Member Briefing November 29, 2022
China Clamps Down on Protesters Against Zero-Covid Policies
Shortly after Chinese leader Xi Jinping reaffirmed his position at the pinnacle of Chinese political power, he faces what could be the biggest test of his tenure. The outcome could reshape how foreign multinationals operate in China, the flow of global manufacturing investment, and China’s relations with developed democracies. What is more, several fundamental factors leading to this moment are unlikely to fade for the foreseeable future.
For decades, foreign companies operating in China have benefited from access to the country’s massive labor force, in exchange for largely steering clear of politics. To the extent that multinational manufacturers worried about political risk, it has primarily been about geopolitics, rather than conditions in China itself. But the twin protests—over labor conditions and Covid-19 policies—erupting this month represent a serious challenge to two key assumptions underlying this arrangement. First, that companies can count on a fundamental level of political stability when they invest in China. And second, that workers won’t push labor actions too far for fear of state reprisals.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- 'Dangerous Rhetoric' Stoking Tensions Among Nuclear-Armed Rivals: UN Chief Antonio Guterres - AP
- Kremlin Denies Russians Are About to Withdraw From Nuclear Plant - CNBC
- Russia Won't Stop Strikes Until it Runs Out of Missiles, Ukraine's Zelenskiy Says - Reuters
- Vladimir Putin’s Red Lines, War Aims Shift in Ukraine - WSJ
- NATO Chief: Russia Using Winter as a Weapon – USA Today
- Senators Urge Biden Administration to Give Ukraine Advanced Drones – The Hill
- U.S. Weighs Sending 100-Mile Strike Weapon to Ukraine - Reuters
- WHO Issues Dire Warning for Ukraine Ahead of Winter – The Hill
- Zelensky Warns of More Russian Missile Attacks as Fighting Rages in Eastern Ukraine - WSJ
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
400 Groups Urge U.S. Lawmakers to Take 'Immediate Steps' to Block Potential Rail Strike
The U.S. Chamber of Commerce, National Association of Manufacturers, National Retail Federation, American Petroleum Institute, National Restaurant Association, American Trucking Associations, American Farm Bureau Federation and other groups warned impacts of a potential strike could be felt as soon as Dec. 5. "The risks to our nation’s economy and communities simply make a national rail strike unacceptable," says the letter to congressional leaders seen by Reuters. "Therefore, absent a voluntary agreement, we call on you to take immediate steps to prevent a national rail strike and the certain economic destruction that would follow."
A rail traffic stoppage could freeze almost 30% of U.S. cargo shipments by weight, stoke inflation and cost the American economy as much as $2 billion per day by unleashing a cascade of transport woes affecting U.S. energy, agriculture, manufacturing, healthcare and retail sectors.
Black Friday Lured Shoppers Back, in Early Test for Holiday Spending
Americans returned to their prepandemic habits on Black Friday as they spent more time and money in stores than last year, but some data show they were also cautious with spending as inflation weighs on their pocketbooks. Shoppers who held off on purchases are betting on even better deals in the days leading up to Christmas, which falls on a Sunday this year, according to shoppers and retail executives. High gasoline and grocery prices are also weighing on many households.
The boost in store traffic over Black Friday comes after a surge last year from 2020, the first year of the Covid-19 pandemic when many shoppers favored buying online. Shoppers still bought items online this year, but many browsed in stores, reveling in a holiday tradition, according to early data. Some consultants and industry groups have predicted slower sales growth for the overall holiday season compared with last year.
U.S. COVID - 2 New COVID Subvariants Driving Majority of U.S. Cases
The omicron BQ coronavirus subvariants have risen to dominance in the U.S. putting people with compromised immune systems at increased risk. BQ.1 and BQ.1.1 are causing 57% of new infections in the U.S., according to data published by the Centers for Disease Control and Prevention on Friday. The omicron BA.5 subvariant, once dominant, now makes up only a fifth of new Covid cases.
The BQ subvariants are more immune evasive and likely resistant to key antibody medications, such as Evusheld and bebtelovimab, used by people with compromised immune systems, according to the National Institutes of Health. This includes organ transplant and cancer chemotherapy patients. There are currently no replacements for these drugs.
Fauci on Covid Lab Leak Theory: ‘I Have a Completely Open Mind’
Anthony Fauci, the retiring top official in the United States response to the Covid-19 pandemic, said Sunday he has “a completely open mind” about the origins of the respiratory virus. “I have a completely open mind about that, despite people saying that I don’t,” Fauci said, when asked on NBC’s “Meet the Press” about the theory that the virus may have leaked from a lab in China in 2019.
A report this fall from Vanity Fair and ProPublica, which said the Wuhan Institute of Virology dealt with an unspecified emergency at the time Covid-19 began, brought back to the forefront a debate about whether the virus might have come from a lab. Early in the pandemic Dr. Fauci had been critical of those who espoused the lab leak theory.
Who’s Ahead in the Georgia Senate Race?
Early voting is underway in Georgia in what promises to be an intense week-and-a-half of campaigning between GOP Senate candidate Herschel Walker and incumbent Democratic Sen. Raphael Warnock. A Warnock win would mean Democrats increase their razor-thin majority in the Senate, while a Walker victory would keep their total to 50 seats, with the tiebreaker vote from Democratic Vice President Kamala Harris.
The latest FiveThirtyEight polling averages put Walker up 1 percentage point over Warnock, 47.8 percent to 46.8 percent. However, a poll released last week by AARP put Warnock ahead by 4 percentage points, though Walker was leading among voters older than 50.
World Cup: Iran is Calling for the U.S. to be Thrown Out of the World Cup After Flag Change, Teams Square Off Today
Iranian state media is calling for the U.S. World Cup soccer team to be thrown out of the 2022 tournament in Qatar after it briefly changed the icon of the Iranian flag on its social media accounts in support of protests taking place in the country. In the posts, the Iranian flag icon was missing its Islamic Republic emblem, and only showed its red, white and green stripes Tuesday’s match is a crucial one that already has drawn political undertones. Whoever wins will proceed to the knockout stages.
In an Instagram post from the U.S. Soccer men’s national team on Sunday promoting the Iran-U.S. match, the official Iranian flag was featured along with the designation “IR Iran,” which stands for Islamic Republic. The teams play each other today at 2:00 pm.
US Bans Gear from China's Huawei and ZTE Over Security Risk
U.S. authorities announced a ban Friday on the import or sale of communications equipment deemed "an unacceptable risk to national security" -- including gear from Chinese giants Huawei Technologies and ZTE. Both firms have been on a roster of companies listed as a threat by the Federal Communications Commission (FCC), and the new rules bar future authorizations of their equipment.
The move is the latest in a series of actions to limit the access of Chinese telecom firms to U.S. networks and comes during a long-running standoff between the world's two biggest economies. U.S. officials have shown growing wariness in recent years of Chinese telecommunications companies and technology. "The FCC is committed to protecting our national security by ensuring that untrustworthy communications equipment is not authorized for use within our borders," said chairwoman Jessica Rosenworcel in a statement.
ITIF: Why Congress Should Restore Full Expensing for Investments in Equipment and Research and Development
As the 2017 Tax Cut and Jobs Act (TCJA) expires, two changes to the tax code will disincentivize investments in innovation and production and reduce the country’s long-term economic growth and competitiveness: 1. Full expensing of qualified equipment will start phasing out in 2023. 2. A five-year amortization schedule for R&D expenses starting in 2022
By not allowing businesses to deduct the full real value of their expenditures on capital equipment and R&D from their income when filing taxes, the federal government is decreasing the financial incentive firms have to make these investments. Doing away with these incentives also makes the United States a less attractive destination for investment, especially compared with other high-income countries. The last few decades have been marked by declines in corporate tax rates and expansions of investment subsidies across Organization for Economic Cooperation and Development (OECD) countries to become more globally competitive and attractive to multinational corporations. In an increasingly globalized world, corporate tax changes do not exist in a vacuum. Policymakers need to consider international as well as domestic effects.
Powell May Hand The Markets A Massive Jolt Of Reality This Week
Chair Jerome Powell is expected to this week cement expectations that the Federal Reserve will slow its pace of interest-rates increases next month, while reminding Americans that its fight against inflation will run into 2023. Powell is scheduled to deliver a speech, nominally focused on the labor market, at an event on Wednesday hosted by the Brookings Institution in Washington. It will be one of the last from policymakers before the start of a quiet period ahead of their Dec. 13-14 gathering.
This is Powell's chance to regain control over the markets in his battle against inflation. Financial conditions have eased dramatically in recent weeks, not helping the Fed.
Apple to Lose 6 Million iPhone Pros From Tumult at China Plant
Turmoil at Apple Inc.’s key manufacturing hub of Zhengzhou is likely to result in a production shortfall of close to 6 million iPhone Pro units this year, according to a person familiar with assembly operations. The shares slumped in early US trading.
The situation remains fluid at the plant and the estimate of lost production could change, the person said, asking not to be named discussing private information. Much will depend on how quickly Foxconn Technology Group, the Taiwanese company that operates the facility, can get people back to assembly lines after violent protests against Covid restrictions. If lockdowns continue in the weeks ahead, production could be set further back. Apple’s shares fell 1.9% in premarket trading in New York Monday. They have declined 17% so far this year.
Rolls-Royce Successfully Tests Hydrogen-Powered Jet Engine
Britain's Rolls-Royce said it has successfully run an aircraft engine on hydrogen, a world aviation first that marks a major step towards proving the gas could be key to decarbonising air travel. The ground test, using a converted Rolls-Royce AE 2100-A regional aircraft engine, used green hydrogen created by wind and tidal power, the British company said on Monday.
Hydrogen is one of a number of competing technologies that could help the aviation industry achieve its goal of becoming net zero by 2050. Planemaker Airbus is working with French-U.S. engine maker CFM International to test hydrogen propulsion technology. Rolls and its testing programme partner easyJet (EZJ.L) are seeking to prove that hydrogen can safely and efficiently deliver power for civil aero engines.
As More States are Legalizing Marijuana, How Should Employers Respond?
After the midterm election about 48% of the U.S. population lives in a state where cannabis is fully legalized. and more than 75% live in a state where the drug is legal for medical use. That translates into more than 155 million Americans, and by extension employees, who will live in states where marijuana is legal.
Jonathan Ash, a partner and practice lead at Fox Rothschild LLP’s Labor & Employment Department in Princeton, says that, given this expansion, employers across the country should revisit their drug and alcohol policies to determine whether they comply with any new laws or updates. “While employers can still prohibit the use and possession of marijuana in the workplace, their testing procedures, including reasonable suspicion testing, may need to be reexamined,” he says. “They should also assess whether their workforce has any safety-sensitive positions, such as operation of heavy machinery, that may require additional considerations.”
Global Steel Output Continues to Drop
Raw steel production slipped to 147.3 million metric tons in October, down -3.0% from September but even with the October 2021 output. Data supplied by the World Steel Assn. further shows that year-to-date raw-steel tonnage for 64 nations stands at 1.55 billion metric tons, which is -3.90% less than last year’s January-October total tonnage. The YTD total is on track with World Steel’s recent short-term outlook for steel demand, which foresees a 2022 contraction of -2.3% from last year – to 1.796 billion metric tons.
World Steel has identified inflation, the tightening money supply, supply shortages, war, and other factors for the decrease in demand – and steelmakers have been adjusting their output levels for much of the past 12 months in order to adapt to the worsening conditions. Excess steel coils, slabs, and billets that remain in inventories could prolong steelmakers’ readiness to profit once demand recovers
Merriam-Webster Picks ‘Gaslighting’ as Word of the Year
American publishing company Merriam-Webster has selected “gaslighting” as its 2022 word of the year, citing a rise in interest in the word over the past few years as misinformation and conspiracy theories become more rampant. Merriam-Webster defines gaslighting under its traditional use as a “psychological manipulation of a person” over time that causes the victim to “question the validity of their thoughts.”
Gaslighting saw a 1,740 percent increase in lookups in 2022, according to Merriam-Webster, and the word has rapidly evolved in meaning. Another definition included by Merriam-Webster is the “act or practice of grossly misleading someone especially for one’s own advantage.”