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China-led development bank halts business in Russia, Belarus



A China-led development bank has suspended all business with Russia and Belarus, a sign of the limits of Beijing’s support for Moscow as it faces sanctions and censure over its war in Ukraine.

The Asian Infrastructure Investment Bank (AIIB) said it had put all activities related to the two countries on hold in light of “the evolving economic and financial situation”.

“Under these circumstances, and in the best interests of the Bank, Management has decided that all activities relating to Russia and Belarus are on hold and under review,” the Beijing-based institution said in a statement on Thursday.

The multilateral development bank, which has 105 members worldwide, did not elaborate on the reason for its decision, but extended “its thoughts and sympathy to everyone affected”.

“Our hearts go out to all who are suffering,” the bank said.

The announcement comes after several Chinese state-owned financial institutions, including the Bank of China, ceased financing for deals involving Russian oil and firms.

Gary Ng, a senior economist at Natixis in Hong Kong, said the AIIB’s move was “symbolic” as the bank had been financing just two projects in Russia to the tune of $800m and none in Belarus.

“Even though most of the cross-border lending from China to Russia may take place with policy banks, this is still another example that China may not unconditionally support Russia as it would be weighing its own benefits and costs from any geopolitical move,” Ng told Al Jazeera.

“The retreat of the AIIB shows the pressure of global financial sanctions on Russia has become more apparent in supranational organisations,” Ng added.

China and Russia have become increasingly close in recent years, often aligning in opposition to perceived interference by the United States and its allies.

Last month, Chinese President Xi Jinping and Russian President Vladimir Putin declared that the friendship between their countries had “no limits” and no “forbidden” areas of cooperation.

Beijing has declined to condemn Moscow’s invasion of Ukraine, abstaining from a United Nations resolution calling on Putin to withdraw his forces, and expressed its opposition to “all illegal unilateral sanctions”.

Chinese customs authorities last month lifted import restrictions on Russian wheat, an industry worth some $7.9bn annually, fuelling speculation the Chinese market could emerge as a key economic lifeline for the beleaguered Russian economy, which is facing unprecedented international isolation.

The two sides have also ramped up cooperation in energy, including the signing last month of a 30-year contract for Russia to supply gas to China via a new pipeline.

Despite deepening ties, Beijing is widely viewed as reluctant to openly violate sanctions, which could put it at risk of being cut off from Western export markets and the US dollar-centric international financial system.

China’s trade with Russia came to $146.9bn in 2021, about one-tenth of its combined trade with the US and European Union.

Tim Harcourt, chief economist at the Institute for Public Policy and Governance at the University of Technology Sydney, described the AIIB’s decision as significant “even given the little work done in Russia” by the development bank.

“It shows China backing away from Russia and the ‘no limits partnership’ between Xi and Putin,” Harcourt told Al Jazeera.

China’s Xi launched the AIIB in 2016 as an alternative to the World Bank and International Monetary Fund, financial institutions perceived to be dominated by Western interests. China is the AIIB’s biggest shareholder, with 31 percent of the bank’s $20bn paid-in capital.


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US stocks suffer biggest daily drop in almost two years



US stocks posted the biggest daily drop in almost two years as investors assess the impact of higher prices on earnings and prospects for monetary policy tightening on economic growth. The dollar and Treasuries gained amid a pickup in haven bids.

The selloff sent the S&P 500 down 4%, with the plunge in consumer shares surpassing 6%. Target Corp. tumbled more than 20% in its worst rout since 1987, after trimming its profit forecast due to a surge in costs. Shares of retailers from Walmart Inc. to Macy’s Inc. were caught in the downdraft. The Nasdaq 100 fell the most among major benchmarks, dropping more than 5% as growth-related tech stocks sank. Megacaps Apple Inc. and Inc. slid at least 5%.

Treasuries rose across the board, sending the 10- and 30-year Treasury yields down as much as 11 basis points. The dollar rose against all of its Group-of-10 counterparts, except the yen and Swiss franc. Gold caught bids in the move into havens.

The benchmark S&P 500 is emerging from the longest weekly slump since 2011, but any rebounds in risk sentiment are proving fragile amid tightening monetary settings, Russia’s war in Ukraine and China’s Covid lockdowns.

In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell said Tuesday that the US central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat. Chicago Fed President Charles Evans said Wednesday he sees a half-point rate increase at next month’s meeting and “probably thereafter.”

In Europe, new-vehicle sales shrank for a 10th month in a row as the industry remains mired in supply-chain crises, while euro-area inflation plateaued at a record high. Meanwhile, UK inflation rose to its highest level since Margaret Thatcher was prime minister 40 years ago, adding to pressure for action from the government and central bank.

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Netflix lays off 150 employees due to slow revenue growth and business needs



Netflix is reportedly laying off nearly 150 employees in the coming days due to disappointing earnings and slow revenue growth.

According to a Variety report, the Amazon Prime Video rival might also terminate its contract with contractual contributors.

The layoffs are about 2 per cent of Netflix’s US workforce. “As we explained [in reporting Q1] earnings, our slowing revenue growth means we are also having to slow our cost growth as a company. So sadly, we are letting around 150 employees go today, mostly U.S.-based,” a Netflix spokesperson said.

The statement further revealed that the decision was primarily driven by business needs rather than individual performance. Netflix reported $7.87 billion in Q1, which was short of Wall Street’s estimates of $7.93 billion.

The report further reveals that nearly 70 part-time employees in Netflix’s animation studio will have to pack up and leave. A report by The Verge stated that about 26 contractors working on Netflix’s fan-focused Tudum website might see a termination.

“A number of agency contractors have also been impacted by the news announced this morning. We are grateful for their contributions to Netflix,” the company said.

Netflix, in its recent earnings call, revealed that it lost thousands of subscribers, which is a first for the company in over a decade.

The company expects to lose an additional 2 million in the next quarter due to the ongoing war between Russia and Ukraine. Netflix has shut shop in Russia following the country’s invasion of Ukraine.

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Dollar breaks N600/$ ceiling ahead of party’s presidential primaries



Less than two weeks to the presidential primaries of the political parties ahead of the 2023 elections, the US dollar has broken the N600/$ mark at the parallel market and set the tone for a possible uptick in the coming days.

The black market rate had traded between N570/$ and N590/$ since the beginning of the year while the Central bank of Nigeria (CBN)’s intervention at the Nigerian Autonomous Foreign Exchange (NAFEX) has kept its rate under N420/$.

With the latest slump of the naira, the arbitrage between the parallel and NAFEX, which is regarded as the official window, is now inching close to N200/$. The spread measures the deviation of the controlled official rate from the real rate of exchange, with experts calling for liberalisation of the market to enable naira to find its true value.

The World Bank and the International Monetary Fund (IMF) have also warned of the repercussions of sustaining an artificially high naira while calling on the CBN to embark on market reform.

But the CBN has maintained that Nigeria, with the current high level of importation and underperformance of the industrial sector, cannot afford to float the naira completely as the exchange rate could spill out of control.

At the Lagos street market, yesterday, naira traded between N595/$ and N600/$ band. With the presidential primaries of the two leading political parties scheduled for Abuja next weekend, there is an expectation the demand pressure has not peaked, suggesting that naira is in for a protracted pressure.

At peer-to-peer (P2P) trading platforms, the dollar has been trading above N600 in the past three weeks, which had signaled that the black market rate could break through the psychological ceiling.

With that eventually happening, naira could be on a renewed free fall.

But there is also hope that it is a season to offload warehoused hard currencies for political campaigns to possibly shore up supply.

Experts are not sure where rising demand and supply of foreign exchange would lead the naira to, but the interplay between the movements of the two variables is a key factor in predicting the value of the naira in the tense political season. Godwin Owoh, a professor of applied economics, advised Nigerians to prepare for a steeper fall of the local currency, saying partisan politics and intra-party meetings, which are highly dollarised would bring much pressure to bear.

The CBN has promised to continue to protect the naira but its ability could be constrained by the equally falling reserve. For the first time in eight months, the gross reserves dropped below N39 billion on Monday, when CBN data put the figures at N38.92 billion. Effectively, the country’s reserves have depleted by $160 billion year-to-date.

Bismarck Rewane, an economist, had projected the reserve to collapse to $32 billion in the year as he expected the CBN to spend $8 to $10 billion defending the naira, which is taking much pressure from excessive importation.

The value of Nigeria’s imports increased by 64 per cent last year to N20.84 trillion. Sadly, the value of exports increased at a slower rate – 51 per cent – to N18. 91 trillion in the same period. The falling reserves and rising imports have put the apex bank in dire straits in its efforts to continue to defend the naira.

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