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Westlake Legal Group > Economic Conditions and Trends

Global Markets Are on Edge as Coronavirus Spreads

Westlake Legal Group 28markets-1sub-facebookJumbo Global Markets Are on Edge as Coronavirus Spreads Travel Warnings Japan Far East, South and Southeast Asia and Pacific Areas Epidemics Economic Conditions and Trends Coronavirus (2019-nCoV) China

After sharp losses around the world, investors on Tuesday continued to assess the long-term economic effects of the coronavirus epidemic.

The verdict was mixed. Investors abandoned stocks in Asia, while markets in Europe steadied after the previous day’s sell-off. Stock market futures in the United States pointed to an upswing when trading starts on Wall Street.

Investors could be in for a rocky period as the pneumonialike illness spreads, having killed 106 people and sickening more than 4,500 to date. Health officials in the United States are warning that travelers should avoid nonessential trips to China, while global businesses are restricting travel. The Chinese government extended the Lunar New Year holiday, which could disrupt production and hurt the country’s growth.

“The Coronavirus is the No. 1 threat to financial markets currently as global investors are becoming jittery on the uncertainty,” said Nigel Green, the founder of the investment group deVere Group.

“This is a worrying and serious situation and investors must be vigilant,” he added.

The concern is that the fallout could create a major shock for markets, even as worries about geopolitics and global trade have eased.

Many Asian stock markets were closed for the Lunar New Year holiday, but those that were open, including Japan’s and South Korea’s, fell and futures trading in China slumped. Money poured into safe-haven assets like gold and pushed up the value of the United States dollar. Most European markets were slightly higher.

Japan’s minister of economic and fiscal policy said on Tuesday that the Chinese outbreak would affect the Japanese tourism industry and warned that it could also hurt exports and corporate profits. Chinese tourists traveling to Japan accounted for 30 percent of all tourists in 2019, he said at a news conference.

“There are concerns over the impact to the Chinese and global economy from the spread of infection in China, transportation disruptions, cancellation of group tours from China and an extension in the Lunar holiday,” said the minister, Yasutoshi Nishimura.

In Tokyo, investors pushed stocks down by 0.6 percent. In Seoul, stocks fell by more than 3 percent. Hong Kong’s stock market will reopen on Wednesday. In China, where authorities have extended the New Year holiday by a week, the major exchanges in Shenzhen and Shanghai said they would remain closed until Feb. 3.

China’s securities regulator on Tuesday called for investors to “rationally and objectively analyze the impact of the epidemic,” and to “adhere to the concept of long-term investment.”

In Europe, London’s FTSE 100 index gained 0.2 percent in midday trading, while the DAX in Frankfurt was 0.1 percent lower.

The price of oil, which tumbled on Monday amid fears that the virus would dampen demand for fuel, drifted slightly lower on Tuesday.

China’s appetite for oil has grown at around 5.5 percent annually, making it an important buyer in the global market. The country has already imposed travel restrictions and any extension could further dampen demand.

“The question isn’t whether coronavirus will depress global oil demand,” wrote Ryan Sweet, head of monetary policy research at Moody’s Analytics. “Rather, the question is by how much.”

Claire Fu and Eimi Yamamitsu contributed research.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Asian Markets Slump With Spreading Coronavirus, While European Shares Rebound

Westlake Legal Group 28markets-1sub-facebookJumbo Asian Markets Slump With Spreading Coronavirus, While European Shares Rebound Travel Warnings Japan Far East, South and Southeast Asia and Pacific Areas Epidemics Economic Conditions and Trends Coronavirus (2019-nCoV) China

After sharp losses around the world, investors on Tuesday continued to assess the long-term economic effects of the coronavirus epidemic.

The verdict was mixed. Investors abandoned stocks in Asia, while markets in Europe rebounded modestly from the previous day’s sell-off. Stock market futures in the United States rose as well.

Investors could be in for a rocky period as the pneumonialike illness spreads, having killed 106 people and sickening more than 4,500 to date. Health officials in the United States are warning that travelers should avoid nonessential trips to China, while global businesses are restricting travel. The Chinese government extended the Lunar New Year holiday, which could disrupt production and hurt the country’s growth.

“The Coronavirus is the No. 1 threat to financial markets currently as global investors are becoming jittery on the uncertainty,” said Nigel Green, the founder of the investment group deVere Group.

“This is a worrying and serious situation and investors must be vigilant,” he added.

The concern is that the fallout could create a major shock for markets, even as worries about geopolitics and global trade have eased.

Many Asian stock markets were closed for the Lunar New Year holiday, but those that were open, including Japan’s and South Korea’s, fell and futures trading in China slumped. Money poured into safe-haven assets like gold and pushed up the value of the United States dollar. European markets were steady.

Japan’s minister of economic and fiscal policy said on Tuesday that the Chinese outbreak would affect the Japanese tourism industry and warned that it could also hurt exports and corporate profits. Chinese tourists traveling to Japan accounted for 30 percent of all tourists in 2019, he said at a news conference.

“There are concerns over the impact to the Chinese and global economy from the spread of infection in China, transportation disruptions, cancellation of group tours from China and an extension in the Lunar holiday,” said the minister, Yasutoshi Nishimura.

In Tokyo, investors pushed stocks down by 0.6 percent. In Seoul, stocks fell by more than 3 percent. Hong Kong’s stock market will reopen on Wednesday. In China, where authorities have extended the New Year holiday by a week, the major exchanges in Shenzhen and Shanghai said they would remain closed until Feb. 3.

China’s securities regulator on Tuesday called for investors to “rationally and objectively analyze the impact of the epidemic,” and to “adhere to the concept of long-term investment.”

The price of oil fell early on Tuesday — before regaining those losses — amid fears that the virus would dampen demand for fuel.

China’s appetite for oil has grown at around 5.5 percent annually, making it an important buyer in the global market. The country has already imposed travel restrictions and any extension could further dampen demand.

“The question isn’t whether coronavirus will depress global oil demand,” wrote Ryan Sweet, head of monetary policy research at Moody’s Analytics. “Rather, the question is by how much.”

Claire Fu and Eimi Yamamitsu contributed research.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

China’s Coronavirus Has Revived Global Economic Fears

Westlake Legal Group merlin_167917920_5e5f38b5-79f8-4f3d-a907-25a1444fe1b6-facebookJumbo China’s Coronavirus Has Revived Global Economic Fears SARS (Severe Acute Respiratory Syndrome) Quarantines International Trade and World Market Factories and Manufacturing Economic Conditions and Trends Coronavirus (2019-nCoV) China

Before a mysterious respiratory illness emerged in the center of China, spreading with lethal effect through the world’s most populous nation, concerns about the health of the global economy had been easing, replaced by a measure of optimism.

The United States and China had achieved a tenuous pause in a trade war that had damaged both sides. The specter of open hostilities between the United States and Iran had reverted to stalemate. Though Europe remained stagnant, Germany — the continent’s largest economy — had escaped the threat of recession.

Now, the world is worrying anew.

An outbreak originating in China and reaching beyond its borders has summoned fresh fears, sending markets into a wealth-destroying tailspin. It has provoked alarm that the world economy may be in for another shock, offsetting the benefits of the trade truce and the geopolitical easing, and providing new reason for businesses and households to hunker down.

On Monday, investors dumped stocks on exchanges from Asia to Europe to North America. They entrusted their money to traditional safe havens, pushing up the value of the yen, the dollar and gold. They pushed down the price of oil over fears that weaker economies would spell less demand for fuel.

In short, those in control of money took note of a growing crisis in a country of 1.4 billion people, whose consumers and businesses are a primary engine of economic growth around the world, and they chose to reduce their exposure to risk.

By late Monday, the virus had killed more than 80 people in China. Nearly 3,000 had been infected — mostly in mainland China, but also in Hong Kong, Japan, Macau, Malaysia, Nepal, Singapore, South Korea, Taiwan, Thailand and Vietnam, and as far away as Australia, Canada and the United States.

The emergence of the virus in China, whose government jails journalists and tightly controls information, left the world uncomfortably short of facts needed to assess the dangers.

“It’s the uncertainty of how the global economy is going to respond to the outbreak,” said Philip Shaw, chief economist at Investec, a specialist bank in London. That will depend on the severity, the spread and the duration of the outbreak, he said, and “we don’t really know the answers to any of these questions.”

What was left to the imagination resonated as a reason for investors to unload anything less than a sure thing.

Stocks in Japan and Europe fell more than 2 percent. In New York, the S&P 500 was down 1.6 percent, with stocks of companies whose sales are dependent on China especially susceptible. Wynn Resorts, which operates casinos in the gambling haven of Macau, a special administrative region of China, dropped more than 8 percent.

The virus and its attendant unknowns conjured memories of another deadly illness that began in China, the 2002-3 outbreak of severe acute respiratory syndrome, or SARS, which killed nearly 800 people.

“In many ways, it looks similar,” said Nicholas R. Lardy, a China expert and senior fellow at the Peterson Institute for International Economics in Washington. “We are seeing fast increases in the number of cases. The hospitals are overwhelmed and are not even able to test people with symptoms. I’m expecting the cases to go way, way up.”

In the end, SARS significantly slowed the Chinese economy, dropping the annual growth rate to 9.1 percent in the second quarter of 2003 from 11.1 percent in the previous quarter, according to Oxford Economics, an independent research institute in London.

The episode is coinciding with the Lunar New Year, a major holiday in which hundreds of millions of Chinese journey to their hometowns to visit relatives.

With air, rail and road links in central China restricted as the government seeks to block the spread of the virus, hotels, restaurants and other tourism-related businesses are likely to suffer.

Some economists assume that those effects will quickly dissipate, leading to a revival in the consumer economy within months. That is how events played out in 2003.

“Our baseline is that it will be a fairly big impact but relatively short-lived,” said Louis Kuijs, the Hong Kong-based head of Asia economics at Oxford Economics.

In the hopeful view, economic damage will be contained by the Chinese government’s aggressive response in effectively quarantining the outbreak’s center — Wuhan, a city of 11 million people, and much of the surrounding area in Hubei Province.

But Wuhan is a hub of industry, sometimes called the Chicago of China, intensifying the quarantine’s implications for the national economy.

“This is really unprecedented,” Mr. Lardy said. “The economic effects may be much larger than SARS. Wuhan is a major industrial city, and if you’re basically shutting it down, it’s going to have a major effect.”

Already, China’s government has extended the Lunar New Year holiday by three days, through Feb. 2, ensuring that migrant workers will not return to their factory jobs as soon as anticipated, almost certainly disrupting production. Suzhou, a major industrial city near Shanghai, has extended the holiday until at least Feb. 8.

Given that China’s economy is the source of roughly one-third of world economic growth, the slowdown could be felt widely.

Most directly, China’s neighbors would absorb the effects, especially those dependent on tourists from China — among them Hong Kong, the Philippines, Singapore, Thailand and Vietnam. Over the weekend, China announced that it was barring overseas group tours by its citizens.

If China’s factories are hobbled by additional restrictions on transportation that limit factory production, that could become a global event. It could hit iron ore mines in Australia and India that feed raw materials into China’s smelters. It could limit sales of computer chips and glass panel displays made at plants in Malaysia and South Korea.

It could trim sales of factory machinery produced in Germany and auto parts made in the Czech Republic, Hungary and Poland. It could even affect the purchases of additional American farm goods that China agreed to under the trade deal signed this month.

The shock is hitting just as China contends with its slowest pace of economic growth in decades, reviving fears that its reduced appetite for the goods and services of the world could jeopardize jobs on multiple shores.

“China is obviously slowing down in a structural way,” said Silvia Dall’Angelo, senior economist at Hermes Investment Management in London. “The global economy is clearly more shaky, with sluggish growth. It is clearly more vulnerable to shocks.”

The SARS outbreak prompted the government to stimulate the Chinese economy by directing surges of credit that financed huge infrastructure projects. But whatever damage China confronts this time, its willingness to respond will be limited by the government’s concerns about mounting public debt.

“They are much more constrained now,” said Mr. Lardy, the China expert. “I think people underestimate the conviction that the top leadership has, that they really want to reduce financial risk.”

But as global investors try to gauge the outlook, one element is the same as ever in China: Information is scarce. Trust in the authorities is minimal.

During the SARS outbreak, the government was slow to acknowledge the existence of the virus as local officials actively covered up cases, allowing the threat to multiply.

This time, the government has sought to project the sense that it is forthrightly reckoning with the crisis. President Xi Jinping has publicly acknowledged the threat, while warning local officials not to hide reports of trouble.

But in the current moment of agitation, any perceived lack of information tends to weigh in as bad news.

“This is, of course, still a government system where transparency is not really held up as an important criterion,” Mr. Kuijs of Oxford Economics said. “This is still an overall system in which discretionary decisions by bureaucrats are driving everything instead of very clear rules.”

Clifford Krauss and Matt Phillips contributed reporting.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

How China’s Coronavirus Outbreak Could Threaten the Global Economy

Westlake Legal Group merlin_167628621_7d7809ba-407c-45b2-a3eb-a2c6783af4f1-facebookJumbo How China’s Coronavirus Outbreak Could Threaten the Global Economy Wuhan (China) Viruses International Trade and World Market Economic Conditions and Trends Coronavirus (2019-nCoV) Consumer Behavior China

HONG KONG — The outbreak of a deadly disease in China has cast a pall over growth prospects for the world’s second largest economy, raising fears about the global outlook if the mysterious coronavirus spreads or worsens.

Financial markets across Asia fell on Thursday, led by sharp drop in stocks in China, as investors pondered the potential impact of the coronavirus. The extent of its severity has become more clear over the past two days, as Chinese officials reported a surge in cases and a near doubling in the number of deaths to 17.

On Thursday, officials extended limits on movement in and out of Wuhan, the epicenter of the outbreak, to two nearby cities that millions more call home.

The uncertainty has put a palpable damper on Chinese life just before the Lunar New Year holiday — typically a time of travel, shopping and gift-giving — which begins on Friday. Train stations and airports were subdued as travelers changed plans for the weeklong holiday, and seven of the most anticipated film openings of the holiday season were postponed.

The Forbidden City — China’s most popular tourist attraction — announced, without giving further information, that it would be closed starting on Saturday.

On the minds of many in China and around the world right now: Could this new virus cause the same kind of damage as the SARS epidemic, which killed 800 people in 2003?

The question is a crucial one beyond China, because the Chinese economy has for years been one of the world’s most powerful growth engines. A stumble in China could hobble jobs and growth elsewhere.

China’s growth in 2003 plunged briefly during the height of SARS but came roaring back in a time when global companies were building Chinese factories and exporting more and more goods abroad.

Today, China’s economy is bigger but is growing at its slowest pace in nearly three decades. It is grappling with problems like the trade war with the United States and a campaign to wean local governments and companies off their addiction to borrowing.

It also depends more on consumers like Mo Chen, 29, who is curtailing her holiday travel plans, to stay on the safe side. In 2003, the worst-hit sectors were transportation, retail and restaurants.

Ms. Mo, who works for an internet company in Shanghai, had been looking forward to traveling home to see her family in Xiangyang, Hubei Province, nearly 200 miles from Wuhan. But given the outbreak, she and her brother, who lives in the city of Hangzhou, decided not to go home. For Ms. Mo, it will be the first time she has not spent Lunar New Year with her parents.

She now plans to stock up on supplies and stay home, not even venturing out to meet friends or go to the movies. She also intends to skip a trip to the mall to buy new outfits, because nobody will be around to see her wear them. Her brother, meanwhile, is planning to buy pots and pans.

“He never cooks,” she said. “He always either eats out or eats at the company canteen. But last night our mom asked us to stock up on food, not go out and cook at home.”

For now, the impact is not yet clear. The authorities seem to be responding faster to this outbreak than they did in 2003, but China’s censors are erasing anything that veers from the official narrative. The new coronavirus appears to be less deadly than SARS, but it is difficult to detect, and the authorities’ limiting of movement out of Wuhan came only after many people had set out for their holiday travels.

“It’s going to depend on how China continues to be transparent with the international community,” said Peter Levesque, the managing director of Modern Terminals, a port operator in Hong Kong. “That’s all business can ask for. The rest is unknown.”

Wuhan itself is essential to commerce in its region of China, though the economic impact there is expected to be muted by the advent of the holiday. The city is a major national transport hub and has also become a key center for auto manufacturing, with factories that build cars for General Motors, Honda and many others, as well as dozens of auto parts makers.

But the effect on people across the country could be a more important factor.

Over the long term, China wants its consumers to spend more. Beijing has sought to develop a consumer culture similar to that of the United States so that China’s economy becomes less reliant on big construction and infrastructure projects that often receive government financing. But that shift makes China more vulnerable to events that spook shoppers.

Chinese consumer sentiment had already been bruised. Families spent the past year watching prices rise in grocery stores, thanks in large part to the outbreak of a pig disease that depleted much of China’s pork supply. More families are saving rather than spending, and are worrying about the future.

“We will probably see a lot less domestic activity than we would normally see at this time of the year,” said Julian Evans Pritchard, a senior China economist at Capital Economics.

“The concern is that it encourages people to cancel their travel plans, and it comes at a crucial time in terms of holiday travel and spending,” he said.

The disease has struck during one of the year’s busiest spending seasons. Box office sales during the Lunar New Year holiday last year set a record, reaching $860 million over the first six days of the holiday, according to Maoyan, a ticketing service owned by Alibaba.

New spending records will be harder to attain this year. Among the film debuts postponed on Thursday was “Boonie Bears: The Wild Life,” a cartoon about clever bears who clash with a hapless logger. In a message to fans on its social media account, the production company wrote, “We don’t want to see audience friends take any health risks,” adding that it did not want to “see that the epidemic may spread further.”

Other businesses in some parts of China have been temporarily closed. Major airlines, including Hong Kong’s flagship carrier, Cathay Pacific, have restricted flights to Wuhan. Companies urged employees to wear masks and not to travel.

Companies that were still offering services urged caution. Didi Chuxing, China’s equivalent to Uber, sent a message to passengers saying that “due to the virus, for the health and safety of everyone, both drivers and passengers should wear face masks.”

Hong Kong, the semiautonomous Chinese city that has roiled with anti-Beijing protests, could sustain yet another blow. The region is already in an economic recession after over half a year of antigovernment protests.

“If you look at those sectors of the economy, the retail and local businesses, they have already been sadly bruised by the protests last year,” said Tara Joseph, the president of the American Chamber of Commerce in Hong Kong. “This would just be an extra kick in the teeth that they don’t need.”

But, she added, “it’s too early to panic.”

Cao Li contributed research.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

How China’s Virus Outbreak Could Threaten the Global Economy

Westlake Legal Group merlin_167628621_7d7809ba-407c-45b2-a3eb-a2c6783af4f1-facebookJumbo How China’s Virus Outbreak Could Threaten the Global Economy Wuhan (China) Viruses International Trade and World Market Economic Conditions and Trends Coronavirus (2019-nCoV) Consumer Behavior China

HONG KONG — The outbreak of a deadly disease in China has cast a pall over growth prospects for the world’s second largest economy, raising fears about the global outlook if the mysterious coronavirus spreads or worsens.

Financial markets across Asia fell on Thursday, led by sharp drop in stocks in China, as investors pondered the potential impact of the coronavirus. The extent of its severity has become more clear over the past two days, as Chinese officials reported a surge in cases and a near doubling in the number of deaths to 17.

On Thursday, officials extended limits on movement in and out of Wuhan, the epicenter of the outbreak, to two nearby cities that millions more call home.

The uncertainty has put a palpable damper on Chinese life just before the Lunar New Year holiday — typically a time of travel, shopping and gift-giving — which begins on Friday. Train stations and airports were subdued as travelers changed plans for the weeklong holiday, and seven of the most anticipated film openings of the holiday season were postponed.

The Forbidden City — China’s most popular tourist attraction — announced, without giving further information, that it would be closed starting on Saturday.

On the minds of many in China and around the world right now: Could this new virus cause the same kind of damage as the SARS epidemic, which killed 800 people in 2003?

The question is a crucial one beyond China, because the Chinese economy has for years been one of the world’s most powerful growth engines. A stumble in China could hobble jobs and growth elsewhere.

China’s growth in 2003 plunged briefly during the height of SARS but came roaring back in a time when global companies were building Chinese factories and exporting more and more goods abroad.

Today, China’s economy is bigger but is growing at its slowest pace in nearly three decades. It is grappling with problems like the trade war with the United States and a campaign to wean local governments and companies off their addiction to borrowing.

It also depends more on consumers like Mo Chen, 29, who is curtailing her holiday travel plans, to stay on the safe side. In 2003, the worst-hit sectors were transportation, retail and restaurants.

Ms. Mo, who works for an internet company in Shanghai, had been looking forward to traveling home to see her family in Xiangyang, Hubei Province, nearly 200 miles from Wuhan. But given the outbreak, she and her brother, who lives in the city of Hangzhou, decided not to go home. For Ms. Mo, it will be the first time she has not spent Lunar New Year with her parents.

She now plans to stock up on supplies and stay home, not even venturing out to meet friends or go to the movies. She also intends to skip a trip to the mall to buy new outfits, because nobody will be around to see her wear them. Her brother, meanwhile, is planning to buy pots and pans.

“He never cooks,” she said. “He always either eats out or eats at the company canteen. But last night our mom asked us to stock up on food, not go out and cook at home.”

For now, the impact is not yet clear. The authorities seem to be responding faster to this outbreak than they did in 2003, but China’s censors are erasing anything that veers from the official narrative. The new coronavirus appears to be less deadly than SARS, but it is difficult to detect, and the authorities’ limiting of movement out of Wuhan came only after many people had set out for their holiday travels.

“It’s going to depend on how China continues to be transparent with the international community,” said Peter Levesque, the managing director of Modern Terminals, a port operator in Hong Kong. “That’s all business can ask for. The rest is unknown.”

Wuhan itself is essential to commerce in its region of China, though the economic impact there is expected to be muted by the advent of the holiday. The city is a major national transport hub and has also become a key center for auto manufacturing, with factories that build cars for General Motors, Honda and many others, as well as dozens of auto parts makers.

But the effect on people across the country could be a more important factor.

Over the long term, China wants its consumers to spend more. Beijing has sought to develop a consumer culture similar to that of the United States so that China’s economy becomes less reliant on big construction and infrastructure projects that often receive government financing. But that shift makes China more vulnerable to events that spook shoppers.

Chinese consumer sentiment had already been bruised. Families spent the past year watching prices rise in grocery stores, thanks in large part to the outbreak of a pig disease that depleted much of China’s pork supply. More families are saving rather than spending, and are worrying about the future.

“We will probably see a lot less domestic activity than we would normally see at this time of the year,” said Julian Evans Pritchard, a senior China economist at Capital Economics.

“The concern is that it encourages people to cancel their travel plans, and it comes at a crucial time in terms of holiday travel and spending,” he said.

The disease has struck during one of the year’s busiest spending seasons. Box office sales during the Lunar New Year holiday last year set a record, reaching $860 million over the first six days of the holiday, according to Maoyan, a ticketing service owned by Alibaba.

New spending records will be harder to attain this year. Among the film debuts postponed on Thursday was “Boonie Bears: The Wild Life,” a cartoon about clever bears who clash with a hapless logger. In a message to fans on its social media account, the production company wrote, “We don’t want to see audience friends take any health risks,” adding that it did not want to “see that the epidemic may spread further.”

Other businesses in some parts of China have been temporarily closed. Major airlines, including Hong Kong’s flagship carrier, Cathay Pacific, have restricted flights to Wuhan. Companies urged employees to wear masks and not to travel.

Companies that were still offering services urged caution. Didi Chuxing, China’s equivalent to Uber, sent a message to passengers saying that “due to the virus, for the health and safety of everyone, both drivers and passengers should wear face masks.”

Hong Kong, the semiautonomous Chinese city that has roiled with anti-Beijing protests, could sustain yet another blow. The region is already in an economic recession after over half a year of antigovernment protests.

“If you look at those sectors of the economy, the retail and local businesses, they have already been sadly bruised by the protests last year,” said Tara Joseph, the president of the American Chamber of Commerce in Hong Kong. “This would just be an extra kick in the teeth that they don’t need.”

But, she added, “it’s too early to panic.”

Cao Li contributed research.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

China Poised to Buy More From U.S., at the Expense of U.S. Allies

Westlake Legal Group 22china-trade-01-facebookJumbo China Poised to Buy More From U.S., at the Expense of U.S. Allies United States International Relations United States Economy United States Trump, Donald J Politics and Government International Trade and World Market Economic Conditions and Trends Customs (Tariff) China

DAVOS, Switzerland — When the United States and China reached a temporary truce in their costly trade war last week, many wondered how Beijing could live up to its commitment to buy $200 billion more of American-made goods over two years. Surely, critics said, China will either renege on the deal, or it will switch to buying products from American farms and factories that it is currently purchasing from other countries.

In the halls of Davos this week, where global leaders gathered at the World Economic Forum to discuss fraying international ties, two realities were becoming clear: China plans to honor the deal, and everybody except the United States may be about to lose a lot of business.

The United States and China are already gearing up for the sale of tens of billions of dollars in American-made products to Chinese buyers in the coming months, according to people familiar with the thinking of officials in both countries. If carried through, that would strengthen President Trump’s election-year claims of achieving victory in his trade war with Beijing.

The two sides are also clear on what that means for other countries. China could pull off those purchases only if it stops buying a lot of farm products and merchandise from countries in Europe, Latin America and East Asia. Many of those countries are American allies, and some are not pleased at the prospect of losing China and its giant economy as a consumer of their exports.

In public, American officials have sought to reassure allies. “It is a great fear. Many of them have expressed it to me,” said Commerce Secretary Wilbur Ross at a news conference in Davos on Thursday. “I think it is unfounded.”

He cited the example of China purchasing more American oil and gas, with which European suppliers do not compete.

Political shifts or economic turmoil in either country could upset plans for China to buy more American goods. Still, should China soon begin to purchase the billions of dollars of American goods at the expense of Washington’s allies, it would highlight a central irony of the trade truce.

The United States has long complained that Beijing controls the levers of Chinese trade and uses them for political advantage. State-run grain companies buy American soybeans. State-run airlines buy Boeing planes. When Beijing is displeased with Washington, it can shift those purchases elsewhere, hurting American workers. The United States has called for the Chinese government to relax its grip and allow freer, fairer trade.

Freer, fairer trade would have made last week’s deal virtually impossible, however. Chinese businesses would not and could not buy $200 billion more in American grain, energy and equipment over two years unless they were told to by Beijing. The trade pact allows Chinese buyers to go elsewhere if American goods are more costly than products from other countries, but Beijing can tell state-run companies that they have more than profitability to think about.

European and Latin American countries that won business when China cut off American purchases could lose that new business. The American businesses that lost those sales would get them back and then some.

American allies have other reasons to dislike the trade pact. The agreement locks in place 25 percent American tariffs on a wide range of high-tech, Chinese-made goods subsidized by Beijing, from electric cars to commercial aircraft to farm equipment.

That could divert Chinese exports of manufactured goods to markets in Europe and elsewhere. European countries want to make and sell their own electric cars and Airbus aircraft, instead of being flooded with Chinese alternatives at prices held artificially low through government subsidies.

The so-called Phase 1 deal is the latest sign of the Trump administration’s unilateral approach to trade and China.

Many trade experts have long urged the American government to put up a united front with European companies and others that have complained about China’s trade practices. Instead, the United States has picked trade fights with allies like Mexico, Canada, South Korea, Japan and Europe. It has rejected international agreements that could have challenged China, such as the Trans-Pacific Partnership accord, and worked to undermine the enforcement abilities of the World Trade Organization, the global trade referee.

“In a worrying return to 19th century practices of managed trade, the ‘shopping list’ imposed by the deal could be seen as going against the rules-based international trading system,” said Joerg Wuttke, the president of the European Chamber of Commerce in China.

For now, Chinese willingness to buy American goods could cover a wide range of industries.

The published text of last week’s agreement sets clear numerical targets for large increases in American exports to China in four categories: manufactured goods, agriculture, energy and services. But officials have described an unpublished annex that specifies large increases in a long list of subcategories.

Many of the subcategories highlight products that China currently imports from Europe and East Asia, in the case of manufactured goods, or Latin America, for many agricultural goods. The trade agreement does almost nothing to change China’s rules so as to increase its total purchases of foreign goods, instead leaving it to the Chinese government to reallocate orders toward American exporters.

Over the past quarter century, China has managed its trade so that it has fairly consistently sold about $4 worth of goods to the United States for each $1 of goods that it bought. China’s trade with Europe has been more balanced, in part because Europe has often been seen as a politically safer choice in Beijing given China’s often rocky relationship with the United States.

But in the last several months, China has concluded that its huge trade imbalance with the United States has become a source of danger and instability, people familiar with the bilateral relationship said in interviews while insisting on anonymity because of political sensitivities. The imbalance has produced demands from the United States for fundamental changes in the Chinese economy, like an end to many subsidies, that are unacceptable, they said.

Beijing’s conclusion, the people said, is that the trade imbalance with the United States must be narrowed sharply this year and next. While that narrowing may hurt the interests of companies and farmers in Europe and elsewhere, those affected by it should realize that they enjoyed extra sales to China over the past two years during the trade war with the United States, they added.

Beijing has already begun ramping up its broad interagency process for managing trade to make sure that American companies receive the extra orders promised under the agreement. In speeches, Chinese officials emphasized that they want to keep commitments to buy imports, although they have publicly glossed over the extent to which the Phase 1 agreement with the United States will divert trade away from other countries.

“Openness has become a trademark of today’s China,” said Han Zheng, a vice premier and one of the seven members of China’s ruling Standing Committee of the Politburo, in a speech at Davos on Tuesday.

Despite the potential loss of business, some American allies like Japan say the greater economic certainty created by the deal is beneficial. Although Japan is likely to lose some export orders to the United States, it nonetheless welcomed the agreement, said Takeshi Niinami, a member of Prime Minister Shinzo Abe’s economic policy council who is also the chief executive and president of Suntory Holdings, a big beverages company.

The trade deal eases tensions between the United States and China and improves political stability and security in East Asia, Mr. Niinami said. It makes it easier for Japan, one of America’s closest allies, to invite President Xi Jinping of China for a possible visit this year, he said.

China has a strong incentive to abide by the agreement. With its economy slowing, Beijing is trying to revive consumer and investor confidence at home by emphasizing that the trade war is over.

The pact will allow the United States to scrutinize its monthly trade figures to see whether the surge in American exports to China has begun. So the Trump administration could restart the trade war with a unilateral imposition of tariffs on Chinese goods if China’s purchases falls short.

In interviews over the past month, people familiar with Chinese policymaking have made clear that Beijing officials do not want to intervene in the presidential elections in November. Indeed, their hope is that the trade deal will make China less of a political punching bag during the campaign this year.

But if the American trade deficit with China does narrow precipitously this year, Mr. Trump may well cite that as a success — particularly in Rust Belt states where trade has been a particularly potent political issue for several decades. Those regions have also tended to be crucial swing states in recent presidential elections.

Mr. Trump spoke enthusiastically about Mr. Xi in Davos on Tuesday, repeating that he was a good friend.

“He’s for China, I’m for the U.S., but other than that we love each other,” Mr. Trump said.

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Wuhan Beyond the Coronavirus: Steel, Cars and Spicy Noodles

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If Wuhan could be compared to an American city, it might be Pittsburgh — a much bigger, much hotter Pittsburgh.

Wuhan, an industrial city in central China, straddles a river, the Yangtze. It is home to a troubled and declining steel industry. It is a university town filled with college students.

The comparisons don’t go much further. Wuhan has a population of more than 11 million people, the equivalent of 36 Pittsburghs. In terms of college students alone, roughly one million are enrolled there, according to government figures. Summer temperatures can approach 100 degrees, with heavy humidity. Its traditional dish, and one of China’s favorite noshes, is a pungent pasta concoction called reganmian, or “hot dry noodles.”

Wuhan is also the epicenter of a viral outbreak that is worrying the world. On Thursday, Chinese officials sharply limited travel to and from the city in an effort to contain a coronavirus that so far has killed 17 people and infected hundreds more. The restrictions hit the city at the peak of the travel period for the Lunar New Year holiday, meaning many residents may miss their families and loved ones this week.

Wuhan embodies China’s rise as a global economic power, in all its complexities. Disposable income per person soared more than sixfold between 2002 and 2018, according to government figures compiled by CEIC Data, an information provider. The area is home to vast automotive factories making cars for General Motors, Nissan, Honda and other global and local brands. The city has become a popular destination for foreign investment.

The Chinese government thinks so highly of the city’s image that Xi Jinping, the country’s leader, met Prime Minister Narendra Modi of India there two years ago. The two walked along the city’s East Lake, building what Chinese state-run media came to call the Wuhan spirit between the two regional rivals.

The boom has come with problems. Heavy pollution has provoked protests. Its streets are often clogged with traffic. Its steel factories, long a backbone of the local economy, have struggled along with the rest of the inefficient industry in China with overcapacity and pollution problems, leading Beijing to combine the state-owned local giant, Wuhan Steel, with another company.

Wuhan has long been a center of commerce in China thanks to its position along the Yangtze River, a major trade route, and it remains a key transportation hub, leading some in China to compare it to Chicago. It was also the site of one formative event in Chinese history: a military mutiny in 1911 that led to the collapse of the Qing dynasty and ushered in the Republic of China.

Wuhan held a special place in the heart of Mao Zedong, who famously took a swim in the Yangtze there in 1966 to show his vitality. This was at the beginning of the Cultural Revolution, which tore Wuhan apart as it did other cities.

As China took off in the modern era, local leaders tried to burnish its image and show Wuhan taking part in the country’s rise. They explored adopting a slogan and considered “Great River, Great Lake, Great Wuhan” and “River Capital of the East, Livable Wuhan,” among others.

They settled on “Wuhan, Different Everyday!”

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The Davos Plutocrats Warm Up to Trump

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DAVOS, Switzerland — The last time President Trump arrived at the World Economic Forum’s annual meeting, his trip was treated with deep skepticism, if not disdain, by the business and political leaders who gather once a year in this ski town in the Swiss Alps. It was 2018 and even with his newly enacted tax cuts, his populist, antiglobalist rhetoric and Twitter outbursts were more than enough to make the event’s collection of plutocrats uneasy.

This time is likely to be different.

With the stock market at record highs, two trade deals announced and the possibility that Mr. Trump may be in office for another four years, there is an increasing sense that he will be accepted, if not embraced (although some attendees may roll their eyes behind his back) when he arrives on Tuesday, even as he faces an impeachment trial.

As anathema as it may be to some participants, Mr. Trump may be the new Davos Man.

The Davos forum, marking its 50th year, has always sought to foster a sense of multilateral unity. But Mr. Trump, along with his counterpart in Britain, Prime Minister Boris Johnson, is seemingly moving the world into a tariff based, decoupled universe, based on bilateral negotiations and diplomacy by tweet.

To the surprise of many Davos regulars, the economic results have yet to prove as disastrous as they expected — and, at least in the short term, have seemingly proven to be quite positive. (The long-term effects, of course, are still unknown.)

Even Mr. Trump’s most ardent detractors acknowledge that an acceptance of the president is settling in among the Davos crowd.

“We are all adjusting to his abnormal behavior,” said the investor Anthony Scaramucci, Mr. Trump’s onetime spokesman turned enemy who has been a Davos regular for over a decade and hosts a wine tasting party that has become a hot ticket for the boldfaced names. “The economic strength helps their cognitive dissonance,” he said.

Just last week, a lineup of some executives who will attend the Davos forum were in the audience at the White House when Mr. Trump signed the initial China trade deal. They more than politely applauded.

“Will you say, ‘Thank you, Mr. President’ at least? Huh?” Mr. Trump asked Mary Erdoes, the chief executive of JPMorgan’s asset and wealth management division and a Davos regular, along with Jamie Dimon, the bank’s C.E.O. “They just announced earnings, and they were incredible,” Mr. Trump said about JPMorgan. “They were very substantial. I made a lot of bankers look very good. But you’re doing a great job. Say hello to Jamie.”

Stephen Schwarzman, the co-founder of Blackstone, who often gets calls from global C.E.O.s seeking advice on how to manage relations with Mr. Trump because of his close relationship with him, said there has been a shift among the C-suite crowd.

“The attitude of the business community toward the Trump Administration appears quite positive,” said Mr. Schwarzman, who runs one of the world’s biggest investment funds. Among the reasons for the warm feelings, he said, are the strength of the economy, trade deals with China, Mexico and Canada, the tax bill and the elimination of regulations.

Still, if there is one topic expected to dominate the week here besides Mr. Trump himself, it will be an issue that he and the Davos community vehemently disagree about: climate change

Just last week, Satya Nadella, the chief executive of Microsoft — and a Davos participant — announced the company would be carbon negative by 2030, and by 2050 it would seek to remove all of the carbon it has ever emitted since its founding in 1975. The World Economic Forum itself announced the meeting would be carbon neutral after it bought carbon credits to offset carbon emission from the event.

Of course, Mr. Trump doesn’t believe in climate change and pulled out of the Paris Climate Agreement to the horror of most of the executives and attendees of Davos.

He is likely to hear criticism from activists like Greta Thunberg, the high school phenom who has become a global icon for the climate. And he may get some nudging from C.E.O.s, but, unlike the activists, they will be unlikely to confront him publicly out of fear that he might turn on them or their companies.

“The Davos crowd are well respected followers of fashion and love whomever is in power,” said Jeffrey Sonnenfeld, the senior associate dean at the Yale School of Management and an expert on corporate leadership. “They celebrate when the people are rich and powerful.”

Mr. Sonnenfeld pointed out that, despite the stock market run-up, only “12 percent anticipate economic conditions will improve over the next six months, up from just 4 percent in the third quarter,” according to the Conference Board’s most recent survey of chief executives.

While the business community has come to accept Mr. Trump — one executive described the view by saying “life is relative” — Mr. Sonnenfeld noted that a poll he conducted three weeks ago found that 56 percent of C.E.O.s favored the president’s impeachment and removal from office.

Mr. Trump may find himself flattered by the Davos audience. Whether it is genuine flattery or something else remains an open question. Whatever the answer, Mr. Scaramucci is convinced it is all self-interested: “The unspeakable truth is that C.E.O.s and their staff are horrified.”

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Trump’s China Deal Creates Collateral Damage for Tech Firms

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WASHINGTON — Among the corporate titans recognized last week by President Trump during a White House signing ceremony for his China trade deal was Sanjay Mehrotra, the chief executive of Micron Technology, whose Idaho semiconductor company is at the heart of Mr. Trump’s trade war.

Micron, which makes memory chips for computers and smartphones, is precisely the kind of advanced technology company that the Trump administration views as crucial to maintaining a competitive edge over China. After Micron rebuffed a 2015 takeover attempt by a Chinese state-owned company, it watched with disbelief as its innovations were stolen and copied by a Chinese competitor and its business was blocked from China.

China’s treatment of American companies like Micron fed Mr. Trump’s decision to unleash a punishing trade war with the world’s second-largest economy, a fight he said would halt Beijing’s use of unfair practices to undermine the United States. But that two-year conflagration may wind up being more damaging to American technology companies.

The initial trade deal announced last week should make operating in China easier for companies like Micron. The deal contains provisions meant to protect American technology and trade secrets and allow companies to challenge China on accusations of theft, including older cases like Micron’s that precede the agreement.

But Mr. Trump’s aggressive trade approach has also accelerated a technology arms race between the two countries, putting American companies like Micron at risk as the two nations try to decouple their economies. In an effort to reduce its reliance on American components, China has expedited efforts to produce its own semiconductors, driverless cars, artificial intelligence and other technologies. Those efforts, along with the Trump administration’s desire to restrict the sales of American tech products to China, could hurt the very companies Mr. Trump set out to protect.

“Let’s be clear, the trade war has been very bad for the semiconductor industry in several ways,” said Robert D. Atkinson, president of the Information Technology and Innovation Foundation, a think tank funded by the tech industry. “It’s like China woke up and said, ‘We’ve relied too much on the United States.’”

The trade deal does nothing to curtail China’s use of subsidies, industrial plans and state-owned companies, which have helped it build formidable industries in steel, wind turbines and solar panels. Those state-directed efforts, which put many American manufacturers out of business, are now being harnessed for high-tech industries.

The Trump administration is constructing its own walls around American technology, reducing access to the lucrative Chinese market out of security concerns. It is restricting exports of sensitive technologies, barring sales to certain Chinese companies and blocking Chinese entities from investing in the United States.

The administration is considering further restricting sales to Huawei, the Chinese telecom company that relies on components from Micron and other American suppliers. And the China trade deal leaves tariffs on more than $360 billion in Chinese goods in place as Mr. Trump tries to push American companies to bring manufacturing back home.

Semiconductor sales to China, which represent more than half the global chip demand, have fallen, and semiconductor stocks have been whipsawed by the trade war.

Mr. Trump and his supporters say that conflict is no longer avoidable, and that the president’s unconventional approach is necessary to take on a growing threat from China. Officials across the administration look with suspicion on Chinese industrial plans, including Made in China 2025, which called for $300 billion in financing and other support for 10 advanced industries, including semiconductors.

American officials worry that gaining an advantage in semiconductors would give China both a commercial and military edge.

Chips, which serve as the tiny sensors, brains and memories of all high-tech devices, are crucial to next-generation telecom networks, supercomputers, artificial intelligence and driverless cars, as well as military ships, satellites and aircraft. They are also one of the United States’ largest exports, along with airplanes, oil and cars.

While China’s ability to make chips is still far behind the United States’, the Chinese government, its state-owned enterprises, and provincial and private equity funds have been pumping billions of dollars into the industry, particularly the kind of memory chips that Micron makes. In areas where Chinese companies cannot develop or buy technology, companies say, some will simply steal their intellectual property.

For the Trump administration, which was looking for a fight with China, Micron’s story proved a formative one. As officials prepared an investigation into Chinese intellectual property theft that would ultimately spiral into the trade war, Micron provided a “camera ready” case that fit everything the administration was looking for, one industry executive said.

In 2015, Micron was the target of a $23 billion takeover attempt by a Chinese state-owned company, but the overture was withdrawn over United States national security concerns. In 2016, another Chinese state-owned company, Fujian Jinhua Integrated Circuit, allegedly worked in concert with a Taiwanese company to steal the American company’s designs and market them as their own.

According to Taiwanese authorities, Fujian Jinhua used Micron’s proprietary designs to build an enormous $5.7 billion microchip factory in China. In 2018, the Department of Justice charged the Chinese company and others with stealing trade secrets from Micron, and the Commerce Department blacklisted it for national security concerns.

The same year, a Chinese court temporarily blocked Micron from selling some products in China, after Fujian Jinhua and another company accused Micron of patent infringement.

Through 2017 and 2018, Micron employees met repeatedly with administration officials, sometimes with the National Security Council and National Economic Council. The company’s case was discussed in internal planning meetings attended by Robert Lighthizer, the United States trade representative, and Peter Navarro, a top Trump trade adviser.

In July of last year, Mr. Trump met at the White House with Mr. Mehrotra of Micron, as well as the chiefs of Intel, Google and Broadcom, to discuss the trade clash with China and the administration’s policies toward Huawei.

Two months later, in an address to the United Nations, Mr. Trump described the Micron theft as a rationale for the trade war.

“To advance the Chinese government’s five-year economic plan, a company owned by the Chinese state allegedly stole Micron’s designs, valued at up to $8.7 billion,” the president said. “Soon, the Chinese company obtains patents for nearly an identical product, and Micron was banned from selling its own goods in China. But we are seeking justice.”

“For years, these abuses were tolerated, ignored or even encouraged,” Mr. Trump added. “But as far as America is concerned, those days are over.”

Chip makers initially supported the Trump administration’s willingness to take on China. Companies had long grumbled about intellectual property theft and unfair treatment in the Chinese market, but they had little recourse: Going public about their troubles could spook investors and invite Chinese retaliation.

Then, in April 2018, the administration announced $50 billion in tariffs that would directly hit semiconductor companies by raising prices for imported equipment and materials. A chip finished in China would be subject to a 25 percent tariff, even if its components had been made in America.

The tariffs caught the industry by surprise. The Semiconductor Industry Association, a trade group, pushed back, telling the United States trade representative in July 2018 that the tariffs would “undermine U.S. technological leadership, cost jobs, and adversely impact U.S. consumers of semiconductor products and the U.S. semiconductor producers.”

Some industry executives grew more nervous as Mr. Trump escalated his trade fight and the prospect of an economic rupture between the United States and China became more real. Chinese customers shifted their purchases to suppliers in South Korea, Taiwan and elsewhere.

Mr. Trump’s trade pact did ink some victories — it includes greater protections for companies like Micron, including preliminary injunctions and expanded legal recourse for theft of trade secrets. It also contains new promises from China to refrain from pressuring American businesses to transfer their technology to Chinese companies, and it allows American companies to sue individuals, including former employees and hackers.

Semiconductor companies said they would press the administration to make more gains in the next phase of negotiations, including subsidies, which Mr. Trump said he plans to address. Just getting China to acknowledge and agree to forgo unfair practices was progress, they said.

In a statement, Micron said it applauded the deal. “We look forward to additional discussions between the countries on significant issues that are important to Micron and the semiconductor industry, such as intellectual property protection and subsidies,” said Jon Hoganson, Micron’s managing director of global government affairs.

But the fight has spilled over into more damaging areas. Last May, the Commerce Department placed Huawei, which makes handsets and telecom equipment, on a national security blacklist that bans it from buying some American products. Other Chinese technology companies were added to the list, and the government began planning which types of advanced technologies it would no longer allow companies to export overseas.

Micron had so far experienced limited effect from Mr. Trump’s tariffs since it does not ship the products it makes in China to the United States. But Huawei’s blacklisting was potentially devastating — 13 percent of Micron’s chip sales are to the Chinese company.

In its fourth-quarter earnings call with investors last September, Micron warned that the clash could damage its bottom line.

“We see ongoing uncertainty surrounding U.S.-China trade negotiations. If the Entity List restrictions against Huawei continue and we are unable to get licenses, we could see a worsening decline in our sales to Huawei over the coming quarters,” Mr. Mehrotra said. Micron’s stock sank 11 percent after his remarks.

Micron, Intel and other companies with global operations initially found a way to keep selling to Huawei since the rule did not restrict products containing less than 25 percent of certain types of American content. But the Commerce Department is considering lowering that threshold and expanding the number of goods subject to the ban, according to five people with knowledge of the plan.

Like other Chinese companies, Huawei has worked to curtail its dependence on America. By substituting parts from Japan and other countries, the company has recently produced handsets and telecom equipment that do not contain any American components.

Its internal semiconductor unit, HiSilicon, has also developed replacements for advanced chips that Huawei once bought from American companies. Huawei said its 2019 sales topped $120 billion, representing 18 percent growth over the year before — less than its initial target, but not by much.

American companies say they are sympathetic to the administration’s complaints about China. But they must compete globally, and they are not willing to forgo access to China, the hub of the global electronics supply chain and probably one of the world’s fastest growing markets for decades to come.

Jim McGregor, the chairman of Greater China for APCO Worldwide, said the trade war and other restrictions were already shaping investment decisions by American technology companies. When deciding where to put their money next, many companies have quietly been looking to invest outside the United States to secure access to China.

“You’ve got to be there, no matter what the president says,” he said.

Raymond Zhong contributed reporting from Beijing.

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In Its 50th Year, Davos Is Searching for Its Soul

It was just weeks before the World Economic Forum would host its 50th anniversary gathering in Davos, Switzerland, and Klaus Schwab, the event’s patrician founder, was pensive. In an interview at his organization’s midtown Manhattan offices, Mr. Schwab lamented the apparent retreat of ideals he has championed for a half-century.

Open borders, liberal democracy and free markets are under threat around the world. Instead, the moment is being shaped by rising nationalism, authoritarianism and a Chinese economic system to rival Western capitalism.

Couple this with a surge of anti-elitist sentiment, and the forum, which hosts world leaders and chief executives in mountaintop chalets under tight security, has for some become a symbol of all that is wrong with the world.

Attendees fret about inequality while hotel rooms in Davos — if you can get one — cost $500 or more a night. Many express concern about climate change, but arrive at the event in private jets. Describing the concentration of executives and heads of state there, the “Late Show” host Stephen Colbert said, “Basically, it’s what Lex Luthor would point his space laser at.” Once a beacon of international cooperation, Davos has become a punch line.

“It pains me,” Mr. Schwab said.

But it hasn’t slowed him down. At 81, Mr. Schwab remains the animating force behind W.E.F., as it is colloquially known. He will preside over the meeting in Davos, greeting dignitaries, opining from the main stage of the Congress Center and dropping in on exclusive dinner parties. A German academic who charted an unlikely path to the summit of international thought leadership, Mr. Schwab has the power to frame the debate among the world’s most influential actors, even as much of what he stands for comes under assault.

“Klaus has been so successful in bringing together these decision makers,” said David Gergen, the former White House adviser and a Davos regular. “And yet in so many ways, we’ve been going backward in terms of climate, nationalism and the health of our democracies.”

Despite the hand-wringing, everyone is still showing up to the party.

The event began in January 1971.Credit…World Economic Forum A farewell lunch at last year’s forum, which is held in the Alpine town of Davos, Switzerland.Credit…Pascal Bitz/World Economic Forum

The forum has once again charged corporations a small fortune for the privilege to send their executives tramping around Davos in snow boots and suits. Companies like Microsoft and Ikea have once again spent lavishly to transform ski town gift shops into glorified exhibition booths. World leaders, including President Trump, are expected to attend.

At a practical level, the sheer concentration of movers and shakers makes Davos an irresistible draw for other movers and shakers. Business and political leaders dice up their schedules into 30-minute increments, cramming in more than a dozen meetings a day with customers, partners, regulators and journalists.

In the evenings, masters of the universe will hop from, say, a dinner hosted by George Soros, the billionaire philanthropist, to a wine party sponsored by Anthony Scaramucci, the financier and former Trump administration official. JPMorgan’s chief executive, Jamie Dimon, is hosting a cocktail reception at a museum. Marc Benioff, the Salesforce co-founder and co-chief executive, will buy out a nightclub and fly in a pop star.

“Six days of work at Davos is easily six months of work in other places for these people,” said Ian Bremmer, the founder of the Eurasia Group, who has worked with the forum over the years. “That intensity is valuable.”

As usual, the agenda will touch upon the litany of threats to the dominant world order, including the climate crisis, rising tensions in the Middle East and income inequality. In the months before each year’s gathering, Mr. Schwab flies around the globe on an international listening tour, asking executives and world leaders what’s on their mind.

After this year’s travels, Mr. Schwab said that the top concerns included rising debt, China’s rise, Brexit and climate change. In short, the elite are worried about the demise of the very ideology long espoused by Mr. Schwab: globalism — the notion that the open exchange of people, products, ideas and services across borders will benefit all.

“That was an ideology that felt completely dominant when the Soviet Union collapsed, but today not so much,” Mr. Bremmer said. “A lot of people inside those democracies feel like that globalism has failed them.

Over the years, Davos has become the target of scrutiny. Critics have said that it allows companies to gloss over their sins with high-minded pledges to do better, and that it is insufficiently diverse. (It remains an overwhelmingly male affair, with just 22 percent of attendees women this year, a record high.) And recently, the debate about Davos has begun playing out in real time.

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Limousines and other cars at last year’s forum.Credit…Fabrice Coffrini/Agence France-Presse — Getty Images

Last year, one of the most talked-about exchanges at the event was about Davos itself.

On a panel discussion featuring, among others, the conservationist Jane Goodall and Edward Felsenthal, the editor of Time magazine, Rutger Bregman, a Dutch journalist and historian, spoke about what he saw as the rampant hypocrisy on display in the Alps.

“Fifteen hundred private jets have flown in here to hear Sir David Attenborough speak about how, you know, we’re wrecking the planet,” Mr. Bregman said, eliciting nervous chuckles from the crowd. “I hear people talk in the language of participation and justice and equality and transparency, but then, I mean, almost no one raises the real issue of tax avoidance, right? And of the rich just not paying their fair share. I mean, it feels like I’m at a firefighters conference, and no one is allowed to speak about water.”

The clip went viral and seemed to confirm people’s suspicions that for all the talk of world-changing agendas in Davos, not much really happened there. Moreover, his comments echoed a broader line of criticism that the global elite are uninterested in solutions to intractable problems if those solutions threaten their dominance.

“They’d rather listen to a Buddhist monk talk about meditation or hear about power poses, but they don’t like to talk about the source of tax evasion,” Mr. Bregman said in an interview, noting that he had not been invited back to Davos this year. “They want to hear about how individuals can change their lives, rather than how structural reform can affect inequality or climate change.”

Mr. Schwab defended the substance of the event.

Other dissenting voices will be in attendance this year, including the teenage climate activist Greta Thunberg, who will attend for a second time. And Mr. Schwab was an early proponent of socially responsible business, helping define the “stakeholder theory,” which holds that corporations should answer not just to shareholders, but to employees, customers and the environment.

That may not sound particularly controversial today, but Mr. Schwab was ahead of his time in the early 1970s. “Back then you had to fight against Milton Friedman, who gave a moral justification to profit maximization,” Mr. Schwab said, referring to the economist who wrote that “the social responsibility of business is to increase its profits.”

Much has changed since then.

Last year, the Business Roundtable, an influential group of American chief executives, redefined its mission statement to more closely align with what Mr. Schwab first said a half-century ago. BlackRock, the world’s largest institutional investor, recently said it would make climate change a focus of its investment strategy.

It’s hard to imagine where the world of business responsibility would be without Davos,” Mr. Gergen said.

And even as globalism comes under attack from all sides, Mr. Schwab argues that, on balance, it has been a force for good. In the 50 years since the World Economic Forum began, life has improved for most people, he said. Even as the human population has doubled, the likelihood of child mortality, illiteracy and deaths by disease are all at record lows. And he said he believed that while, yes, governments and corporations had fallen short — and maybe even contributed to the problems — they were an integral part of whatever solutions might be possible.

“Elites have always existed,” he said. “We bring together people of influence, and we hope that they use their influence in a positive way.”

In recent years, Mr. Schwab has tried to address the criticism that Davos is out of touch. Aware of the bad optics of all those private jets, he has asked all forum members to commit to be carbon-free by 2050. He recently expressed his support for reining in executive pay. Yet he is unlikely to upset BP or Google with calls for a steep carbon tax or stricter antitrust regulation. After all, those are among the companies that pay lavishly for access to the most elite party on earth.

“Klaus is much more comfortable being an activist in the world of ideas than one in the world of action,” Mr. Gergen said.

“He doesn’t see himself as someone who needs to be in front of a parade, changing one law or another.”

To skeptics like Mr. Bregman, this is the very problem.

While Mr. Schwab fashions himself as the conscience of global capitalism, he is constrained in just how far he can go. The genial host of Davos, he must be careful not to upset his guests. If the debate about how to fix the world’s problems is unfailingly polite, it is unlikely that the hard questions will get asked. If access to the forum is restricted to those who can afford the price of admission or score a sponsored invite, the voices at the table risk an ideological homogeneity.

“Some people believe that the global elite go to Davos and plan for world domination, but it’s much scarier than that,” Mr. Bregman said.

“You go there and you find out that all those people are pretty nice. But friendliness can stand in the way of justice.”

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