已经足够 is “enough already” in mandarin according to Google translate.

Relayed to the Kremlin: уже достаточно!

Zelenskiy Says Russia Positions ‘More Realistic’ 

Ukrainian President Volodymyr Zelenskiy said Russia’s “positions in the negotiations sound more realistic” as the two sides are scheduled for another round of talks on Wednesday. Russian Foreign Minister Sergei Lavrov also said there is some hope for compromise, but progress remains difficult. Hours earlier, Russian President Vladimir Putin said Ukraine’s leadership was not “serious” about resolving the conflict.

• Kremlin Says Neutral Ukraine With Army Could Be Compromise
• China’s Goal With Putin Is to Resist U.S. Without Economic Pain China’s support for Russia in the war in Ukraine is showing its limits as the domestic costs for President Xi Jinping start to outweigh the benefits of confronting the U.S.

Whether a trade war or a real one like in Ukraine, China has shown that it will try to prevent its geopolitical struggles with the U.S. from hurting the domestic economy. A rapidly worsening Covid situation and the need to maintain stability in a pivotal year for Xi make it less likely the Chinese leader would allow Vladimir Putin’s invasion of Ukraine to blow back at home. (…)

“The big issue now is what decisions and actions China takes,” Singaporean Foreign Minister Vivian Balakrishnan said in an interview to be broadcast at the upcoming Bloomberg Live Asean Business Summit, adding that Beijing has “enormous influence” on Russia. “If you get a deepening of the bifurcation of the global economy, of supply chains, of technology, this will be a very, very different world.” (…)

On Tuesday, China’s envoy in Washington issued one of Beijing’s clearest denials yet that it had advanced warning of Russia’s war. (…)

“Assertions that China knew about, acquiesced to or tacitly supported this war are purely disinformation,” he wrote. “Had China known about the imminent crisis, we would have tried our best to prevent it.” (…)

The FT’s Gideon Rachman made an interesting point:

The fact that the EU, UK, Swiss, South Koreans, Japanese and Singaporeans have joined in the financial sanctions on Russia has created a united front of developed economies that should concern Beijing. China has repeatedly measured itself directly against the US, ticking off milestones as it goes: largest trading power, largest economy measured by purchasing power, largest navy. Yet if China now has to measure itself against not just the US, but also the EU, UK, Japan, Canada and Australia, its relative position looks much less powerful. … The idea of an economic severance of China from the west, once unthinkable, is beginning to look more plausible. It might even appeal to the growing constituency of economic nationalists in the west who now regard globalisation as a disastrous error.

• Russia’s Brain Drain Becomes a Stampede for the Exits The country’s best and brightest see no future as long as their president is obsessed with the past.

(…) This can no longer be described as a brain drain: It’s a stampede for the exits. Konstantin Sonin, an economist at the University of Chicago, has estimated that about 200,000 Russians fled in the first 10 days of the invasion—to Armenia, Georgia, Israel, Kazakhstan, Kyrgyzstan, Turkey—any country that admits Russians visa-free. (…)

They’re leaving everything behind, most of them because they want nothing to do with Putin’s sham-imperial project and don’t want to be associated with his war crimes; others because they cannot imagine living under the Soviet-style autarky to which Western sanctions have doomed Russia. (…)

Xi Spurs Frantic Stock Buying With Lifeline for China Markets After a brutal 12 months for Chinese equities, Wednesday’s session was looking like a tepid bounce off multi-year lows until the headlines started rolling from Beijing. Then greed quickly replaced the panicked selling of the past few days.

In a brief statement carried by state media, China’s top financial policy body vowed to ensure stability in capital markets, support overseas stock listings, resolve risks around property developers and complete the crackdown on Big Tech “as soon as possible.” Yi Gang, governor of the People’s Bank of China, followed with a statement saying the central bank would help implement the policies, as did the banking watchdog.

(…) it was the first time China publicly addressed investors’ top concerns in one coordinated swoop. The move underscored Xi’s focus on ensuring economic and financial stability before a Communist Party congress at which he’s expected to secure at least another five years in power. (…)

The State Council statement made a veiled reference to his political imperatives, calling on all parties “to deeply understand the significance of the “‘two establishes’” in keeping the economy and markets stable — jargon that affirms Xi’s position as the Communist Party’s most important figure.

Government departments should “actively introduce policies that benefit markets,” according to a meeting of the Financial Stability and Development Committee, led by Vice Premier Liu He, who’s in charge of overall economic policy.

China also supports firms listing overseas and has achieved positive progress in discussions with Washington over Chinese stocks on U.S. exchanges, Xinhua’s report of the meeting said, adding that both sides are working to formulate a detailed cooperation plan. Concern that companies like Alibaba might need to delist from overseas markets had been a major driver of the selloff in recent days. (…)

The Hang Seng China gauge plunged 24% this month through Tuesday. Even after Wednesday’s surge, the index is down about 40% in the past year, the worst performance globally. Chinese stocks in the U.S. have lost 75% from their 2021 peak, while the yield on Chinese junk dollar debt has surged above 27% for the first time.

The yuan has also started to look vulnerable. Selling momentum in the offshore Chinese currency on Monday reached an intensity only seen a handful of times in the past five years. The yuan suffered the biggest real-money net outflows among all global emerging-market currencies last week, according to Citigroup Inc. calculations based on client trades. (…)

Xi is totally focused on next October. He needs to deal with a sinking Putin, surging Covid, a slowing economy, threatening real estate, a sinking stock market and a weakening currency. In 6 months!

BTW, recall that Chinese vaccines were said much less efficient against Omicron than Western mRNA vaccines. Maybe, this is what’s behind this new, stronger wave:

Cities with high-/mid-risk districts account for roughly 25% of national GDP

Source: NHC, CEIC, Goldman Sachs Global Investment Research

BTW #2:

  

(NBF)

France Opens Door to Talks With Spain on Building Gas Pipeline France is willing to resume talks with Spain about building a gas pipeline connecting the two countries as Europe races to reduce its dependence on Russian gas.

France, which has long resisted Spanish calls to build the link, is now willing to discuss the viability of the so-called Midcat pipeline if Madrid officially requests it, said Jean-Michel Casa, French ambassador in Madrid. Spain has about a quarter of Europe’s regasification capacity. (…)

The pipeline could help substitute Russian gas by allowing Algerian gas to flow into Europe as well bolstering liquefied natural gas imports through Spain. (…)

U.S. Producer Price Gain Moderates in February

The Producer Price Index for Final Demand increased 0.8% (10.0% y/y) during February following a 1.2% January rise. A 0.9% increase had been expected in the Action Economics Forecast Survey. The PPI excluding food and energy rose 0.2% in February (8.4% y/y) after strengthening 1.0% in January. Expectations had been for a 0.6% gain. The PPI less food, energy and trade services also rose 0.2% (6.6% y/y) after increasing 0.8% in January. These series were surveyed before Russia’s invasion of Ukraine and date back to 2010.

Another surge in energy prices led last month’s increase in the PPI with an 8.2% jump (33.8% y/y) following a 3.7% January rise. (…)

Food prices increased 1.9% (13.4% y/y) after rising 1.7% in January. (…)

Final demand for goods prices less foods & energy rose a steady 0.7% (9.6% y/y). Finished consumer goods prices less good & energy rose 0.9% in February (7.4% y/y) following a 0.7% increase. Durable consumer goods prices surged 0.9% last month (8.3% y/y) for the second consecutive month.

Core nondurable consumer goods prices also rose 0.9% (6.9% y/y) following a 0.5% increase. Prices for private capital equipment jumped a record 1.0% (8.0% y/y) for the second consecutive month.

Services prices held steady (7.8% y/y) after strengthening 1.0% in January. Trade services prices rose 0.2% (14.4% y/y) following three straight months of strong increase. Services prices less trade, transportation & warehousing fell 0.4% in February (+3.8% y/y) following a 0.8% increase in January.

Construction product prices rose 0.6% (16.6% y/y) after surging 3.6% in January. Construction costs for private capital investment rose 0.7% (18.3% y/y) after 4.0% increase.

Intermediate goods prices jumped 1.6% (23.3% y/y) due to a 7.4% gain (37.9% y/y) in processed fuel costs.

Goods prices, including Core Goods, remain very strong.

The surprise was in PPI Services, unchanged in February after jumping at a 10.6% annualized rate in December-January. Still up 7.8% YoY. From the BLS:

Within the index for final demand services in February, prices for truck transportation of freight moved up 2.0 percent. The indexes for food and alcohol retailing, machinery and vehicle wholesaling, transportation of passengers (partial), and outpatient care (partial) also rose.

Conversely, prices for portfolio management decreased 4.2 percent. The indexes for guestroom rental; apparel, jewelry, footwear, and accessories retailing; automobile retailing (partial); and residential real estate loans (partial) also declined.

Services inflation essentially comes from wages and fees. That lower portfolio management and guestroom rental fees along with slower gains in select retail wages result in unchanged services inflation numbers in February must be seen as a temporary inconsequential aberration.

February’s moderation in PPI will likely be reversed in March.

Oil Market Faces Biggest Supply Crisis in Decades, IEA Says Russia’s invasion of Ukraine and Western sanctions on its oil exports threaten a supply shock that will tighten energy markets even further unless major producers increase output, the International Energy Agency said.

(…) The impact could mean 3 million barrels a day of Russian supply effectively cut off from global markets starting next month, the IEA said. [That’s 26% of Russian oil production]. The agency slashed its forecast for global oil supply this year by 2 million barrels a day to 99.5 million barrels a day, based on what major producers of the Organization of the Petroleum Exporting Countries have currently agreed to pump. (…)

The result will also mean a blow to oil demand, but not by enough to balance the lost Russian supply. Demand for oil will be 1 million barrels a day less this year than the IEA was expecting last month at 99.6 million barrels a day. The IEA also cuts its forecasts for oil demand growth this year by 1.1 million barrels a day, to 2.1 million barrels a day.

The oil market will slip into a deficit as early as the second quarter unless the OPEC group of oil producers increase their supply levels, the IEA said. Beyond the spare capacity of leading OPEC members Saudi Arabia and the United Arab Emirates, there are no other sources of additional supply that can balance the market with oil inventories having already been depleted to multiyear lows and the prospect of additional supplies from Iran seemingly a long way off. (…)

• IEA Sees Russia Crisis Accelerating Transition to Clean Energy

Chinese Auto Stocks Drop as Troubles Pile Up Sluggish sales and supply-chain disruptions have made investors more pessimistic about the world’s largest car market.

(…) China’s shortage of auto chips is easing and the country’s supply of cars is rising, a spokesman for the country’s statistics bureau told a press conference Tuesday, according to an official summary posted on the website of the state-owned Securities Times.

More broadly, Chinese economic growth has decelerated and the property market is slumping. In China, that tends to dampen purchases of cars as well as furniture and home appliances, since home buyers often purchase a new car as well.

“If you look at the past 20 years of property-sales and passenger-vehicle-sales growth, they’re basically correlated,” said Angus Chan, an analyst at Bocom International. (…)

New car sales rose 4.4% last year to 20.1 million vehicles, after three years of declines. (…)

EVs have been rapidly growing market share in China. Sales of electric and plug-in hybrid cars in February more than doubled to 272,000 vehicles from a year earlier, according to the China Passenger Car Association.

U.S. Empire State Manufacturing Index Fell Sharply in March

The Empire State Manufacturing Index of General Business Conditions fell fifteen points in March to -11.8, its lowest level since May 2020. A reading of 8.8 had been expected in the Action Economics Forecast Survey. Twenty-four percent of respondents reported that conditions had improved, down from 33.5% last month, while 35.4% reported that conditions had worsened, up from 30.5% in February. The latest survey was conducted between March 2 and March 9. (…)

The new orders index fell in March to -11.2 from 1.4 in February and the shipments index fell to -7.4 from 2.9 last month. A lessened 26.2% of respondents reported higher shipments, while an increased 33.6% reported lower shipments. (…)

The number of employees index dropped 8.6 points to 14.5, suggesting only a modest rise in employment levels. Twenty-one percent of respondents reported increases in employment during March and 6.2% reported lower employment. The average workweek declined to 3.5, down from 10.9 in February.

Inflation pressures continued to be mixed this month. The prices paid index edged down to 73.8 from 76.6 in February, while prices received rose to a record high of 56.1 from 54.1 last month, signaling ongoing substantial increases in both input prices and selling prices. Seventy-five percent of respondents reported higher prices paid in March, while only 0.9% reported lower prices paid.

  

FIBER: Industrial Commodity Prices Continue to Strengthen

Ray Dalio: My Discussion with Henry Kissinger about how the World Order is Changing

Why you should care about quantum computing (McKinsey)

• Speedy and secure. There are two big reasons leaders should care about quantum computing. The first: quantum computers are much faster than conventional ones at solving problems. For instance, a typical computer would take billions of years to figure out the prime factors of large numbers, but a quantum computer takes only a few days. The second reason: since prime factorization underpins a great deal of today’s IT infrastructure, quantum computing will put an end to our present-day cybersecurity systems, which means companies that don’t update their IT systems will be powerless against cyberattacks. [HBR]

• With great power. When a commercial-grade version of a quantum computer arrives, it will deliver an explosion of computational power that will enable the world to do what it has only imagined before. Quantum computers can run simulations that could help companies speedily develop new medications and materials, for example. However, quantum computers could also be used to design bioweapons and hack into communications systems. Strong governance is therefore needed to manage the risks and maximize the benefits. [WEF]

MUST READ:

Possible Outcomes of the Russo-Ukrainian War and China’s Choice

This is from Hu Wei, a Chinese political scientist and national political adviser. He is the vice-chairman of the Public Policy Research Center of the Counselor’s Office of the State Council, the chairman of Shanghai Public Policy Research Association, the chairman of the Academic Committee of the Chahar Institute, a professor, and a doctoral supervisor. He is also a member of the 13th National Committee of the Chinese People’s Political Consultative Conference.

This article was submitted on March 5 by the author to the Chinese-language edition of the US-China Perception Monitor.

The article was censored in China and Hu Wei’s WeChat account was suspended.

Yet, it is a rational analysis of Putin’s situation and of China’s seemingly only alternative.

The Russo-Ukrainian War is the most severe geopolitical conflict since World War II and will result in far greater global consequences than September 11 attacks. At this critical moment, China needs to accurately analyze and assess the direction of the war and its potential impact on the international landscape. At the same time, in order to strive for a relatively favorable external environment, China needs to respond flexibly and make strategic choices that conform to its long-term interests.

Russia’s ‘special military operation’ against Ukraine has caused great controversy in China, with its supporters and opponents being divided into two implacably opposing sides. This article does not represent any party and, for the judgment and reference of the highest decision-making level in China, this article conducts an objective analysis on the possible war consequences along with their corresponding countermeasure options.

I. Predicting the Future of the Russo-Ukrainian War

1.  Vladimir Putin may be unable to achieve his expected goals, which puts Russia in a tight spot. The purpose of Putin’s attack was to completely solve the Ukrainian problem and divert attention from Russia’s domestic crisis by defeating Ukraine with a blitzkrieg, replacing its leadership, and cultivating a pro-Russian government. However, the blitzkrieg failed, and Russia is unable to support a protracted war and its associated high costs. Launching a nuclear war would put Russia on the opposite side of the whole world and is therefore unwinnable. The situations both at home and abroad are also increasingly unfavorable. Even if the Russian army were to occupy Ukraine’s capital Kyiv and set up a puppet government at a high cost, this would not mean final victory. At this point, Putin’s best option is to end the war decently through peace talks, which requires Ukraine to make substantial concessions. However, what is not attainable on the battlefield is also difficult to obtain at the negotiating table. In any case, this military action constitutes an irreversible mistake.

2.  The conflict may escalate further, and the West’s eventual involvement in the war cannot be ruled out. While the escalation of the war would be costly, there is a high probability that Putin will not give up easily given his character and power. The Russo-Ukrainian war may escalate beyond the scope and region of Ukraine, and may even include the possibility of a nuclear strike. Once this happens, the U.S. and Europe cannot stay aloof from the conflict, thus triggering a world war or even a nuclear war. The result would be a catastrophe for humanity and a showdown between the United States and Russia. This final confrontation, given that Russia’s military power is no match for NATO’s, would be even worse for Putin.

3.  Even if Russia manages to seize Ukraine in a desperate gamble, it is still a political hot potato. Russia would thereafter carry a heavy burden and become overwhelmed. Under such circumstances, no matter whether Volodymyr Zelensky is alive or not, Ukraine will most likely set up a government-in-exile to confront Russia in the long term. Russia will be subject both to Western sanctions and rebellion within the territory of Ukraine. The battle lines will be drawn very long. The domestic economy will be unsustainable and will eventually be dragged down. This period will not exceed a few years.

4. The political situation in Russia may change or be disintegrated at the hands of the West. After Putin’s blitzkrieg failed, the hope of Russia’s victory is slim and Western sanctions have reached an unprecedented degree. As people’s livelihoods are severely affected and as anti-war and anti-Putin forces gather, the possibility of a political mutiny in Russia cannot be ruled out. With Russia’s economy on the verge of collapse, it would be difficult for Putin to prop up the perilous situation even without the loss of the Russo-Ukrainian war. If Putin were to be ousted from power due to civil strife, coup d’état, or another reason, Russia would be even less likely to confront the West. It would surely succumb to the West, or even be further dismembered, and Russia’s status as a great power would come to an end.

II. Analysis of the Impact of Russo-Ukrainian war On International Landscape

1. The United States would regain leadership in the Western world, and the West would become more united. At present, public opinion believes that the Ukrainian war signifies a complete collapse of U.S. hegemony, but the war would in fact bring France and Germany, both of which wanted to break away from the U.S., back into the NATO defense framework, destroying Europe’s dream to achieve independent diplomacy and self-defense. Germany would greatly increase its military budget; Switzerland, Sweden, and other countries would abandon their neutrality. With Nord Stream 2 put on hold indefinitely, Europe’s reliance on US natural gas will inevitably increase. The US and Europe would form a closer community of shared future, and American leadership in the Western world will rebound.

2. The “Iron Curtain” would fall again not only from the Baltic Sea to the Black Sea, but also to the final confrontation between the Western-dominated camp and its competitors. The West will draw the line between democracies and authoritarian states, defining the divide with Russia as a struggle between democracy and dictatorship. The new Iron Curtain will no longer be drawn between the two camps of socialism and capitalism, nor will it be confined to the Cold War. It will be a life-and-death battle between those for and against Western democracy. The unity of the Western world under the Iron Curtain will have a siphon effect on other countries: the U.S. Indo-Pacific strategy will be consolidated, and other countries like Japan will stick even closer to the U.S., which will form an unprecedentedly broad democratic united front.

3. The power of the West will grow significantly, NATO will continue to expand, and U.S. influence in the non-Western world will increase. After the Russo-Ukrainian War, no matter how Russia achieves its political transformation, it will greatly weaken the anti-Western forces in the world. The scene after the 1991 Soviet and Eastern upheavals may repeat itself: theories on “the end of ideology” may reappear, the resurgence of the third wave of democratization will lose momentum, and more third world countries will embrace the West. The West will possess more “hegemony” both in terms of military power and in terms of values and institutions, its hard power and soft power will reach new heights.

4. China will become more isolated under the established framework. For the above reasons, if China does not take proactive measures to respond, it will encounter further containment from the US and the West. Once Putin falls, the U.S. will no longer face two strategic competitors but only have to lock China in strategic containment. Europe will further cut itself off from China; Japan will become the anti-China vanguard; South Korea will further fall to the U.S.; Taiwan will join the anti-China chorus, and the rest of the world will have to choose sides under herd mentality. China will not only be militarily encircled by the U.S., NATO, the QUAD, and AUKUS, but also be challenged by Western values and systems.

III. China’s Strategic Choice

1. China cannot be tied to Putin and needs to be cut off as soon as possible. In the sense that an escalation of conflict between Russia and the West helps divert U.S. attention from China, China should rejoice with and even support Putin, but only if Russia does not fall. Being in the same boat with Putin will impact China should he lose power. Unless Putin can secure victory with China’s backing, a prospect which looks bleak at the moment, China does not have the clout to back Russia. The law of international politics says that there are “no eternal allies nor perpetual enemies,” but “our interests are eternal and perpetual.” Under current international circumstances, China can only proceed by safeguarding its own best interests, choosing the lesser of two evils, and unloading the burden of Russia as soon as possible. At present, it is estimated that there is still a window period of one or two weeks before China loses its wiggle room. China must act decisively.

2. China should avoid playing both sides in the same boat, give up being neutral, and choose the mainstream position in the world. At present, China has tried not to offend either side and walked a middle ground in its international statements and choices, including abstaining from the UN Security Council and the UN General Assembly votes. However, this position does not meet Russia’s needs, and it has infuriated Ukraine and its supporters as well as sympathizers, putting China on the wrong side of much of the world. In some cases, apparent neutrality is a sensible choice, but it does not apply to this war, where China has nothing to gain. Given that China has always advocated respect for national sovereignty and territorial integrity, it can avoid further isolation only by standing with the majority of the countries in the world. This position is also conducive to the settlement of the Taiwan issue.

3. China should achieve the greatest possible strategic breakthrough and not be further isolated by the West. Cutting off from Putin and giving up neutrality will help build China’s international image and ease its relations with the U.S. and the West. Though difficult and requiring great wisdom, it is the best option for the future. The view that a geopolitical tussle in Europe triggered by the war in Ukraine will significantly delay the U.S. strategic shift from Europe to the Indo-Pacific region cannot be treated with excessive optimism. There are already voices in the U.S. that Europe is important, but China is more so, and the primary goal of the U.S. is to contain China from becoming the dominant power in the Indo-Pacific region. Under such circumstances, China’s top priority is to make appropriate strategic adjustments accordingly, to change the hostile American attitudes towards China, and to save itself from isolation. The bottom line is to prevent the U.S. and the West from imposing joint sanctions on China.

4. China should prevent the outbreak of world wars and nuclear wars and make irreplaceable contributions to world peace. As Putin has explicitly requested Russia’s strategic deterrent forces to enter a state of special combat readiness, the Russo-Ukrainian war may spiral out of control. A just cause attracts much support; an unjust one finds little. If Russia instigates a world war or even a nuclear war, it will surely risk the world’s turmoil. To demonstrate China’s role as a responsible major power, China not only cannot stand with Putin, but also should take concrete actions to prevent Putin’s possible adventures. China is the only country in the world with this capability, and it must give full play to this unique advantage. Putin’s departure from China’s support will most likely end the war, or at least not dare to escalate the war. As a result, China will surely win widespread international praise for maintaining world peace, which may help China prevent isolation but also find an opportunity to improve its relations with the United States and the West.

The only question is how long it will take China to sway Putin.

• In the NYT: It’s Time to Offer Russia an Offramp. China Can Help With That.

(…) The United States and its allies might be reluctant to have China play any role in this crisis, given that they view Beijing as a strategic rival. That’s foolish and shortsighted; the conflict’s immediate dangers far outweigh any competitive considerations. Ukraine itself sees the potential of Chinese-led conflict resolution.

So far, China has called for dialogue and says it supports humanitarian aid efforts. But Beijing’s interests in more proactive involvement are growing by the day.

China has a significant economic interest in a quick resolution to the Russian-Ukrainian war. China enjoys strong ties with Russia and Ukraine and is both countries’ largest single trading partner, though each trades more with the E.U. bloc than with China. Russia and Ukraine are crucial components of the Belt and Road infrastructure program as well as conduits for China’s trade with Europe. China-Europe rail transports have experienced a hundredfold increase since the beginning of the 2010s, but the ongoing conflict threatens to disrupt these trade flows.

China is also uniquely positioned to act as a neutral mediator between a Western-supported Ukraine and Russia. (…)

It is not in Beijing’s interests to rely solely on an anti-Western alliance with Moscow. Russia may possess a mighty military, but its economy is in long-term structural decline, with a G.D.P. not much larger than that of Spain. For all the talk of ties with Moscow, it is worth remembering that China’s economic interests with Russia are dwarfed by those it shares with the West. In 2021, trade between China and Russia may have jumped by 36 percent compared to the prior year, to $147 billion — but that’s still less than a tenth of the combined trade with the United States ($657 billion) and European Union ($828 billion). (…)

As Russia becomes isolated from the world economy, China will not want to shoulder Russia’s economic burden alone.

(…) from Mr. Putin’s perspective, (…) {as] he and his country face increasing isolation, he can’t afford to lose China, too.

There are also political reasons China wants this conflict to end in a way that is appealing to all involved. The longer the war lasts, the more it will reinvigorate the Western alliance around the idea of a values-based confrontation between East and West, bringing the United States and the European Union into even closer alignment while driving military budgets up around the globe. That is not good for China, which would prefer to maintain lucrative economic ties with the West and focus its resources on domestic development.

(…) Beijing has long striven to convince political and business elites in Europe and America that the rise of China does not present a threat. Support for Russian aggression — even perceived support — threatens to undermine that assertion. By contrast, playing a constructive role in ending the war could help cast China as a strategic and not just economic partner.

Ideologically, China has common ground with both Ukraine and Russia. China deeply values the principle of state sovereignty and has long opposed outside interference in what it considers internal affairs such as Taiwan. Last month, Foreign Minister Wang Yi of China once again called for a global respect of territorial integrity, saying, “Ukraine is no exception.” In this way, at least, Mr. Putin’s invasion directly undercuts one of China’s key values. (…)

The longer the war goes on, though, China may find itself in a position of diminishing returns in its close relationship with Russia. This makes the argument for Beijing to take on an active mediation role even more compelling.

What form could mediation take? Any serious resolution would have to involve the United States and the European Union as key actors in European security arrangements. Beijing could help to broker an immediate cease-fire as a prelude to talks among Russia, Ukraine, the United States, the European Union and China.

Beijing’s goal would be to find a solution that gives Mr. Putin sufficient security assurances that can be presented as a win to his domestic audience while protecting Ukraine’s core sovereignty and NATO’s open-door policy. Finding a landing zone for such an agreement is challenging but not impossible. Some creative diplomacy could solve this, such as a formula for NATO expansion that rules out Ukrainian membership in practice while preserving its sovereignty and NATO principles in theory.

Securing a multilateral resolution to the crisis in Ukraine will be a tough and risky challenge, but there is no country better placed to do so than China.

In today’s WSJ:

Beijing’s foreign-policy advisers say the fact that Mr. Xi, whose joint statement with Mr. Putin just a month ago brought the China-Russia relationship to its closest point in seven decades, dispatched his top diplomat for a meeting that would focus heavily on Ukraine showed Beijing’s growing interest in taking a more proactive role in de-escalating the crisis.

The advisers also point to recent remarks by Mr. Xi and other senior officials during phone calls with European leaders, in which they expressed desires to work with the international community for a cease-fire in Ukraine. (…)

“The U.S. needs to cut down bashing and sanctions on China,” said Wang Huiyao, an adviser to the Chinese government and president of the Center for China and Globalization, a Beijing think tank. “You can’t keep beating up China on one hand and then expect China to help.”

Bloomberg:

(…) “China is committed to promoting peace talks,” said Yang, a member of the Communist Party’s 25-seat Politburo. “And the international community should jointly support the Russia-Ukraine peace talks to achieve substantive results as soon as possible, and push the situation to cool down as soon as possible.”

During the “constructive” talks with Sullivan, Yang stressed Beijing’s opposition to Washington’s support for Taiwan, which “concerns China’s sovereignty and territorial integrity.” Beijing considers democratically ruled Taiwan to be part of its territory. (…)

George Friedman, who views the economic and financial sanctions winning it:

Saving Putin’s face in this situation is not a high priority. He gambled, he lost. Demonstrating what it means to lose, in a situation where the U.S. is involved, is more important because the next one who tries this should remember the lessons of Putin. (…) We have to force him backwards because we can’t give him what he wants, Ukraine.

CONSUMER WATCH

Goldman Sachs says that strong wage growth is now broad-based: “53% of (employment-weighted) industries saw annualized wage growth between 7% and 11% over the last six months (vs. 35% in July 2021), and the middle 60% of the wage distribution saw annualized wage growth averaging 7.4% (vs. 5.2% in July 2021).”

Employers are raising wages more aggressively to retain talent:

In the last 6 months, the middle 60% of the wage distribution saw annualized wage growth averaging 7.4%, up from 5.2% in July 2021. GS says that “the tightness of the labor market argues even more strongly for sustained strong wage growth than they did in the summer and fall.”

Yet, “we expect wage growth will remain very firm and only settle down to 5% by the end of the year.”

Why the settling down given that “the tightness of the labor market…”?

You’re too curious!

Consumer Spending Growth Expectations Spike, while Inflation Expectations Edge Back Up

• Median one-year-ahead inflation expectations increased to 6.0% in February from 5.8% in January, matching its November 2021 series’ high. (…)
• Median expectations about year-ahead price changes for food and gas increased by 3.3 and 1.5 percentage points to 9.2% and 8.8%, respectively. The median year-ahead expected change in the costs of medical care and college education increased to 9.6% and 9.0%, from 9.5% and 7.3%, respectively. The median expected one-year-ahead change in the price of rent increased to 10.1%, from 9.8%.
• Median one-year-ahead expected earnings growth was unchanged for the second consecutive month at 3.0% in February and remains above its 12-month trailing average of 2.6%.
• Median year-ahead household spending growth expectations increased sharply to 6.4% from 5.5% in January, reaching a new series high since the start of the series in June 2013. The increase was broad-based across age, income, and education groups.

Why Your Electric Bill Is Soaring—and Likely to Go Higher Surging natural-gas prices, stoked by the Ukraine crisis, are raising power costs for utilities, and in turn, customers: “My utility bill literally doubled overnight.”

(…) Already, the natural-gas supply crunch has made it substantially more expensive for utilities to purchase or produce electricity. As a result, some customers have seen winter power bills increase by 20% or more compared with the year before, in addition to seeing higher home-heating bills. (…)

U.S. Henry Hub gas prices on Friday reached about $4.73 per million British thermal units. That is up from about $2.66 per million British thermal units a year ago. (…)

Average retail electricity prices for residential customers rose 4.3% last year to 13.72 cents per kilowatt-hour, the largest annual increase since 2008, according to the Energy Information Administration. (…)

Eversource Energy, ES -0.70% a utility that serves 3.6 million electric and natural-gas customers in Connecticut, Massachusetts and New Hampshire, raised electricity rates at the start of January to account for higher wholesale prices. The company said an average residential customer could see bills increase by as much as 25% through the end of June. (…)

San Diego Gas & Electric, a unit of Sempra that serves about 1.5 million electric customers and 900,000 natural-gas customers, raised rates at the start of the year to account for higher supply costs. Average residential bills increased by 11.4%. (…)

Treasury Yields Rebound to New Multiyear Highs The yield on the 10-year Treasury note hit the highest close since June 2019 as investors worry the isolation of Russia will add to inflation by boosting commodity prices.

The yield on the benchmark 10-year U.S. Treasury note settled at 2.139%, up from 2.004% Friday and its highest close since June 2019. (…)

While some have thought that higher commodity prices could slow economic growth and therefore make the Fed cautious about raising interest rates, “our view is, that for the U.S., that the inflation impact will be higher than any negative impacts from growth,” she said. (…)

Rosenberg Research estimated the impact of food-and-energy-induced inflation for the U.S. using

a range of scenarios from agriculture price inflation staying right where it is at roughly 50% year-over-year (determined by underlying commodity food costs) and WTI oil prices increasing to $150 per barrel, to food prices doubling and oil prices increasing to $200 per barrel.

If the price shock were to persist, this would contribute anywhere from 2.6 to 4.4 percentage points to the year-over-year inflation print, and if core CPI were to sustain its current pace (6.4% YoY in February), then we could be looking at double-digit U.S. inflation figures in 2022.

RR estimates that GDP growth would be shaved between 1.1 to 1.7 percentage points as a result, getting the U.S. close to recession markers.

China’s Factories, Consumers Make High-Speed Start to Year Covid lockdowns and war in Ukraine threaten to slow growth

(…) Industrial output jumped 7.5% during the first two months from a year earlier, accelerating from December’s 4.3% pace and more than double the 3.5% expected by economists polled by The Wall Street Journal.

Retail sales, a gauge of household consumption, rose 6.7% during the same period from a year earlier, beating the 4.3% growth expected by the surveyed economists. Catering sales, including from restaurants, grew at a faster pace than goods sales for the first time since July.

China saw a strong recovery in fixed-asset investment, which rose 12.2% in the first two months from a year earlier, compared with 4.9% growth in the same period of last year. Economists surveyed had predicted a 5% gain.

Investment in infrastructure projects increased by 8.1% from a year earlier, an indicator that authorities plan to rely more on funded projects to drive growth as the contribution from exports wanes and the real-estate sector’s woes drag on. (…)

Broad credit expansion pulled back from 10.5% in January to 10.2% in February, slowing for the first time since September. In February, new medium- to long-term household loans, primarily mortgages, contracted for the first time since 2008, signaling that confidence remains weak even after authorities cut mortgage lending rates to spur demand.

Home sales by value slumped 22.1% in the first two months from a year earlier, the biggest decline since March 2020, when the initial eruption of the Covid-19 pandemic dealt a hammer blow to China’s economy. Real-estate investment during the first two months slowed to a 3.7% gain from a year ago, down from 4.4% growth in 2021.

China’s official unemployment rate edged up 0.4 percentage point to 5.5% in February from the end of 2021, while the youth jobless rate climbed to 15.3% in February from 14.3% in December. (…)

HALF A BEAR

From Horan Capital:

• For the S&P 500 Index, almost half of the stocks in the index are down greater than 20% from their most recent 52-week high, in fact 44.8% are down an average of 31.9%. Another 29.7% are down 15.1% from their one-year high. The average stock in the index is down 20.1%.

• The S&P 400 Mid Cap Index is showing 82% of the index holdings are down greater than 10% from their 52-week highs. Just over 50% are down an average of 33.9% and the average stock in the Mid Cap Index is down 22.8%.

• The S&P 600 Small Cap Index is exhibiting the greatest weakness among its holdings with 81.4% are down more than 10%. The small cap index has the largest number of stocks down more than 20% at 58.6%. The average stock in the small cap index is down 26.6% from their 52-week highs.

• In total, 778 stocks, 52% of the combined 1500 large, mid and small cap indices, are down more than 32% from their 52-week high. This while the average index was down 23.2%.

Market bottoms normally happen when investors capitulate.

(…) capitulation bottoms have characteristics where trading volume spikes and the number of stocks making now lows spikes. As the below chart shows, 52-week new lows appear elevated but not at extremes, The number of new 52-week highs has declined and would be indicative of the weakness seen this year. The mixed trading and sentiment data are a few factors clouding the anticipated future direction of the market. However, with a large number of stocks down a lot, there are opportunities in individual stocks that are beginning to surface.

SentimenTrader agrees:

Curiously, there have been no days with truly exhaustive selling pressure during this entire [10-week] stretch.

Despite the large (but not extreme) price swings, there have been zero days with more than 90% selling pressure. The NYSE Up Issues Ratio has remained above 10% the entire time, unlike the pandemic crash and its aftermath.

The suggestion is that investors are relatively complacent. Despite heavy and persistent losses, we haven’t yet seen a whoosh of panic selling pressure, something that always piques the interest of contrarians. While such behavior would certainly help more metrics reach compelling oversold levels, it’s not necessarily required. (…)

The persistent selling pressure is causing sentiment to stay weak. Or rather, weak sentiment is causing rally attempts to falter quickly: chicken and egg.

At least some investors seem to be stepping up. With commercial hedgers covering some of their historic short positions against major equity index futures, Smart Money Confidence has been able to rise. It has now surpassed the peak from the pandemic.

According to the Backtest Engine, the S&P 500 rallied during the next 2-4 weeks after 52 out of 57 days when the Smart Money was more than 85% confident in a rally.

As Jay recently noted, the spread between Smart and Dumb Money has been wide for a while, and the 20-day average just crossed above 47%. Again, the Backtest Engine shows excellent short- to medium-term returns after similar behavior. (…)

Basically, every metric I use to gauge the market environment is negative. For all intents and purposes, that requires truly extreme sentiment readings to have any confidence in a multi-week to multi-month rebound. There are always some outliers, but fewer than 10% of core indicators are in risk-on mode, and more than a third of a broader range of indicators have been in extreme pessimism territory. We’re seeing ample evidence of extremes, but not panic. Maybe we need that one final flush that finally triggers it. That would make a case for a sustained rebound easier from a contrary point of view. The tricky part is that a final flush is unnecessary for that rebound to occur.

BTW, the 13-34 EMA trend lines finally crossed yesterday:

Here’s the record since 2006: