widely as to how many will have swappable batteries.

The Ministry of Industry and Information (MIIT), a major supporter of battery swapping, did not immediately respond to a request for further comment about China’s battery swapping strategy

Furthermore, big Chinese players are also looking overseas.

Ningde-based CATL (Contemporary Amperex Technology Company Ltd), the world’s biggest battery maker, told Reuters it was developing swapping services not only for China, but “to meet the demand of global markets”.

“We are accumulating experience in the Chinese market and at the same time communicating closely with overseas partners. You’ll receive more concrete information soon,” said CATL, which supplies about half of China’s market and more than 30% of the battery cells used in EVs globally.

Nio, among China’s top EV makers, plans to offer U.S. customers battery-swapping services by 2025, the company’s North American head Ganesh Iyer said. It has more than 800 swap stations in China and has just set up its first in Europe.

‘NEVER GOING TO HAPPEN’

Such plans clash with the views expressed by global EV pioneer and leader Tesla in March 2021 when it dismissed the viability of large-scale battery swapping in China. It trialed swapping in the United States years ago and abandoned it.

Industry executives are divided over whether China’s push can overcome the reluctance of European and U.S. automakers to abandon their own battery designs and adopt standardized ones.

“You’ll never ever get carmakers to agree to swappable batteries,” said Andy Palmer, former CEO of Aston Martin and currently head of EV maker Switch Mobility.

John Holland, wireless EV charging company Momentum Dynamics’ commercial director for Europe and the Middle East, said convergence on batteries created a quandary for automakers.

“Then how do you differentiate your product?”

Tesla, GM and Volkswagen say they are not exploring battery swapping right now.

A GM spokesperson told Reuters that swappable batteries “are not part of our strategy at present.”

A VW spokesperson said the company originally considered battery swapping to avoid waiting times at charging stations, but that advances in fast charging and the lower costs of non-swappable batteries had led it to shift focus to the latter.

“Nevertheless, our strategists closely monitor and evaluate the competitive environment and all developments in this area,” the German carmaker said.

A Tesla spokesperson didn’t immediately respond to a request for comment.

Swapping and regular grid-charging both have critics and cheerleaders in a rapidly evolving auto tech arena.

The ease of exchanging batteries in e-scooters has been demonstrated in Asia and Europe, but the challenge is adapting the technology to larger and more complex cars, trucks and vans. See accompanying short story:

Concerns about the length of swapping times have also faded, with Nio saying it has automated the process so it takes as little as 180 seconds.

Yet the more familiar grid-charging side has a huge head start, and is bolstered by the fact there’s already billions of dollars’ worth of charging infrastructure built globally.

Automakers are also rolling out EVs with improved batteries that boast longer ranges and shorter charge times, which could make swapping obsolete.

‘BIGGEST GAME IN TOWN’

In China, MIIT released the global auto industry’s first standards for swapping technology last year. They went into effect in November, specifying safety requirements, test methods and inspection rules for EVs with swappable batteries.

The ministry aims to have more than 100,000 battery-swappable vehicles and more than 1,000 swap stations, in total, in 11 cities by 2023; stations in the bigger cities will accommodate both passenger and commercial vehicles, while outlying provincial cities will focus on electric heavy-duty trucks.

Yet a key uncertainty for China’s ambitions is whether enough carmakers adopt standardized batteries, an obstacle that scuttled attempts at battery swapping in the last decade – yet, if overcome, could propel the technology to a viable scale. Read a short history of swappable batteries:

There’s a long way to go. Even the swapping option offered to customers by Nio uses the company’s own batteries, thus limiting the service to people driving Nio cars equipped with the company’s proprietary batteries.

CATL, which helped Nio develop swappable batteries, has signed up China’s FAW Motor as the first customer for its new Evogo battery swapping service and expects to extend the service to other Chinese automakers.

CATL wants domestic firms to accept its standard battery design so its stations can service models from multiple brands, according to a person close to the company who declined to be named due to commercial sensitivities, adding that it expected more car brands to adopt its standardized designs.

The company is “the biggest game in town” for EV batteries, said Tu Le, managing director of Sino Auto Insights.

“They can offer a large footprint for swapping stations and a low cost to use those stations,” he said.

Meanwhile, among those Chinese companies building out swap station networks, Shanghai-based Aulton New Energy Automotive Technology has said it is working with automakers to develop standardized batteries, and with Sinopec to install stations at 30,000 Sinopec gas stations in China by 2030.

Aulton didn’t respond to a request for comment.

MAGIC IN AMERICA?

While international carmakers may resist swappable batteries, they are reliant on Chinese sales to fund their costly transition to electric and will have little choice but to adapt to the market there, according to many industry experts.

Furthermore, if Beijing ultimately mandates swappable batteries “and starts saying, ‘okay, the only car you’re allowed to produce is one that meets the standard’ . . . you would have to comply to stay in business” in China, says John Helveston, assistant professor at George Washington University’s School of Engineering.

Some advocates of swapping are looking beyond China.

Battery swapping “is too convenient, too economical and too logical for this not to happen at scale in Europe and the United States,” said Levi Tillemann, head of policy and international business at San Francisco-based battery swap startup Ample.

“It’s a sort of magical thinking to imagine that this is a uniquely Chinese phenomenon,” he added.

Ample, one of just a handful of battery swapping developers outside China, has raised $275 million from investors, including energy companies Shell, Repsol and Eneos, boosting its valuation to $1 billion.

It is running pilot programs with Uber and car rental startup Sally, and says it is collaborating with several unnamed automakers.

“With a relatively small number of vehicles that are heavily utilized, we can deploy and operate a battery swap system profitably,” Tillemann said. “So fleets are a prime target for us.”

(Reporting by Paul Lienert in Detroit, Nick Carey in London and Norihiko Shirouzu in Beijing; Additional reporting by Victoria Valdersee in Berlin; Editing by Pravin Char)

By Saqib Iqbal Ahmed

NEW YORK -The Federal Reserve’s hawkish tilt has shaken up the bond market, with Treasuries recording their worst start to the year in history.

Yields on the U.S. benchmark 10-year Treasury, which move inversely to bond price, reached a high of 2.417% earlier this week as investors factored in a more aggressive Fed, a 90 basis point gain since the beginning of the year and its highest level since May 2019.

Many investors expect more turmoil in bonds, as soaring consumer prices push the Fed into full inflation-fighting mode. Goldman Sachs on Thursday raised its year-end forecast for the 10-year yield to 2.7% from an earlier projection of 2.25% and predicted a “modest” inversion of the Treasury yield curve, though the bank’s analyst said the phenomenon would not necessarily be indicative of an oncoming recession, as it has in the past.

Here is a quick look at the state of the Treasury market nearly three months into 2022.

The ICE BofA Treasury Index is down 5.6% this year, its worst start in history, as investors reprice a Fed that is now expected to tighten monetary policy by a further 190 basis points this year and has said could raise rates by 50 basis points at one of its upcoming meetings if warranted.

Investors worried that hawkish monetary policy could dent growth have been eyeing the shape of the Treasury yield curve, which has increasingly shown yields on some shorter-dated debt rising above yields on longer-dated debt.

An inverted yield curve is typically a sign that investors are worried about the economy and recessions have followed when yields on 2-year Treasuries have risen above those on 10-years. That part of the yield curve has so far not inverted, although the gap between yields has narrowed dramatically in recent weeks.

Analysts at Goldman Sachs said they expected that part of the yield curve to invert this year, though such a move would not necessarily signify a recession due to the current “high inflation” environment.

“In such an environment, a deeper nominal curve inversion may be needed to produce the same recession odds in models as seen in more recent business cycles,” Goldman’s analysts wrote in a recent report.

Investors also have been watching so-called real yields, or the nominal yield of a bond minus the rate of inflation.

Negative real yields on Treasuries have burnished the attractiveness of stocks and other comparatively risky assets for more than two years, helping to underpin the S&P 500’s doubling from its March 2020 lows. Yet they have started to move higher in recent weeks, reflecting the Fed’s increasingly hawkish stance. That may signal further trouble ahead for the S&P 500, which is down 5.2% this year.

The selloff in bonds likely bruised investors who had recently piled into Treasuries, a popular safe haven, as geopolitical uncertainty soared after Russia invaded Ukraine last month. The TLT iShares 20+ year Treasury bond ETF – often used by investors to express views on the government bond market – saw net inflows for the last six weeks, the longest streak in three years.

Other segments of the market appear to have been positioned for higher yields, however. CFTC data on Treasury futures, which captures positioning by hedge funds and other shorter-term market participants, shows investors have a net short position on 10-year Treasury futures since mid-October.

(Reporting by Saqib Iqbal Ahmed and Davide Barbuscia: Writing and additional reporting by Ira Iosebashvili; editing by Diane Craft)

By William Schomberg

LONDON -Britons cut back on their shopping in February and consumer confidence levels tumbled this month as accelerating inflation cast a shadow over the world’s fifth-biggest economy, data released on Friday showed.

Retail sales volumes unexpectedly fell by 0.3% in February from January. Economists polled by Reuters had on average forecast a 0.6% monthly rise.

Excluding automotive fuel, which rose in price in February as tensions between Russia and Ukraine escalated, sales volumes fell by a sharper 0.7%.

Some of the fall was linked by the Office for National Statistics to stormy weather which kept some shoppers at home while the fading of the Omicron COVID-19 meant people returned to pubs and restaurants at expense of grocery retailers.

But rising prices meant the amount of money spent on food shopping rose, even as volumes fell.

Analysts said the data – combined with a drop in polling firm GfK’s measure of consumer confidence in March to levels last seen in November 2020 – was a taste of things to come as inflation climbs higher.

GfK’s gauge of personal finances for the coming year slumped to a joint record low, matched only by the reading in July 2008 when the global financial crisis was reaching a climax.

Inflation hit a 30-year high of 6.2% in February and the government’s budget watchdog this week forecast it will go close to 9% in late 2022, contributing to the biggest fall in living standards since at least the 1950s.

“Against that backdrop, it seems all but inevitable that households will continue to pare back spending in the coming month,” Bethany Beckett, an economist with Capital Economics, said.

Finance minister Rishi Sunak announced tax cuts this week that he said would help to ease the squeeze on households, but analysts said his plan did little to help those on lowest incomes.

There were some bright spots for retailers.

The easing of the coronavirus crisis, and the subsequent increase in people socialising and returning to workplaces, led to a 13% leap in clothing sales in February from January.

The share of online sales in value terms was its lowest since March 2020 at 27.8% but overall sales were 3.7% above their pre-coronavirus levels of February 2020.

Volumes of fuel bought surpassed their pre-pandemic levels for the first time, although the amount of money spent on fuel grew more quickly, reflecting the higher prices.

Compared with a year earlier, overall sales volumes were up by 7.0%, short of the 7.8% growth expected in the Reuters poll.

(Reporting by William Schomberg; Editing by Kate Holton and Raissa Kasolowsky)