China Vice Premier Liu He joined the chorus of cautious optimism from the global elite in Davos by projecting that the world’s second-largest economy will normalize as Covid restrictions ease.
(Bloomberg) — China Vice Premier Liu He joined the chorus of cautious optimism from the global elite in Davos by projecting that the world’s second-largest economy will normalize as Covid restrictions ease.
Despite tentative signs of economic resilience, the lack of snow on the slopes is a reminder of the climate crisis that will dominate much of the discussions in the Swiss Alps. Concerns about political stability are also high on the agenda and other topics will include the end of the era of cheap money and food and energy security.
While the business and finance elite are back in their regular January slot after a three-year hiatus due to the Covid pandemic, there are fewer heavy hitters from politics. Russia’s war in Ukraine and tensions between the US and China have made feel-good appearances at the event in the Alps awkward.
The only leader from a Group of Seven country traveling to the event will be German Chancellor Olaf Scholz. He’ll be speaking to Bloomberg TV later on Tuesday from our studio in Berlin.
Key Developments
- China Stirs Hope for Global Growth in 2023 Even as Davos Worries
- Saudi Arabia Open to Talks on Trade in Currencies Besides Dollar
- UBS CEO Says Bank Is ‘Bucking the Trend’ as Rivals Fire Bankers
- OPEC Chief Is ‘Cautiously Optimistic’ About Global Economy
(All times CET)
Coinbase Plans Operational Review (1:50 p.m.)
Coinbase Global Inc. will assess its operations this year to ensure they are appropriately-sized for each market, Faryar Shirzad, the crypto exchange’s chief policy officer, said in an interview.
The San Francisco-based firm said this month it would close the bulk of its operations in Japan as part of a move to adjust its international investment. It also plans to cut 20% of its workforce globally, equal to roughly 950 employees.
Sanctions Aren’t Breaking Putin’s Russia (1:30 p.m.)
Sanctions against Russia will take years to bring Vladimir Putin to heel because oil and gas revenues are holding up, trade is being re-routed and the economy is well managed, according to the chief economist of the European Bank for Reconstruction and Development. Hopes that sanctions from US and Europe would tip the balance of power was “unrealistic,” Beata Javorcik said in an interview.
Russia’s resilience is visible in its economic performance, with the ruble currently 5% higher than before the war. Shortly after sanctions were announced, the International Monetary Fund forecast an 8.5% contraction in GDP in 2022. Its latest forecast from October was a fall of just 3.4%. For 2023, it expects the economy to shrink 2.3%. The EBRD has also upgraded its Russia outlook.
The slow impact of sanctions is frustrating Ukrainian politicians. Oleksii Goncharenko, a member of the Ukrainian parliament who is in Davos, called for the assets of the 1,200 sanctioned Russians linked to the Putin regime to be seized and the money used to help fund Ukraine’s defense and reconstruction.
BlackRock to Set Up Ukraine Reconstruction Fund (1 p.m.)
Ukraine’s government hired BlackRock Inc. to help build a reconstruction fund for the country and the fund has “the whole team tasked,” Chief Executive Officer Larry Fink said in an interview with Bloomberg TV.
“Our job is to make sure that the opportunities for private capital can come to Ukraine, and we will have a fair and just return on that,” Fink said, adding that the fund is also helping Ukraine to hire the right team. “Our job is to make sure that the new Ukraine is an open society, open economy and capital will be there.”
Ukrainian President Volodymyr Zelenskiy last year discussed having BlackRock provide free consultation to his government on both a fund and support for the country’s economy.
Citigroup’s Fraser Predicts Mild Recessions (12:45 p.m.)
Citigroup Inc.’s chief executive officer said the bank is expecting “mild recessions,” as she joined other Davos attendees in expressing tentative optimism in the state of the global economy.
“I think the general view in the States, certainly one we hold at Citi, is we expect to see a mild recession, largely driven by the painfully persistent service inflation,” Jane Fraser said Tuesday at a Bloomberg event at the World Economic Forum in Davos. “The vulnerabilities that amplified previous recessions around the world are not present.”
She noted that banks and consumer and corporate balance sheets are “in good shape, and I think that omens well for mild recessions when they come rather than ones that we have to be worried about.”
Singapore’s Sun Cable Link in Doubt (12:40 p.m.)
Billionaire Andrew Forrest, an investor in the developer of a massive solar-power cable between Australia and Singapore threw doubt on the project, at an interview in Davos. Sun Cable, which wants to build the $21 billion link, went into administration.
Read more: Tycoon Forrest Says Singapore Wants Green Fuels, Not Giant Cable
Forrest, through Squadron Energy, owns a 25% stake in Sun Cable is interested in taking over the company. However, he said that Singapore, a global commodities trading hub, is more interested in green fuels, such as hydrogen or ammonia, than in electricity.
Regulation Is the Hot Topic for Crypto (12:35 p.m.)
At an event space branded by stablecoin operator Circle — signs touting that they solve “real-world problems” adorn the walls — panelists discussed their expectations for UK and European regulation over the next 18 months.
In the UK, “there’s going to be a real emphasis on consumer protection,” said Isabella Chase, senior policy adviser at TRM Labs. She noted the prevalence of frauds and scams that have affected investors there as a key consideration for regulators.
Teana-Baker Taylor, Circle’s VP for policy and regulatory strategy for the UK and Europe, echoed the expected focus on consumer protection. She said she anticipated European regulators would also be paying close attention to market integrity, centralized trading platforms, and stablecoins.
Fink Says ESG Debate Has Turned Ugly (12:30 p.m.)
BlackRock’s Fink said the narrative around ESG investing has become ugly and is creating “huge polarization.” The 70-year-old has been outspoken about investing with environmental, social and governance goals, making it a focal point in his annual letters to the industry.
BlackRock has become a political punching bag from forces on both ends of the spectrum, with some on the right alleging its policies harm the fossil-fuel industry and others on the left arguing it’s not doing enough to respond to climate change.
“I’m taking this very seriously,” Fink said in a Bloomberg TV interview. “For the first time in my professional career, attacks are now personal. They’re trying to demonize the issues.”
China Eyes Economic Normalization (12:25 p.m.)
China’s Liu took advantage of an international audience to explain where he sees the world’s second-largest economy heading as Covid-Zero restrictions are lifted.
Liu spoke hours after economic data came in stronger than expected, but with most China watchers still anticipating a bumpy recovery. Liu said he expects the economy to return to normal, with imports and investment among the drivers. He acknowledged risks remain in the property market.
Unilever Still Seeks Meaning in Mayonnaise (12:20 p.m.)
Unilever continues to espouse the importance of giving the food it sells “purpose”. Speaking on a panel in Davos, Unilever’s head of nutrition Hanneke Faber said the consumer giant’s Hellmann’s mayonnaise, a €2 billion brand, has spent its entire marketing budget on a campaign called “Make Taste Not Waste” encouraging customers to reduce how much food they throw out. The campaign will be showcased during the Superbowl in February.
Faber said it’s just one example of how Unilever is driving change. It wants to reduce waste, make food healthier and be transparent about the nutritional content of its products.
OMV Can Endure Without Russian Gas (12:15 p.m.)
Energy company OMV AG has enough alternative sources to serve customers with natural gas without Russian imports, if needed, CEO Alfred Stern told CNBC. Its own production, deliveries via a fully-booked LNG terminal in Amsterdam and long-term contracts in Norway and Italy have helped diversify supplies, he said.
Austria has traditionally relied on a long-term contract between OMV and Russia’s Gazprom to meet 80% of its gas needs. That dependence halved to 41% in November with some gas still arriving via Ukraine, according to data from energy regulator E-Control.
Winters Endorses UK’s Sunak (12 p.m.)
UK Prime Minister Rishi Sunak won a ringing endorsement from Standard Chartered CEO Bill Winters. Speaking on the fringes of the meeting, Winters offered hesitant support for the UK but backed the premier.
The decision to leave the European Union was a “huge negative” but “given the disaster of Brexit, it’s getting better,” he told Bloomberg. On Sunak, a former fellow financier who is not attending the meetings, he said he was “ten out of ten.” Winters’ comments follow positive news on the UK from a survey of global chief executives by PWC this week. Britain is the third most important country for investment, equal with Germany and behind the US and China, the poll found. The UK has moved up the rankings over the last three years.
Fed Rates ‘Won’t Return to Pre-Crisis Levels’ (12 p.m.)
Sticky inflation above the 2% target will force policy makers at the Federal Reserve to keep interest rates higher for longer, according to Harvard University professor Kenneth Rogoff.
“Inflation will eventually come down — maybe just to 2.5%, not to 2% — but interest rates aren’t going to come down to the same level as they were before,” Rogoff told Bloomberg TV. “I wouldn’t be surprised to have a Fed funds rate of 3.5% for quite a while from now.”
VdL Says EU Must Boost Clean Tech Funds (11:50 a.m.)
The EU should pass a new law to fast-track investments in clean tech and boost funding for the energy transition, Ursula von der Leyen said in outlining her response to a US climate law the bloc fears unfairly subsidizes American companies.
“To keep European industry attractive, there is a need to be competitive with the offers and incentives that are currently available outside the EU,” the president of the European Commission said in a speech. As part of a new Green Deal Industrial Plan, the bloc should temporarily adapt its state aid rules to make them faster and simpler from calculations to approvals, she said, adding that tax-break models are an option. Her plan opens the door to government funding for the production of specific clean tech projects.
Germany Waiting on US for Tanks Decision (11:45 a.m.)
A decision on sending Leopard battle tanks to Ukraine will be easier for Germany if the US sends equivalent vehicles to the war zone too, according to Economy Minister Robert Habeck.
The Green Party politician, who is also the vice chancellor, told Bloomberg TV that he is in favor of authorizing the shipment of the tanks, and also some belonging to Poland and Finland. “If America will decide that they will bring battle tanks to Ukraine, that will make it easier for Germany,” Habeck said. “You know our history, and we are little bit more reluctant there for understandable reasons.”
Ukrainian Minister Sees Chance for Growth (11:30 a.m.)
Ukraine may record a small amount of growth this year after the nation’s economy shrank by less than initially expected in 2022, Economy Minister Yulia Svyrydenko told Bloomberg TV. She pegged last year’s contraction at just over 30%, less than the 50% plunge forecast by economists.
Authorities should find a way to bring back Ukrainians from abroad, Svyrydenko said, adding that the country still needs power generators to help with electricity shortages caused by Russian missile attacks.
CS Bonuses ‘Won’t Look Great’ (11 a.m.)
Credit Suisse bankers ought not to expect significant bonuses after last year’s performance, Chairman Lehmann said in an interview with Bloomberg TV. “Obviously we had such a poor year, it was a horrifying year for Credit Suisse so I think people will have realistic expectations that it will not look great.”
Bloomberg reported last week that the Zurich-based bank is weighing cutting the bonus pool by about half compared with 2021. After a string of quarterly losses, the bank was forced to raise $4 billion in capital to fund a broad restructuring. The bank also suffered historic outflows of client funds, which Lehmann said had now “basically stopped.” “I’m rather optimistic for the remainder of the year,” he said.
EY Boss Warns Politics Driving US-China Rift (10:50 a.m.)
The growing threat of a major rift between the US and China is being driven by politicians, according to Carmine Di Sibio, global chairman and CEO of EY.
Business leaders are keen to retain links between the two countries, but Democratic and Republican politicians in the US are taking a harder stance and similar pressures are visible in the UK and Canada, Di Sibio said during a panel discussion. Anne Richards, chief executive officer of Fidelity International, said the West’s relationship with China has changed but there are important signs that the two sides want to retain links despite obstacles. Business is adapting to the greater risks by looking to secure suppliers alongside their Chinese ones, Richards said.
Downturn ‘Playing on Minds of CEOs’ (10:50 a.m.)
The size of the looming downturn is the biggest worry for company bosses this year, according to the boss of professional services group Marsh & McLennan Cos Inc.
“Everyone’s worried about the risks of a recession — not just a mild recession but a hard landing later in the year,” John Doyle told Bloomberg TV. “Things look OK right now but it’s quite obvious that central banks’ top priority is tamping down inflation and that’s going to have an impact.” Marsh & McLennan is also seeing growing interest in cyber risks, particularly since the invasion of Ukraine. “We need to bring more investors to the game to really deal with tail risks in cyber,” said Doyle.
OPEC Chief ‘Cautiously Optimistic’ (10:40 a.m.)
OPEC’s top official said he’s “cautiously optimistic” about the outlook for the global economy, as a recovery in oil demand in China is tempered by signs of fragility elsewhere.
“China is a big economic powerhouse” and there are “good signals” as it ends Covid-related lockdowns, OPEC Secretary-General Haitham Al-Ghais said in an interview with Bloomberg Television at the World Economic Forum in Davos on Tuesday. The oil producers’ group will do “whatever it takes” to keep world crude markets in balance, he said.
HK’s Chan Sees ‘Very Strong Rebound’ (10:40 a.m.)
Hong Kong’s economy will rebound “very strongly” this year as tourism and consumption revives after the border reopened, Financial Secretary Paul Chan told Bloomberg TV. “The first quarter may be slower, but then will pick up very fast,” he said, adding that there are also “signs of a stabilization” in the city’s property market after a decline in 2022.
The financial secretary is “optimistic” about the city’s market for initial public offerings recovering, and is seeking to lure companies in Southeast Asia and the Middle East to list in the city. “We are casting our net very wide, hopefully to attract more to come,” said Chan, who added that he will “never give up” in his pursuit of Saudi Aramco after the city’s attempt back in 2018.
Managers ‘Should Tackle Quiet Quitting’ (10:35 a.m.)
It’s the responsibility of managers and business leaders to prevent quiet quitting after the pandemic fundamentally changed working conditions, according to a panel of managers and human resources professionals.
“It’s a top-down leader’s job to solve this problem,” Vimeo Chief Executive Officer Anjali Sud said. “We need to communicate very differently,” she observed, adding that she doesn’t believe most leaders feel equipped to do so.
Gore Wants Climate Finance Reform (10:30 a.m.)
Al Gore, the former US vice president who now chairs Generation Investment Management, called for an urgent rebalancing of climate finance to ensure the developing world doesn’t get left behind.
The current mechanism, whereby poorer nations have very restricted access to the private finance needed to help them deal with the fallout from climate change, is “absolutely insane,” Gore said during a panel discussion. Failing to help poorer countries will ultimately hurt their richer peers, Gore said, because “88% of the projected increase in emissions comes from developing countries. But “they do not have practical access to private capital today.”
DP World Cautiously Positive (10:30 a.m.)
Container terminal giant DP World took a cautiously positive view on the global economy, saying pessimism may be overblown. Chairman and CEO Sultan Ahmed Bin Sulayem told Bloomberg TV that companies developed a resilience during the Covid pandemic that should help them cope with the slowdown.
The reopening of China will be the key factor in boosting world trade, though the impact won’t be immediate, with cargo volumes building toward the fourth quarter as backlogs of export goods are addressed, he predicted. DP World continues to view the UK as a focus for investment, despite financial and political upheaval, with the company spending £300 million ($366 million) on a fourth berth at its London Gateway container hub.
China Stirs Hope for Growth (10 a.m.)
China’s reopening and the resilience of advanced economies provide hope for the world to weather 2023 even if some struggle to grow, according to a panel on the prospect of a recession.
“If we look at the key event this year so far, definitely the reopening of China has to be the major event,” said Laura M Cha, chair of Hong Kong Exchanges and Clearing. “The lockdown of the last three years has created pent-up demand domestically, so I would see increased domestic consumption and of course the manufacturing sector will pick up. All those will be good factors for global growth.”
Hamers Says High Inflation Here to Stay (9:40 a.m.)
UBS CEO Ralph Hamers said that 2023 will be the year of inflation and that even as it recedes each month, he expects it to remain much higher than in the past.
“Higher inflation rates are here to stay,” he told Bloomberg TV, adding that if Europe does fall into recession, it’s likely to be short and shallow. The Swiss bank is still in hiring mode, even as some competitors cut jobs, though is looking more at filling its most important vacancies, he added. “We are not in retrenchment mode on staff, we are hiring for critical jobs,” Hamers said.
Man U Targets the Davos Crowd (9:30 a.m.)
Manchester United is trying to score in Davos by taking over one of the shopfronts on the promenade, usually home to Wall Street banks and tech companies. The football club — a partner with the World Economic Forum since 2019 — is bringing goalkeeping legend Peter Schmeichel to meet delegates at a Tuesday nightcap this year.
The American Glazer family that owns the club is looking for an investor and might be prepared to sell up, but that doesn’t seem to be the purpose of the Red Devils’ Alpine adventure. “Manchester United is proud to be the first sports team to partner with the World Economic Forum,” a spokesperson said. “We’re in Davos to explore ways to maximize the impact” of the team’s global fan base.
Poland Sees Germany Under Pressure on Tanks (9:25 a.m.)
Polish President Andrzej Duda said pressure is growing on Scholz’s government in Berlin to give the green light to send German-made Leopard battle tanks to Ukraine.
Poland has pledged to supply about 14 Leopards and the country is talking to “a few allies” to ensure additional vehicles, Duda said during a panel discussion. Shipping them has the potential to start “a new chapter” of the war, he said, adding that Poland already supplied more than 260 of its Soviet-model battle tanks last year.
Lehmann Doesn’t See Recession (9:15 a.m.)
Credit Suisse Chairman Axel Lehmann said that the bank’s high net-worth clients still have plenty to invest, and he’s optimistic that a global recession can be avoided, with China reopening and “huge growth” coming from India.
“We are entering into a multipolar world, it is not a global recession,” Lehmann said on a panel with Bloomberg TV’s Francine Lacqua.
ECB’s Centeno Upbeat on Economy (9 a.m.)
European Central Bank Governing Council member Mario Centeno said the euro-area economy is performing better than many anticipated in the face of record inflation and the energy crisis that erupted after Russia attacked Ukraine.
“The economy has been surprising us quarter after quarter,” Centeno told the same panel. “The fourth quarter in Europe will be most likely still positive. Maybe we’ll be surprised also in the first half of the year.”
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