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China’s middle class looks to flee as Covid policies bite

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Workers and security guards in protective gear outside a locked down residential estate in Beijing
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Alan Li no longer sees any future for his family in China after harsh Covid rules decimated his business, upended his son’s education and left his country out of step with the rest of the world.

He has given up hope of a return to normal after months of lockdowns in Shanghai, and now plans to close his firm and move to Hungary, where he sees better opportunities and his 13-year-old son can attend an international school.

“Our losses this year mean that it’s over for us,” he told AFP wearily, asking to withhold his real name.

“We have been using our own cash savings to pay 400 workers (during the lockdown). What if it happens again this winter?”

Shanghai’s long shutdown, which brought food shortages and protests, has driven some to reconsider staying in a country where livelihoods and lifestyles can vanish at the whim of the state.

Schools have been closed and exams called off, including assessments for applying to American universities.

Li is frustrated that his son’s expensive bilingual schooling has been mostly online for two years, and he is anxious about the way Beijing has tightened oversight of the curriculum.

“This is a waste of our children’s youth,” Li said.

Being fairly well off, he has been able to take advantage of a European investment scheme that grants him and his family residency in Budapest.

“Many people know that if they sold all their assets they could ‘lie flat’ in a European country,” he said, using a slang phrase meaning to take it easy.

Beijing-based immigration consultant Guo Shize told AFP his company has seen an explosion of enquiries since March, including a threefold increase in Shanghai clients.

Even after the lockdown eased, requests continued flooding in at more than double the usual level.

“Once that spark has been lit in people’s minds, it doesn’t die down quickly,” he said. 

– Exit ban –

Censors have sought to suppress discussion of emigration, prompting nimble internet users to adopt the term “run” instead.

Searches for the term on messaging app WeChat peaked during Shanghai’s shutdown.

But as more people consider ways to leave, Beijing has doubled down on strict exit policies for Chinese citizens.

All “unnecessary” travel out of the country has been banned. Passport renewals have been all but halted, with authorities blaming the risk of Covid being carried into the country.

In the first half of 2021, immigration authorities issued only two percent of the passports given out in the same period in 2019.

One woman who emigrated to Germany told AFP she receives dozens of messages from Chinese people looking for tips on escaping.

Emily, who did not want to use her real name, tried to help a relative obtain a new passport to take up a job in Europe, but the application was denied.

“It’s like being a child who wants to go to their friend’s house to play but their parents won’t let them leave,” she said, adding that she has heard of passports being sold for up to 30,000 yuan ($4,500) on the black market.

– ‘Absolutely insane’ –

A Chinese freelancer told AFP he was turned back by immigration officers while attempting to fly to Turkey for work last October, despite having already checked in.

“My itinerary sounded too suspicious to them. They took my passport into an office and 15 minutes later told me I do not meet the requirements” for leaving, he said on condition of anonymity. “It was absolutely insane.”

He managed to leave weeks later by entering semi-autonomous Macau on a different travel document, before catching an onward flight.

Some are disillusioned with Beijing’s growing controls, which have been ramped up during the pandemic.

“I just want to live in a country where the government won’t crudely interfere in my personal life,” said Lucy, a 20-year-old student at an elite Beijing university involved in LGBTQ and Marxist activism.

The virus policies had “allowed the government to control and monitor everything”, she said.

“Perhaps rather than accepting and adapting to this system, we must go elsewhere and create a new life.”

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South Korean truckers end week-long strike

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South Korean truck drivers protest outside a container port in Incheon, near Seoul
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South Korean truck drivers will return to work Wednesday after reaching an agreement with Seoul to end an eight-day protest over wages and fuel costs that had snarled global supply chains.

The truckers’ industrial action had disrupted production and shipments for the crucial steel, petrochemical and automobile sectors, in an early test for new President Yoon Suk-yeol who has vowed to deal with labour disputes “strictly”.

The Cargo Truckers Solidarity Union reached an agreement with the transport ministry late Tuesday and truckers will return to work from Wednesday, the ministry said in a statement.

The ministry said is “relieved” that the union decided to end their strike, adding “we are very sorry for causing concern for the people due to discruptions in logistics and production”.

The truckers called the strike to protest over sharp rises in fuel prices — with inflation at its highest level in more than a decade — and the ending of a minimum wage guarantee.

The Safe Trucking Freight Rates System was due to expire later this year but the two sides reportedly agreed to keep it in place.

The policy was designed to help prevent dangerous driving by truckers and guarantee minimum freight rates.

“All we are asking for is to remove the uncertainty in our lives,” union member Cho Jeong-jae told AFP Tuesday at a protest in Incheon, a city bordering Seoul.

“Our livelihood is at stake.”

Cho said the rising cost of fuel had not been reflected in the fees businesses pay to transport their goods.

“When fuel prices drop, it’s reflected very quickly by lowering freight fees,” Cho said. “But that’s not the case when fuel prices rise.”

The strike in Asia’s fourth-largest economy was the latest blow to international supply chains that are already strained by Covid-19 lockdowns in China, and Russia’s invasion of Ukraine.

South Korea is the world’s largest memory chip exporter and home to global chip powerhouse Samsung Electronics, as well as large car companies including Kia and Hyundai Motors.

The country’s trade ministry said Tuesday that the action had resulted in losses for businesses of about 1.6 trillion won ($1.2 billion).

Prime Minister Han Duck-soo had called for an end to the strike at a cabinet meeting on Tuesday, saying “it’s causing a major setback to the logistics network.”

On the campaign trail, President Yoon — a political novice — had vowed to be strict on labour disputes and indicated he was more pro-business on issues such as minimum working hours.

At least 23 members of the Cargo Truckers Solidarity Union have been arrested for “illegal activities” at the protests, according to the transport ministry.

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Asian markets enjoy post-rout calm as traders await Fed hike

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Shares in the management agency behind K-Pop band BTS plunged 27 percent after the group announced they were taking an indefinite break
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Asian equities were mixed Wednesday with investors nervously awaiting a Federal Reserve interest rate decision that has taken on greater significance since a forecast-busting inflation report sent shockwaves through world markets.

Trading floors saw a sea of red at the start of the week after data showed US consumer prices soared at their fastest pace in four decades last month, confounding hopes they were stabilising and putting pressure on officials to act.

The news ramped up bets that the central bank would hike interest rates at a steeper and faster pace than expected as it struggles to retain credibility.

Before Friday’s data, the Fed had been tipped to lift borrowing costs by half a point when its policy meeting ends Wednesday but investors are now widely anticipating a three-quarter point increase, with some even suggesting one percentage point.

The moves fuelled worries that the tighter monetary conditions will deal a blow to the US economy and potentially send it into recession next year.

Still, many observers say acting now is the only option available to policymakers if they want to rein in prices and prevent stagflation.

“The sooner they are going to be clear about how quickly they are going to raise rates and what is an acceptable rate of inflation for them, the sooner markets will calm down,” Wincrest Capital’s Barbara Ann Bernard told Bloomberg Television.

And StoneX Financial’s Matt Simpson added: “A bullish outcome for risk-appetite is the well-telegraphed 75-basis-point hike, conviction from the Fed that they’ll manage a soft landing, alongside a downwardly revised CPI forecast for good measure”.

But he warned that a half-point increase “could inadvertently weigh on sentiment as markets are concerned the Fed aren’t taking inflation seriously enough”.

While most of Wall Street and Europe ended down, they saw less turbulent action than Friday and Monday.

Asia was mixed, with some markets enjoying a bargain-buying.

Hong Kong, Shanghai, Singapore, Wellington, Taipei and Jakarta were all in positive territory, while Tokyo, Sydney, Seoul and Manila slipped.

While there is a little calm ahead of the Fed announcement, commentators warn that uncertainty will continue to course through trading floors for some time.

Strategist Louis Navellier said markets could go one of two ways after the meeting.

“The big unknown is will the market have a relief rally thinking that inflation is finally being seriously addressed and will therefore be tamed sooner than feared?

“Or will the move create new sellers from fears that the Fed is panicking and may hasten a recession by overshooting as it chases inflation?

“Either way, rates will be rising in an attempt to slow demand in order to slow inflation and further volatility is almost guaranteed.”

In company news, the management agency of K-pop supergroup BTS plunged by a quarter in Seoul after the band announced they were taking an indefinite break.

The seven members, who have generated billions of dollars for South Korea’s economy, made the shock announcement on Tuesday.

On Wednesday morning the band’s label HYBE collapsed about 27 percent, wiping $1.6 billion off its market valuation.

– Key figures at around 0230 GMT –

Tokyo – Nikkei 225: DOWN 0.7 percent at 26,435.01 (break)

Hong Kong – Hang Seng Index: UP 1.0 percent at 21,281.78

Shanghai – Composite: UP 1.0 percent at 3,320.70

Euro/dollar: UP at $1.0445 from $1.0420 late Tuesday

Pound/dollar: UP at $1.2040 from $1.1993

Dollar/yen: DOWN at 135.17 yen from 135.33 yen 

Euro/pound: DOWN at 86.77 pence from 86.84 pence

Brent North Sea crude: UP 0.3 percent at $121.47 per barrel

West Texas Intermediate: UP 0.3 percent at $119.24 per barrel

New York – Dow: DOWN 0.5 percent at 30,364.83 (close)

London – FTSE 100: DOWN 0.3 percent at 7,187.46 (close)

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Ultra-fast delivery firms face post-pandemic hangover

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Germany-based delivery firm Gorillas has laid off 300 workers
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Prathamesh Jathar is one of many brightly dressed riders zipping through the streets of Berlin, dropping off groceries just minutes after the orders come in.

The 25-year-old Master’s student from Mumbai could be a poster-child for the multibillion-dollar “quick commerce” sector, but instead he symbolises the malaise. 

“Working conditions are terrible,” he said, complaining that his employer, Turkish start-up Getir, fails to supply safety equipment or managerial support and did not tolerate unionisation — claims the firm denies.

Worker discontent, a drop-off in investment and reduced demand all suggest a hard landing from the stellar growth of the pandemic era.

Millions turned to grocery delivery firms during pandemic lockdowns, and the firms gobbled up billions in venture capital and other investment.

But Getir recently announced “with a heavy heart” it was letting go 14 percent of its global workforce — several thousand staff. 

German-based outfit Gorillas fired 300 people, with its boss in France, Pierre Guionin, telling AFP it was a necessary step “to be stronger and more profitable in the long term”.

The path to profitability, though, is beset by potential pitfalls. 

– Capital flight –

“Some of these companies raised too much money and the valuations at which they raised make absolutely no sense,” said Hendrik Laubscher, an analyst at Blue Cape Ventures in South Africa.

Getir achieved a valuation of almost $12 billion earlier this year, US start-up Gopuff was valued at $15 billion.

But rising inflation and slowing economic growth have sent investors fleeing from riskier tech investments and left many consumers facing a cost of living crisis.

Smaller firms like Fridge No More and Buyk have gone to the wall, and analysts say some of the remaining platforms have burnt through cash in pursuit of customers and could face a tricky future.

The rapid growth in customer numbers seems likely to end — almost one quarter of Europeans using ultra-fast delivery intend to reduce or end their use of such apps, according to a recent survey by McKinsey consulting firm.

As competition intensifies and firms look for margins, online message boards are abuzz with complaints from staff with all the main platforms, and workers collectives have begun to spring up.

Prathamesh Jahar said the way he was treated amounted to exploitation. Other Getir workers in Berlin said they had similar experiences.

“We reject all allegations,” a Getir spokesman told AFP, listing all the equipment and support it offers workers.

He also rebuffed the anti-union label, saying: “The opposite is true: Getir Germany supports the efforts of employees to form a works council.”

Getir and Gorillas have made a point of offering workers contracts and moving away from the casual labour associated with the gig economy.

– Dark stores –

Another difficulty that has beset the industry is a backlash against so-called dark stores –- the city centre warehouses the firms use as delivery hubs.

The companies were able to buy shops cheaply during the pandemic but the prospect of shuttered warehouses taking over shopping streets has gone down badly with local authorities in the United States and Europe. 

The industry is looking for solutions. 

Gopuff, for example, has started to open some of its hubs to shoppers in New York.  

So the combative start-ups have essentially become the thing they wanted to destroy. 

“If they are just a convenience store that delivers, what is the difference,” said Insider Intelligence analyst Blake Droesch. 

Also several firms have started to make deals with large supermarket chains, embedding themselves further into the existing ecosystem. 

– ‘Marketing gimmicks’ –

The future of the industry hinges on whether people are willing to pay for ultra-fast delivery. 

Analysts and industry figures reckon there is definitely a future for the business.

“The way people get ahead is by offering faster delivery,” said Droesch, describing himself as “bullish”. 

“That is how Amazon got where it is now, they figured out ways to get people products they needed way faster than the other guys.” 

But some of the claims of disruption and revolution were “marketing gimmicks”, said Laubscher, and the future was likely to be slower and less dramatic than promised. 

“I don’t think it really matters if you get the item delivered in 10 to 20 minutes,” he said, describing 60 minutes as perfectly adequate. 

Bearing out his analysis, South Korean firm Coupang has nine million customers and runs a profitable business operating a same-day service.

With bigger baskets and smaller promises, Coupang’s strategy could show the way for its more unruly Western cousins.

“I can’t imagine my life without Coupang anymore,” said 35-year-old Lee Seung-yeon, an office worker from Seoul. 

“I don’t have to walk back home with heavy groceries and it’s cheaper.”

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