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Shanghai euphoria tempered by deep wound to China’s economy

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Shanghai is slowly coming back to life after a two-month lockdown that has slammed small businesses
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Orders have evaporated at Zhou’s textile company based just outside Shanghai, a city now stumbling free from a two-month lockdown that has left small businesses on life support.

Sales are on “a very serious downward slope” and layoffs are imminent at his factory, owner Zhou told AFP, asking for his company to remain unidentified.

The firm is based in Zhejiang province, the anteroom to Shanghai’s cavernous consumer and manufacturing market.  

His is one of tens of thousands of small enterprises clinging to life as China’s strict zero-Covid policies drive a crippling economic slowdown.

Shanghai, a city of 25 million, is the centre for innumerable supply lines that radiate across the country’s eastern seaboard, including Tesla cars and iPhones.

For Zhou, survival will be his only thought over the next two months in an economy whose growth forecast has been clipped by rating agencies.

“I will have to fire people,” Zhou said, as he scours for customers to fill his order book.

– Supply chains chained –

Beijing is tied to a strategy of eliminating Covid outbreaks through harsh lockdowns and mass testing, even as most of the rest of the world has chosen to live with the virus.

That has meant closing factories, disrupting logistics, and squeezing travel to almost zero for weeks on end in major manufacturing hubs including Shenzhen and Shanghai, home to the world’s busiest container port.

Factory activity nationwide plummeted to a two-year low in April after Shanghai shut its 25 million residents at home while multiple Omicron-driven outbreaks bubbled up elsewhere, with activity continuing to shrink — albeit at a slower pace — into May.

The slowdown has choked entire supply lines.

“Downstream factories, stores and businesses are all affected,” Xu Xuebing, owner of Shanghai-based wood supplier Sam Wood told AFP.

“The impact is big… I didn’t even (try to) evaluate how much I have lost during the lockdown,” Xu said, adding he hopes the next two to three months could see a bounce-back.

Shanghai’s lockdown has calcified businesses across China, analysts say, with fears any new virus clusters could see swathes of the country once more plunged into lockdown.

“Lingering uncertainties” are bad for business confidence, Peiqian Liu, China Economist at NatWest Markets, told AFP.

 – Constant uncertainty –

Reopening also does not guarantee total recovery, Zhaopeng Xing, senior China strategist at ANZ Research, warned.

“Mobility inside Shanghai is lifted,” Xing said. 

“But the restrictions when you go outside of Shanghai are still there.” 

“A lot of logistics issues haven’t been restored 100 percent to previous levels,” Xing said, adding “the losses of the past two months” would not be easy to recover from.

Spooked by the unpredictability and harshness of the Shanghai lockdown, foreign businesses have also raised fears over their futures in China.

Meanwhile, experts say smaller enterprises will shy away from hiring “due to the uncertainty of business environment from future lockdowns,” Iris Pang, chief economist for Greater China at ING, told AFP. 

China’s urban youth unemployment rate hit 18.2 percent in April, according to the National Bureau of Statistics.

– Staying alive –

Sagging economic indicators have alarmed Chinese authorities, who are now rushing to inflate confidence and prop up ailing sectors.

The central government has said it will offer tax relief and a bond drive to help industries while increasing government procurement from smaller businesses.

But analysts are cautious about China’s growth in the coming months, with Moody’s on Monday lowering its annual growth forecast to 4.5 percent. 

Beijing is likely to “hand out its stimulus as fast as possible”, Natixis economist Gary Ng said.

“But the rebound may not arrive in Q3 2022 and it is unlikely to see a big change in the Covid-19 policy until the year-end,” he added.

For Zhou the textile maker, survival trumps profit in zero-Covid China.

“I don’t need to make more money than my competitors, but I need to be able to hold on for longer than them over this difficult period,” he said. “This is my short-term plan.”

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Google to delete user location history on US abortion clinic visits

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Google has faced calls to limit smartphone data collection in the wake of anti-abortion laws passed in the United States
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Google announced Friday it would delete users’ location history when they visit abortion clinics, domestic violence shelters and other places where privacy is sought.

“If our systems identify that someone has visited one of these places, we will delete these entries from Location History soon after they visit,” Jen Fitzpatrick, a senior vice president at Google, wrote in a blog post. “This change will take effect in the coming weeks.” 

Other places from which Google will not store location data include fertility centers, addiction treatment facilities, and weight loss clinics.

The announcement comes a week after the US Supreme Court made the tectonic decision to strip American women of constitutional rights to abortion, leading a dozen states to ban or severely restrict the procedure and prompting mass protests across the country.

Activists and politicians have been calling on Google and other tech giants to limit the amount of information they collect to avoid it being used by law enforcement for abortion investigations and prosecutions.

Fitzpatrick also sought to reassure users that the company takes data privacy seriously.

“Google has a long track record of pushing back on overly broad demands from law enforcement, including objecting to some demands entirely,” she wrote. 

“We take into account the privacy and security expectations of people using our products, and we notify people when we comply with government demands.”

Concerns over smartphone data and reproductive rights arose even before the Supreme Court ruling, when several conservative US states in recent months passed laws that give members of the public the right to sue doctors who perform abortions — or anyone who helps facilitate them.

That led a group of top Democratic lawmakers in May to send a letter to Google chief executive Sundar Pichai, asking him to stop collecting smartphone location data lest it become “a tool for far-right extremists looking to crack down on people seeking reproductive health care.”

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Kerry vows US to meet climate goal despite court setback

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US Special Presidential Envoy for Climate John Kerry fists-bumps a guest at the Summit of the Americas in Los Angeles in June 2022
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US climate envoy John Kerry vowed Friday the United States will meet goals it submitted to the United Nations on slashing greenhouse gas emissions, despite a Supreme Court ruling that curtailed the government’s powers.

“We are determined to achieve our goals. We can achieve our goals,” Kerry told AFP.

“But obviously it would help if we had a majority of the Supreme Court in the United States of America that actually understood the gravity of the situation and was more willing to try to be helpful rather than present a hurdle of one kind or another,” he said.

President Joe Biden, after defeating the climate-skeptic Donald Trump, in April last year said the United States would reduce greenhouse gas emissions by 50 to 52 percent by 2030 from 2005 levels, dramatically increasing the climate ambitions of the world’s largest economy.

He submitted the so-called nationally determined contribution to the UN climate body in line with the 2015 Paris Agreement, the landmark deal brokered by Kerry when he was secretary of state.

China, the world’s largest carbon emitter, called Friday on all nations to live up to Paris commitments, with foreign ministry spokesman Zhao Lijian saying of the United States, “it is not enough to just chant slogans.”

Kerry, who has worked with Chinese officials in his climate role despite soaring tensions between Beijing and Washington, said that he was “not surprised by the messaging” from the Asian power.

“We will show China precisely how we’re going to get the job done,” Kerry said.

In an unusual commentary, Stephane Dujarric, the spokesman for UN Secretary-General Antonio Guterres, called the Supreme Court decision “a setback in our fight against climate change.”

– ‘Every option available’ –

The Supreme Court, finishing a term in which three justices nominated by Trump pushed it sharply to the right, on Thursday cut the wings off a key way in which the government could have tackled climate change.

In a 6-3 ruling branded “devastating” by Biden, the top court said the Environmental Protection Agency did not have authority to order sweeping cuts on emissions from coal-fired power plants.

“I am convinced — and our legal people are looking at it very carefully — that this decision leaves plenty of latitude for us to be able to do a lot of things that we need to do,” Kerry said.

Asked about calls by some lawmakers from his Democratic Party for Biden to declare a climate emergency, Kerry said, “I think the president needs to evaluate every option available.”

Coal accounts for around 20 percent of US electricity generation — still roughly on par with renewables. China, despite investing heavily in wind and solar, has also kept building coal production capacity.

But Kerry said that the marketplace showed that coal was not the future.

“Nobody’s going to fund any new coal power in the United States — no bank, no private lender. Coal is the dirtiest fuel in the world,” he said.

– ‘Pin into balloon’ –

Scientists warn that the world is far off track in avoiding the worst ravages of climate change including worsening heatwaves, floods, drought, rising sea levels and storm surges. 

The Paris accord set the goal of limiting end-of-century warming to two degrees Celsius (3.6 Fahrenheit) above pre-industrial levels — and preferably not beyond 1.5 degrees — but the planet has already warmed by nearly 1.2 Celsius.

Ruth Greenspan Bell, a climate expert at the Woodrow Wilson International Center for Scholars, said it was difficult for the United States to show climate leadership while also fighting internally on whether it is a priority.

“It’s kind of putting a pin into a balloon. There’s a little bit less air in the balloon than there was before,” she said of the court decision. 

“The times call for a moonshot but imagine trying to pull off a moonshot when you are at the same time in a defensive crouch.”

Environmental groups have put guarded hope in negotiations in Congress on an energy bill that would include climate action.

But on the Democratic side, Senator Joe Manchin from coal-producing West Virginia holds the key vote — and Trump’s Republican Party is widely expected to advance in November elections.

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French police bust gang selling fake Bordeaux wine

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Bordeaux wines have become a major target of thieves and traffickers, who seek to profit off its worldwide recognition.
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French police have broken up a gang that had allegedly produced hundreds of thousands of bottles of fake Bordeaux wine in an elaborate counterfeiting operation, prosecutors said on Friday.

Officers investigating drug dealing in the southwestern French region discovered printing machinery being used to create the labels for the bottles last September, sparking a wider criminal probe.

It led to the arrest of around 20 people on Monday during an operation in seven different areas of France, with three of them charged with organised fraud, counterfeiting and money laundering.

The main suspect is a winemaker and broker in the Medoc region near Bordeaux who was buying low-grade wine from other areas including Spain, then bottling it up as more expensive local produce, a statement from Bordeaux prosecutors’ office said.

“Major orders” had been placed for the wine “destined for supermarkets and foreign countries”, the statement added.

Bottling operations were being run at night to avoid detection, it said.

“If the allegations are proven, we hope that the culprits will be heavily punished because these practices undermine the image of Bordeaux wines and those who work properly and respect the rules,” the local wine industry body told AFP.

French wine makers, customs and police are constantly on the lookout for cheats who pass off budget plonk as top vintages.

In 2016, police busted a Bordeaux vintner who was blending poor-quality wine with high-end Saint-Emilions, Lalande-de-Pomerols and Listrac-Medocs to sell to major supermarkets under prestigious labels.

The owner of several domains, Francois-Marie Marret, was handed a prison sentence and a fine of eight million euros after being found bringing in cheap wine at night.

In 2010, 12 French winemakers and dealers were convicted of selling millions of bottles of fake Pinot Noir to the US firm E&J Gallo.

Before that, in 2006 legendary Beaujolais winemaker Georges Duboeuf was fined more than 30,000 euros for blending grapes from different vineyards to disguise the poor quality of certain prized vintages.

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