South Africa’s economy – one of Africa’s biggest – is in recession.

A 0.7 percent decline in GDP in the first quarter of this year followed a 0.3 percent contraction in the last quarter of 2016, meeting the definition of a recession as two or more quarters of negative growth, the South African government said Tuesday.  

 

The country’s economy was already struggling with official unemployment of 27.7 percent, as well as financial fallout from scandals surrounding President Jacob Zuma.

 

This year, Fitch and Standard & Poor’s lowered South Africa’s credit rating to below investment grade after Zuma fired Pravin Gordhan, a finance minister seen by many South Africans as a bulwark against alleged corruption at top levels of government. Calls for Zuma to resign have increased within the ruling African National Congress party, fueling uncertainty about the country’s leadership.

 

Citing leaked emails, South African media have reported on the alleged influence of the Gupta family, Indian immigrant businessmen with close ties to Zuma who have been accused of trying to manipulate the government for financial gain.

 

“It is a toxic combination of policy uncertainty and grand corruption which has led us to this point,” Mmusi Maimane, leader of the opposition Democratic Alliance party, said after the recession was announced.

 

Trade fell by 5.9 percent and manufacturing declined by 3.7 percent in the first quarter of 2017, said Statistics South Africa, a government agency. The sector comprising finance, transport, trade, government and personal services logged its first quarter of decline since 2009, when South Africa was swept up in the global financial crisis, it said.   

 

Agriculture posted growth in a possible sign of recovery from a harsh drought, and mining grew partly because of a production increase in gold and platinum, according to the agency.
…

The number of job openings advertised in the United States hit a record high of six million in April.

Tuesday’s report from Labor Department said the pace of hiring went down at the same time.

Analysts say the apparent contradiction may show that employers are having difficulty finding workers with the right skills.

Data about job openings and the recently reported U.S. unemployment rate (4.3 percent), and new information on inflation will be part of the discussion next week when leaders of the U.S. central bank gather to set interest rates. The Federal Reserve’s goal is to reach full employment and keep prices stable.

The Fed is widely-expected to raise interest rates slightly to fend off inflation without stalling economic growth.

 

 

 
…

Poland and Ukraine said Tuesday they are working toward developing a regional gas hub that would end Central and Eastern Europe’s dependence on Russian supplies and keep prices in line with European standards.

 

The region still relies to some extent on Russian natural gas and has been exposed to political pressure from Moscow, which has at times in the past limited supply volumes or hiked gas prices. Governments in the region have been reducing their imports of gas from Russia and seeking other sources. They have also been trying to become more energy-efficient, a task Ukraine still needs to fully undertake.

 

Poland is increasingly importing gas from other regions. Its new liquefied natural gas port has received deliveries by sea from Qatar and is expecting a delivery from the United States this week. Poland is also proceeding with a project to bring in North Sea gas.

 

Poland is sending some of resources on to Ukraine, after the country cut imports from Russia in 2015.

 

Government officials participating in a Poland-Ukraine Gas Conference on Tuesday said the planned hub should be in place by 2022 on the Polish-Ukrainian border.

 

“We now have enough infrastructure to move onwards with the hub,” said Serhiy Makohon, deputy head of Ukraine’s oil and gas company, Ukrtrans’haz.
…

Qatar’s currency came under pressure on Tuesday as Gulf Arab commercial banks started holding off on business with Qatari banks because of a diplomatic rift in the region.

Banking sources said some banks from Saudi Arabia, the United Arab Emirates and Bahrain delayed letters of credit and other deals with Qatari banks after their governments cut diplomatic ties and transport links with Doha on Monday, accusing Qatar of backing terrorism.

Saudi Arabia’s central bank advised banks in the kingdom not to trade with Qatari banks in Qatari riyals, the sources told Reuters. The central bank did not respond to a request for comment.

Qatar has dismissed the terrorism charge and welcomed a Kuwaiti mediation effort. Doha, the world’s biggest liquefied natural gas exporter, says it has enough reserves to support its banks and its riyal currency, which is pegged to the dollar.

Qatari banks have been borrowing abroad to fund their activities. Their foreign liabilities ballooned to 451 billion riyals ($124 billion) in March from 310 billion riyals at the end of 2015, central bank data shows.

So any extended disruption to their ties with foreign banks could potentially threaten a funding crunch for some Qatari banks. Banks from the UAE, Europe and elsewhere have been lending to Qatari institutions.

Gulf banking sources, who declined to be named because of political sensitivities, said Saudi Arabian, UAE and Bahraini banks were postponing deals until they received guidance from their central banks on how to handle Qatar.

“We will not take action without central bank guidance, but it is wise to evaluate what you give to Qatari clients and hold off until there is further clarity,” said a UAE banker, adding that trade finance had stalled for the time being.

The sources said the UAE and Bahraini central banks had asked banks under their supervision to report their exposure to Qatari banks. The UAE and Bahraini central banks did not reply to requests for comment.

Reserves

With an estimated $335 billion of assets in its sovereign wealth fund and its gas exports earning billions of dollars every month, Qatar has enough financial power to protect its banks.

“We are watching the financial sector very closely. If the market needs liquidity, the central bank will definitely provide liquidity,” a Qatari central bank official told Reuters.

Nevertheless, losing some of their foreign business links could be uncomfortable for Qatari banks because they have been expanding their loans faster than other banks in the six-nation Gulf Cooperation Council. To fund this, they have been seeking loans and deposits from the rest of the GCC.

Among large banks, Doha Bank and Qatar Islamic Bank (QIB) are the most exposed to GCC deposits, with QIB obtaining a quarter of its deposits from the GCC, said Olivier Panis, analyst at Moody’s Investors Service.

“We need to look into the maturity of those deposits but if they’re short-term deposits, this could expose the banks rapidly to reduced confidence from GCC institutions,” he said.

Doha Bank and QIB did not respond to requests for comment.

Because of such worries, the Qatari riyal fell in the spot market on Tuesday to 3.6470 against the U.S. dollar, its lowest level since June 2016, although it later rebounded to 3.6405, almost equal to its official peg of 3.64.

It also fell slightly in the one-year forwards market, where traders bet on rates 12 months from now.

The riyal’s drop “is based on speculation,” the Qatari central bank official said, adding Doha had a “huge cushion” of foreign currency to support the riyal if necessary.

A commercial banker in fellow GCC state Kuwait, which did not sever diplomatic ties with Qatar, said on Tuesday that business with Qatari institutions was continuing as normal.

But there were signs that Qatar’s financial ties might be damaged well beyond the Gulf. Some Sri Lankan banks stopped buying Qatari riyals, saying counterpart banks in Singapore had advised them not to accept the currency.

In Egypt, which also cut diplomatic and transport ties with Qatar, some banks resumed dealing in Qatari riyals after halting trade on Monday, but others appeared to be continuing to limit transactions with Doha.

Banks reducing their business with Qatar could lose out financially, but the damage looks likely to be relatively minor.

Panis at Moody’s estimated under 2 percent of Saudi banking sector assets were related to Qatar and the figure was around 5 percent for Bahrain, while the UAE’s exposure was also small.

 
…

Cities are pushing back on the possibility of losing millions of dollars in U.S. anti-terrorism grants under President Donald Trump’s spending plan — the third straight White House that has moved to cut the funding.

 

The proposed budget would cut cash for the program from $605 million to nearly $449 million for the fiscal year beginning Oct. 1 and require cities such as New York, Los Angeles and Las Vegas to pay 25 percent of the grants.

 

The administration says it is proposing the cost-share system, similar to other grant programs, to “share accountability” with states and cities.

 

But lawmakers and local officials argue that reducing funding for the Urban Area Security Initiative would undercut efforts to maintain safe communities. Cities have spent the money on command centers, active-shooter training and personnel to patrol airports, transit hubs and waterways.

 

Big cities have been down this road before, with funding fluctuating over the years.

 

President George W. Bush created the grant program after the Sept. 11, 2001, attacks, but scaled it back in his second term. President Barack Obama’s proposed 2017 budget suggested slashing the funding from $600 million to $330 million.

 

In each instance, local politicians reacted with outrage and questioned the wisdom of taking away money in the fight against terrorism. This year, Congress ignored Obama’s guidance and increased funding by $5 million.

 

But some cities that have received grants in previous years have not spent all the money, another reason the White House says the changes are needed.

 

The proposed cuts came a day after the deadly Manchester, England, concert bombing and the same day authorities in Las Vegas tried to ease concerns about the city being targeted in a recent Islamic State propaganda video. It encouraged knife and vehicle attacks and featured images of Sin City, Times Square in New York and banks in Washington, D.C.

 

Law enforcement officials in Orlando, Florida, told a congressional committee weeks after a nightclub became the site of the worst mass shooting in modern U.S. history that central Florida had missed out on needed training and opportunities to buy equipment because it had not made the cut to receive funding.

 

Grants are awarded to the highest-ranked urban areas on a list determined by risk of terrorist threats based on past plots or a known presence; whether its infrastructure is a valuable target; and the consequence of an attack on the population, economy or national security.

 

Last year, the 29 highest-ranked metro areas that applied for a grant received funding.

 

The Las Vegas area has spent the money on training and equipment for bomb and hazardous-material squads along with computer software and hardware at a law enforcement command center.

 

Las Vegas received almost $3 million in fiscal year 2016. Irene Navis, planning coordinator and assistant emergency manager in Nevada’s Clark County, said the area would be able to meet the proposed 25 percent cost-share requirement.

 

“Fortunately, not one agency is going to get the whole amount; it’s split up,” Navis said. “So, for one agency, it might be that they get $25,000 for equipment and the match is really small. Agencies that get a large amount of money, that’s something that they would have to consider. But, in general, in our urban area, it would not be a problem.”

U.S. Rep. Dina Titus, a Democrat whose district includes the Las Vegas Strip, called the funding change a “pay-to-play scheme.”

 

“It is unimaginable that the administration believes southern Nevada’s security will be improved by cutting vital programs that protect residents and travelers in our community,” she said.

 

But the government questions why state and local governments aren’t spending all the money if it’s so important.

 

“The federal government cannot afford to over-invest in programs that state and local partners are slow to utilize when there are other pressing needs,” according to a written justification from the Trump administration.

 

The office of Sen. Chuck Schumer, the New York Democrat who has sparred with Obama and Trump on the grants, says that because of government procurement rules, it can take time for cities and states to spend the money. But he says that does not mean they have not allocated the money or don’t need it.

 

New York City received the largest grant last year at more than $178 million, followed by Chicago, Los Angeles and Washington, D.C.

 

“America’s cities are critical partners in the fight against terrorism — and taking away this funding would undermine the national priority to secure the homeland,” Los Angeles Mayor Eric Garcetti, a Democrat, said in a statement.
…

The Trump administration is considering letting companies use seismic air guns to look for oil and gas deposits below the Atlantic Ocean, outraging environmentalists and coastal towns and resorts.

The National Oceanic and Atmospheric Administration (NOAA) says it has gotten five separate requests to carry out the operations.

NOAA admits using the high-powered guns may “incidentally but not intentionally harass” marine mammals and reptiles. If the permits are approved, NOAA says companies must carry out a number of strict rules.

Observers would keep watch

They include placing observers on board ships to watch out for protected species and shut down operations if they are spotted. They also must listen for vocal communications between marine mammals, such as whales and dolphins.

The air guns use incredibly powerful blasts of air to look for oil and gas deep under the ocean floor.

The companies propose searching for possible drilling sites off the Atlantic coast from Delaware south to central Florida.

Environmentalists are furious. They say noise from the guns is one of the loudest man-made sounds created and can kill and injure millions of whales, dolphins, turtles, and other sea animals that depend on sound to communicate and survive.

Coastal towns oppose air guns

“Coastal communities have the most to lose, but unfortunately their overwhelming opposition may be ignored by the Trump administration,” said Nancy Pyne of the conservation group Oceana.

She calls it the first step towards offshore drilling and points to the 2010 BP Deepwater Horizon disaster in the Gulf of Mexico as a major reason this should not be allowed to happen. Officials and business owners in coastal towns up and down the Atlantic also oppose the air guns.

NOAA has given the public 30 days to comment for or against the proposal.

Former President Barack Obama had rejected permits to air blast in the Atlantic. But President Trump signed an executive order in April expanding the search for oil and gas in the Atlantic to help make the U.S. more energy independent.
…

Religious hospitals don’t have to comply with federal laws protecting pension plans, a unanimous Supreme Court ruled Monday in a case that affects retirement benefits for roughly a million workers nationwide.

The justices sided with three church-affiliated nonprofit hospital systems being sued for underfunding their employee pension plans.

 

The hospitals — two with Catholic affiliation and one with Lutheran ties — had argued that their pensions are “church plans” that are exempt from the law and have been treated as such for decades by federal officials.

 

Workers asserted that Congress never meant to exempt massive hospital systems that employ tens of thousands of workers. They said the hospitals are dodging legal safeguards that could jeopardize their benefits.

 

Pension plans are required to be fully funded and insured under federal law, but Congress carved out narrow exemptions for churches and other religious organizations. The hospitals claimed the law also exempts plans associated with or controlled by a church, whether or not it was created by a church in the first place.

 

Writing for the court, Justice Elena Kagan said a pension plan operated by a religiously affiliated hospital is exempt from the law “regardless of who established it.”

 

The federal government has long agreed with the hospitals’ understanding of the law. Agencies including the IRS and the Labor Department have assured them for more than 30 years that they are exempt from traditional pension rules.

 

But three federal appeals courts had ruled against the hospitals — California-based Advocate Health Care Network, Illinois-based Dignity Health and New Jersey-based Saint Peter’s Healthcare System. The hospitals appealed, warning that the rulings could expose them to billions of dollars in liability.

 

Together, the three hospitals employ about 100,000 workers. But about a million workers around the country work for similar nonprofits that have been exempt from pension funding requirements.

 

In one of the cases, workers allege that Dignity Health — the fifth-largest provider of health care in the country — has underfunded its pension plan by $1.2 billion.

 

Justice Neil Gorsuch did not participate in the ruling, which was argued before he joined the court.
…

The U.S. government is investigating complaints that air bag control computers in some Jeep Liberty SUVs can fail, preventing the air bag system from operating properly in a crash.

The probe covers about 105,000 of the vehicles from the 2012 model year.

 

The National Highway Traffic Safety Administration says in documents posted Monday that it has received 44 complaints about the problem involving a computer that detects crashes and controls air bag deployment. No related injuries have been reported.

 

Many drivers told the agency that an air bag warning light came on. In some cases the problem was corrected by replacing the computer, while others kept driving their SUVs with the light on.

 

 

 
…

On the border of China and Kazakhstan, an international free trade zone has become a showpiece of Chinese President Xi Jinping’s signature Belt and Road initiative to boost global trade and commerce by improving infrastructure and connectivity.

Chinese state media are filled with stories about the stunning success of Horgos, the youngest city of China’s new Silk Road. Last month at China’s Belt and Road Summit — its biggest diplomatic event of the year — promotional videos about Horgos’ booming economy ran on a loop at the press center.

But Chinese business owners and prospective investors who had recently visited the China-Kazakhstan Horgos International Border Cooperation Center (ICBC), told Reuters they were disappointed by the disconnect between the hype and reality.

Rather than the vibrant 21st century trading post of Beijing’s grand vision, Horgos is instead developing a reputation as China’s very own tax haven.

“We were so unimpressed by what we saw that after looking around for three hours, we turned around and drove eight hours straight back to Urumqi,” said a businessman from the capital of China’s far western region of Xianjiang, who only wanted to give his surname, Ma, due to the sensitivity of the topic.

Several business owners echoed complaints about poor design and low visitor numbers made by Ma, who visited Horgos to investigate the viability of opening a high-end clubhouse.

“You’ve got Kazakh farmers walking around with plastic bags full of cheap Chinese T-shirts and you want me to open a club for government officials and businessmen to meet inside the zone — which, by the way, you can’t drive your car into and doesn’t have any five-star hotels?” Ma said.

On the Chinese side of the border there are five malls selling cheap consumer goods, though traders complain there are not enough visitors.

“Sometimes I’ll sit here for a whole day and not make a single sale,” said Ma Yinggui, 56, who has a market stall selling clothes. “Some Kazakhs are rich but most are poor. They come and haggle over a 20 yuan [$2.93] T-shirt.”

More than five years after the 5.3-square-kilometer trade zone opened, much of the Kazakh side remains empty.

Only 25 of the 63 projects on the Kazakh side have investors, according to Ravil Budukov, ICBC press secretary on the Kazakh side. About 3,000 to 4,000 people enter from Kazakhstan each day and around 10,000 from China, he added.

The Xinjiang and Horgos governments declined to make officials available for comment to Reuters for this article.

Huang Sanping, a senior Xinjiang government official, told Reuters at a news conference in Beijing that he had just returned from a visit to Horgos, a city “performing extremely well. It’s full of vitality and flourishing.”

China’s tax haven

Beijing has bestowed numerous tax breaks and preferential policies on Horgos hoping to stimulate growth in this strategic border town in Xinjiang, a key link on the new Silk Road between China and Central Asia, where the government says it is battling to defeat Islamist extremism.

According to Horgos’ tax bureau, 2,411 companies registered in Horgos last year, taking advantage of five years of no company tax, and a further five years paying half rate.

At least half those companies are registered in Horgos solely for tax purposes, estimates Meng Shen, director of Chanson & Co, a boutique investment bank in Beijing.

Chinese celebrities are opting to register production companies in Horgos and an increasing number of financial services and IT companies are also registering there, according to Guan Xuemei from Shenzhou Shunliban, a tax advisory firm that recently opened an office there.

But with no obligation to operate from Horgos or even in Xinjiang, it is unlikely this policy will create jobs or bring money to what has long been an economic backwater, say experts.

“In theory this is a good policy because it aims to stimulate the local economy,” said Shen. “But Beijing didn’t think through the fact lots of companies wouldn’t actually want to operate from Horgos, which is very far away from China’s economic centers.”

Those who do trade in the “free trade zone” find they face restrictions from both sides.

The Russian-led Eurasian Economic Union (EEU) — of which Kazakhstan is a member — limits traders from the Kazakh side to importing up to 50 kg (110 lbs) of any goods per month duty-free.

China bans imports of many food products — the Kazakh goods most desired by Chinese consumers worried about food safety at home — and caps traders from taking more than 8,000 yuan ($1,175) worth of goods out each day.

“The EEU is a significant barrier because Russia and Kazakhstan and other Central Asia countries want to develop their own industries, they don’t want to constantly rely on cheap Chinese goods,” said a former Chinese government official turned businessman, who spoke on the condition of anonymity.

Mao Shishi, 44, who currently raises cattle in nearby Qingshuihe, wants to import wool and wild herbs used in traditional Chinese medicine from Kazakhstan to China through Horgos.

“I’m watching and waiting for any policy changes. Right now we can’t import lamb, fish or wild herbs into China,” Mao said.

Logistics thoroughfare

Plans to develop a parallel special economic zone in Khorgos — as it is known on the Kazakh side — as a logistics hub appear to be having more success.

Trade volumes are skyrocketing at the Khorgos Gateway dry port in Kazakhstan, where container freight is lifted off Chinese trains and onto Kazakh ones because of different gauge rail tracks.

“According to our plans, this year we are going to trans-ship around 100,000 TEUs, five times more than we are doing now,” said Asset Seisenbek, head of the commercial department at Khorgos Gateway, referring to “twenty-foot equivalent units,” an industry measure based on standard shipping container sizes.

Electronics giants HP and Foxconn both ship goods through the dry port, which is faster than sea freight but cheaper than air cargo. One container sent by sea to Europe is about three times cheaper than rail, while air freight is between five to 10 times more expensive, according to Seisenbek.

Last month, China’s COSCO Shipping and Lianyungang port took a 49 percent stake in Khorgos Gateway — which Seisenbek sees as an opportunity to attract more Chinese business.

This sort of investment is what Horgos/Khorgos should hang its hat on, according to Ma, the businessman underwhelmed by the international free trade zone.

“The free trade zone doesn’t need to be that successful if the intercontinental trains and roads take off,” he said. “In the grand scheme of things, that’s the main role for this part of the world.”
…

The productivity of American workers was flat in the first three months of this year, while labor costs rose at the fastest pace since the second quarter of last year.

Productivity growth was zero in the January-March quarter after rising at a 1.8 percent annual rate in the fourth quarter, the Labor Department reported Monday. It was the weakest performance since productivity had fallen at a 0.1 percent rate in the second quarter of last year but an improvement from an initial reading of a 0.6 percent decline.

 

Productivity, the amount of output per hour of work, has been weak through most of the current recovery. Many analysts believe finding a way to boost productivity growth is the biggest economic challenge facing the country, but there is no consensus on the cause of the slowdown.

 

Labor costs rose at a 2.2 percent rate after having fallen at a 4.6 percent rate in the fourth quarter. It was the fastest gain since April-June of last year.

 

The revision in first quarter productivity had been expected because of the revision to first quarter gross domestic product, the economy’s total output of goods and services. The government initially reported that GDP had risen by a tepid 0.7 percent rate in the January-March perio. But that was revised to show a slightly better reading of a 1.2 percent gain. The boost in output led to the better reading for productivity.

 

Since 2007, productivity increases have averaged just 1.2 percent. That’s less than half the 2.6 percent average annual gains turned in from 2000 to 2007, when the country was benefiting from increased efficiency from greater integration of computers and the internet into the workplace.

 

Rising productivity means increased output for each hour of work, which allows employers to boost wages without triggering higher inflation.

 

The effort to boost productivity back to the levels since before the Great Recession will likely be a key factor in determining whether President Donald Trump will achieve his goal of boosting overall growth from the weak 2.1 percent average seen since the recession. The economy’s potential for growth is a combination of increases in the labor force and growth in productivity.

 

During the campaign, Trump pledged to double growth to 4 percent or better. Trump last month released a budget that projects faster economic growth will produce $2 trillion in deficit reduction over the next decade but that forecasts expects growth to rise over the next few years to a sustained pace of 3 percent annual gains.

 

 
…

The Trump administration is considering possible sanctions on Venezuela’s vital energy sector, including state oil company PDVSA, senior White House officials said, in what would be a major escalation of U.S. efforts to pressure the country’s embattled leftist government amid a crackdown on the opposition.

The idea of striking at the core of Venezuela’s economy, which relies on oil for about 95 percent of export revenues, has been discussed at high levels of the administration as part of a wide-ranging review of U.S. options, but officials said it remains under debate and action is not imminent.

The officials, speaking on condition of anonymity, told Reuters the United States could hit PDVSA as part of a “sectoral” sanctions package that would take aim at the OPEC nation’s entire energy industry for the first time.

 

Complicating factors

But they made clear the administration is moving cautiously, mindful that if such an unprecedented step is taken it could deepen the country’s economic and social crisis, in which millions suffer food shortages and soaring inflation. Two months of anti-government unrest has left more than 60 people dead.

Another complicating factor would be the potential impact on oil shipments to the United States. Venezuela is the third largest oil supplier for the U.S. after Canada and Saudi Arabia. It accounted for 8 percent of U.S. oil imports in March, according to U.S. government figures.

“It’s being considered,” one of the officials told Reuters, saying aides to President Donald Trump have been tasked to have a recommendation on oil sector sanctions ready if needed. “I don’t think we’re at a point to make a decision on it. But all options are on the table. We want to see the bad actors held to account.”

The U.S. deliberations on new sanctions come against the backdrop of the worst protests faced yet by socialist President Nicolas Maduro, who critics accuse of human rights abuses in a clampdown on the opposition.

Since Trump took office in January, he has stepped up targeted sanctions on Venezuela, including on the vice president, the chief judge and seven other Supreme Court justices. He has pressed the Organization of American States to do more to help resolve the crisis.

While Trump has taken a more active approach to Venezuela than his predecessor Barack Obama, he has so far stopped short of drastic economic moves that could hurt the Venezuelan people and give Maduro ammunition to accuse Washington of meddling.

The two administration officials said the United States is also prepared to impose further sanctions on senior officials it accuses of corruption, drug trafficking ties and involvement in what critics see as a campaign of political repression aimed at consolidating Maduro’s rule.

Oil sanctions big step

But broad measures against the country’s vital oil sector, for which the United States is the biggest customer, would significantly ratchet up Washington’s response. The United States has imposed sectoral sanctions against Russia’s energy, banking and defense industries over Moscow’s involvement in Ukraine’s separatist conflict.

The officials declined to specify the mechanisms under consideration and said the timing of any decision would depend heavily on developments on the ground in Venezuela.

Possibilities could include a blanket ban on Venezuelan oil imports and preventing PDVSA from trading and doing business in the United States, which would have a severe impact on PDVSA’s U.S. refining subsidiary Citgo.

A more modest approach, however, could be to bar PDVSA only from bidding on U.S. government contracts, as the Obama administration did in 2011 to punish the company for doing business with Iran. Those limited sanctions were rolled back after the 2015 international nuclear deal with Tehran.

The Venezuelan government and PDVSA did not respond to requests for comment.

U.S. officials recognize, however, that oil sanctions on Venezuela could exacerbate the suffering of the Venezuelan people without any guarantee of success against Maduro, who accuses Washington and Venezuelan opposition of fomenting an attempted coup.

Given the potential for regional spillover, any decision on oil sanctions would require consultation with Venezuela’s neighbors, the officials said.

“The concern we have is that it will be a very serious escalation,” one official said. “We’d have to be prepared to deal with the humanitarian consequences of essentially collapsing the government.”
…

The restaurant business can cause serious heartburn. It’s a mixed salad of bureaucracy, money, and paperwork that keeps some chefs from ever selling that first plate of food. But there may be hope as “restaurant incubators” offer chefs an alternative menu for success. Arash Arabasadi reports from Washington.
…

Diversification is a growing trend in some sectors of the agriculture industry. Some winemakers in the northwestern state of Oregon are branching out into marijuana as a new business venture. Faith Lapidus reports.
…

The U.N. Security Council increased international pressure on North Korea on Friday to give up its pursuit of a nuclear bomb, adding 14 individuals and four companies to its sanctions lists.

The council unanimously voted to impose travel bans and asset freezes following North Korea’s stepped-up ballistic missile launches this year. The tests, including three last month alone, violate existing council resolutions demanding that Pyongyang cease such activity.

The United States, which drafted the resolution in consultation with China, took a strong stance, with U.S. Ambassador Nikki Haley declaring that “all options for responding to future provocations must remain on the table.”

“Beyond diplomatic and financial consequences, the United States remains prepared to counteract North Korean aggression through other means, if necessary,” Haley said.

Future launches ‘unacceptable’

“The United States is fully committed to defending ourselves and our allies against North Korean aggression,” she added.  

Haley said future ballistic missile launches or nuclear tests would be “absolutely unacceptable,” and she urged Pyongyang to choose “a more constructive path toward stability, security and peace.”

Several of the individuals added to the sanctions list were elderly, including one man, Ri Yong Mu, 92. He is listed as the vice chairman of a state commission that deals with military and security affairs, including acquisition and procurement. At least two other designees are in their 80s, and two are 79.

 

“The individuals and entities that will be subject to the travel ban and asset freeze by this resolution include the senior DPRK officials and its core military operators that are directly responsible for the regime’s illicit nuclear and ballistic missile programs,” South Korea’s U.N. ambassador, Cho Tae-yul, told the council.

Sanctions have financial sting

“Some DPRK businessmen and commercial entities are also newly designated, which I believe will help further restrict the DPRK’s ability to finance its illicit activities,” he added. DPRK is the customary acronym in English for North Korea’s formal name, the Democratic People’s Republic of Korea.

There is growing frustration in the international community with North Korea for its continued defiant behavior. Since January, Pyongyang has test-fired nine ballistic missiles, some landing close to South Korea, Japan and even Russia.

Even Beijing is reportedly increasingly weary of its rogue ally. China has condemned the launches and repeatedly called for a reduction in tensions on the Korean Peninsula and a return to talks.

“The current situation on the Korean Peninsula is complex and sensitive,” China’s Ambassador Liu Jieyi said. “At the same time, there is a critical window of opportunity for the nuclear issue of the peninsula to come back to the right track of dialogue and negotiations.”

US targets Russians

On Thursday, the United States imposed unilateral sanctions on three Russian firms and one individual for their support of North Korea’s weapons program. Russia’s deputy U.N. ambassador, Vladimir Safronkov, expressed his government’s anger at the move.

“This step is something that is very puzzling and deeply disappointing,” Safronkov said, demanding an explanation from the United States.  

“It’s been shown that this is a destructive approach when instead of diplomatic instruments, the sledgehammer of sanctions is being used as a universal way of resolving issues,” Safronkov said. “And this fully applies to the current decision made by Washington; it is not helpful in settling the situation in the Korean Peninsula.”

He noted Moscow’s disappointment that relations with Washington had not improved since the start of the Trump administration and that sanctions remained a constant of U.S. policy.

“Instead of trying to work through the bilateral backlog in our work, Washington is doing exactly the opposite, and undertaking unfriendly steps which make it more difficult to normalize our dialogue and make it more difficult to cooperate in international affairs,” he added.

The United States’ unilateral sanctions on Moscow for its invasion and annexation of Ukraine’s Crimea region in March 2014 remain in effect as well.
…

The European Union and China recommitted Friday to the 2015 Paris climate deal, one day after the United States announced it would withdraw from it.

In a joint statement, the EU and China said climate change and clean energy “will become a main pillar” of their bilateral partnership.

European Council President Donald Tusk said the fight against climate change would continue, with or without the United States:

“Today, China and Europe have demonstrated solidarity with future generations and responsibilities for the whole planet,” he said. “We are convinced that yesterday’s decision is a big mistake.”

Chinese Premier Li Keqiang, in Brussels for an EU-China business summit, said it was important for China and EU relationships to become more stable.

“We believe that there have been changes in the international situation, and there will be rising uncertainty and destabilizing factors,” he said. “This requires our efforts to resolve existing issues.”

Other issues

Besides climate change, other issues discussed at the summit included trade, investment, the migration crisis, North Korea and the security partnership in Africa.

Li had expressed China’s continued support for the global climate deal on Thursday during his meeting with German Chancellor Angela Merkel, saying, “China will stand by its responsibilities on climate change.”

European Commission President Jean-Claude Juncker said China agreed with the EU on the “unhappiness” about America’s unilateral decision to abandon the climate agreement.

The 2015 agreement, signed by 195 countries, calls for reducing the impact of climate change by keeping the global temperature rise this century well below 2 degrees Celsius above pre-industrial levels.

The EU and China committed to actions related to climate change, such as developing ways to change into zero-emissions economies, promoting zero-carbon transitions in developing countries and developing long-term decarbonization plans.

Wendel Trio, director of the Climate Action Network Europe, called the EU-China statement a milestone in the history of global climate diplomacy.

“This historic partnership to push forward with the Paris Agreement is a significant advance in the fight against climate change. Through deeper cooperation on climate action, the EU and China can propel the global clean energy transition,” Trio said.

China and the EU are two of the three biggest economies in the world with a large carbon footprint. If one of them were to follow the U.S. withdrawal, it’s unlikely that the Paris accord would lead to large-scale reduction of emissions.

Push from Greenpeace

Ansgar Kiene of the environmental activist group Greenpeace said it was clear from the global response to the American decision that leaders around the world were united in the fight against climate change. But Kiene urged leaders to translate their words into actions.

“The EU and China are switching to clean energy production too slowly to keep global temperature rises below levels that will cause catastrophic changes in our climate,” Kiene said. “The EU’s investment in renewable energy, once the highest in the world, has dropped off in recent years as its targets for renewables were too low compared to the real rate of growth.”

China still produces 62 percent of its energy with coal, according to Greenpeace. But despite its bad record in the past, China’s investments in recent years in solar and wind energy have been much larger than those of any other country. Investments in renewable energy in Europe, though, have dropped by half in the past six years.

In withdrawing the United States from the climate accord, which was signed by his predecessor, Barack Obama, U.S. President Donald Trump cited the predicted economic burden and job losses associated with complying with the accord as some of his reasons.

“The Paris climate accord is simply the latest example of Washington entering into an agreement that disadvantages the United States to the exclusive benefit of other countries,” Trump said.

Renegotiation spurned

Trump said the U.S. could re-enter negotiations on the climate pact, but that idea was dismissed by the EU Commissioner for Climate Action Miguel Arias Cañete, who said Friday that “the 29 articles of the Paris Agreement are not to be renegotiated, they are to be implemented.”

China and the European Union wrote in their joint statement that they thought investing in tackling climate change would actually contribute to job creation, investment opportunities and economic growth.

Many world leaders have condemned the U.S. withdrawal. French President Emmanuel Macron even invited scientists to relocate to France, saying in a speech televised in English, “Make our planet great again.”

The United States joined Nicaragua and Syria as the only countries in the world that are not part of the Paris Agreement.
…

The U.S. trade deficit rose in April to the highest level since January. The politically sensitive trade gap with China registered a sharp increase.

 

The Commerce Department said Friday that the U.S. trade gap in goods and services climbed 5.2 percent to $47.6 billion in April from March. Exports dropped 0.3 percent to $191 billion, pulled down by a drop in automotive exports. Imports rose 0.8 percent to $238.6 billion as Americans bought more foreign-made cellphones and other consumer goods.

 

So far this year, the trade deficit is up 13.4 percent from a year earlier to $186.6 billion. Exports are up 6.1 percent to $765.6 billion this year, but imports are up more _ 7.5 percent to $952.2 billion. So far in 2017, the United States is running a $268.7 billion deficit in goods and an $82.1 billion surplus in services such as banking and tourism.

 

The deficit in goods with China rose by 12.4 percent to $27.6 billion in April.

 

The Trump administration has vowed to reduce the trade deficit, blaming the gap between exports and imports on abusive practices by America’s trading partners.

 

President Donald Trump recently has singled out Germany for criticism, saying it is unfairly benefiting from a weak euro. When a country’s currency is weak, its products enjoy a price advantage in foreign markets. The trade deficit with Germany rose 4.3 percent in April to $5.5 billion.

 

 
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The price of oil has fallen sharply as investors bet that President Donald Trump’s decision to pull the United States out of the Paris climate agreement will increase the country’s oil and gas production.

The cost of a barrel of crude slumped 2.4 percent, or $1.18, to $47.18 in electronic trading in New York on Friday, hours after Trump said the U.S. would immediately stop implementing the Paris deal. He said his administration could try to renegotiate the existing agreement or try to create a new one that is more favorable to the U.S.

The deal would have required the U.S. to reduce polluting emissions by more than a quarter below 2005 levels by 2025, potentially limiting the growth of high-emissions industries like oil and gas production. Economists, however, say that the climate deal would likely help create about as many jobs in renewable energy as it might cost in polluting industries.

U.S. oil production has already been increasing in recent months since the price of crude came off lows last year, making expensive shale oil extraction more economically viable.

“Now that U.S. President Trump has announced that the U.S. will be withdrawing from the Paris Climate Agreement, it is expected that the U.S. will expand its oil production even more sharply,” said analysts at German bank Commerzbank.

The increase in U.S. production is neutralizing the efforts of the OPEC cartel and other major oil-producing nations, like Russia, to support prices by limiting their output. OPEC and 10 other countries led by Russia agreed last week to extend for nine months, to March, a production cut of 1.8 million barrels a day initially agreed on in November.

On Friday, the head of Russia’s state-controlled Rosneft oil giant said that that a rise in shale oil output in the U.S. would likely offset the effect from the OPEC and Russian production cuts.

Speaking at an economic forum in St.Petersburg, Rosneft CEO Igor Sechin said that the OPEC and Russian cuts fall short of “systemic measures that would lead to long term stabilization.”

He said that thanks to increasing efficiency, U.S. shale oil producers would likely deliver an additional 1.5 million barrels of crude a day to the market in 2018.
…

The heated debate over India’s cash ban continues, with critics saying it slowed an economy that was growing, while the government says economic momentum was barely affected.

Critics say the scrapping of 86 percent of the country’s currency last November cost India its status as the world’s fastest growing economy.

 

According to data released this week, from January to March, growth plunged to 6.1 percent – lower than China’s 6.9 percent growth in the same period.

Overall growth for the last financial year, which began in April 2016 and ended in March 2017, however, stood at 7.1 percent.

 

Finance Minister Arun Jaitley has tried to distance the disappointing economic numbers from the currency ban, citing other factors.

“There was some slowdown visible, given the global and domestic situation, even prior to demonetization in the last year,” he told reporters.

 

The slowdown affected almost all sectors of the economy, with farming, manufacturing and services all taking a hit. With people scrambling to get access to new notes, consumption slowed sharply, impacting both small shopkeepers and large businesses.

The government, however, is encouraged by forecasts that the economy is expected to recover swiftly on the back of monsoon rains, which are expected to be plentiful, and a slew of major reform measures.

 

As economists estimated growth this year will rebound to 7.4 percent, the government pointed out that India’s economy is still among the world’s top performers. Jaitley said given the global scenario, “7 to 8 percent growth, which at the moment is the Indian normal, is fairly reasonable and by global standards very good.”

There are widespread expectations of a major economic boost from India’s most ambitious tax reform action since independence – the launch of a nationwide tax that will replace a plethora of levies starting July 1.

 

The World Bank said this week the reform would lower the cost of doing business for firms and reduce logistics costs.

 

In the coming year, “we actually have very strong fundamentals of the Indian economy, GDP growth being up, exports have revived and there has been continued reform momentum,” said Frederico Gil Sander, a senior economist at the World Bank in New Delhi.

And while demonetization undoubtedly left its imprint on India by slowing down the economy, the government is optimistic there will be long-term gains because the move would help clean up an economy where many businesses and professionals evade taxes, resulting in the generation of what is known as “black money.”

 

“The message has gone loud and clear and it continues to this day that it is no longer safe to deal in cash,” said Jaitley.

 

Skeptics say only improved tax collections in the coming years will demonstrate whether that is true, or whether tax evasion remains a challenge in a country where cash transactions are the norm in large sectors of the economy.
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Long the preserve of geeky enthusiasts, bitcoin is going mainstream in Asia, attracting Mrs Watanabe — the metaphorical Japanese housewife investor — South Korean retirees and thousands of others trying to escape rock-bottom savings rates by investing in the cryptocurrency.

Asia’s moms and pops, regular investors in stock and futures markets, have been dazzled by bitcoin’s 100 percent surge so far this year. In comparison, the broader Asian stocks benchmark has gained 17 percent over the same period.

Even after a tumble from last week’s record $2,779.08 high, bitcoin rose more than 60 percent in May alone, driven higher in part by investors in Japan and South Korea stepping in as China cooled after a central bank crackdown earlier this year.

Legal tender in Japan

Over the last two weeks, and encouraged by Japan’s recognition of bitcoin as legal tender in April, exchanges say interest has jumped from the two countries. Bitcoin trades at a premium in both, because of tough money-laundering rules that make it hard for people to move bitcoin in and out.

“After I first heard about the bitcoin scheme, I was so excited I couldn’t sleep. It’s like buying a dream,” said Mutsuko Higo, a 55-year-old Japanese social insurance and labor consultant who bought around 200,000 yen ($1,800) worth of bitcoin in March to supplement her retirement savings.

“Everyone says we can’t rely on Japanese pensions anymore,” she said. “This worries me, so I started bitcoins.”

Thriving investment culture

Asia has proved fertile ground for bitcoin because of the region’s thriving retail investment culture, where swapping investment tips is common. China, Japan and South Korea are home to several of the world’s busiest cryptocurrency exchanges, according to a ranking by CoinMarketCap.

“Right now, it’s a form of speculation, like stocks,” said Park Hyo-jin, a 27-year-old South Korean who owns around 3 million won ($2,700) of bitcoin. “I don’t think anybody in South Korea buys bitcoin to use it.”

The risks, though, are rising too.

Bitcoin is largely unregulated across Asia, while rules governing bitcoin exchanges can be patchy.

In Hong Kong, bitcoin exchanges operate under money service operator licenses, like money changers, while in South Korea they are regulated similar to online shopping malls, trading physical goods. Often there are no rules on investor protection.

Park and Higo were drawn into bitcoin by friends. Others are attracted through seminars, social media groups and blogs penned by amateur investors.

Noboru Hanaki, a 27-year-old Japanese web marketer and bitcoin investor, said his personal finance blog gets around 30,000 page views each month. The most popular post is an explanation of bitcoin, he said, noting that when the bitcoin price surged last month, readership of the article doubled.

Rachel Poole, a Hong Kong-based kindergarten teacher, said she read about bitcoin in the press, and bought five bitcoins in March for around HK$40,000 ($5,100) after studying blogs on the topic. She kept four as an investment and has made HK$12,000 tax-free trading the fifth after classes.

“I wish I’d done it earlier,” she said.

Not everyone’s making money.

Scams, pyramid schemes

The bitcoin frenzy has spawned scams, with police in South Korea last month uncovering a $55 million cryptocurrency pyramid scheme that sucked in thousands of homemakers, workers and self-employed businessmen seduced by slick marketing and promises of wealth.

Leonhard Weese, president of the Bitcoin Association of Hong Kong and a bitcoin investor, warned amateur investors against speculating in the digital currency.

Some larger exchanges have voluntarily adopted security measures and compensation guarantees, according to their websites, although there are dozens of smaller platforms operating more or less unchecked.

In South Korea, the Financial Services Commission (FSC) has set up a task force to explore regulating cryptocurrencies, but it has not set a timeline for publishing its conclusions, an official there said.

In Japan — where memories are still fresh of the spectacular 2014 collapse of Mt. Gox, the world’s biggest bitcoin exchange at the time — the Financial Services Agency (FSA) said it supervises bitcoin exchanges, but not traders or investors.

Some professional investors say bitcoin can be a useful hedge to help diversify a portfolio, but investors should be cautious.

“This is an extremely volatile and innovative asset class,” said Pietro Ventani, managing director of APP Advisers, an asset allocation strategy firm.
…

Exactly eight years after the Great Recession ended, the U.S. job market has settled into a sweet spot of steadily solid growth.

 

The 4.4 percent unemployment rate matches a decade low. Many people who had stopped looking for jobs are coming off the sidelines to find them. More part-timers are finding full-time work. About all that’s still missing is a broad acceleration in pay. 

 

On Friday, when the government releases the jobs report for May, that pattern is likely to extend itself. The consensus expectation of economists is that the Labor Department will report that employers added 176,000 jobs, according to a survey by FactSet, a data provider. That’s right in line with the monthly average of 174,000 over the past three months.

 

All told, it’s evidence of an American economy that is running neither too hot nor too cold, with growth holding at a tepid but far from recessionary 2 percent annual rate. Few economists foresee another downturn looming, in part because the recovery from the recession has been steady but grinding, with little sign of the sort of overheated pressures that normally trigger a recession.

 

May jobs expectations high

Separate reports Thursday solidified expectations that job growth for May was healthy. Payroll processor ADP reported that in a private survey of companies, it found that a hefty 253,000 jobs were added in May, mostly among companies with fewer than 500 workers.

 

Nor are layoffs much of a concern. Weekly applications for unemployment benefits, which tend to reflect the pace of layoffs, averaged a low 238,000 over the past four weeks, according to the Labor Department.

 

The government’s monthly jobs report produces a net gain by estimating how many jobs were created and comparing that figure with how many it estimates were lost.

 

The unemployment rate is expected to have remained in May at 4.4 percent, a low figure that historically has reflected a healthy job market. If hiring maintains its current pace, it would exceed population growth, and the unemployment rate should eventually fall even further.

 

Mark Zandi, chief economist at Moody’s Analytics, estimates that monthly job growth above 80,000 or so should cause the unemployment rate to fall.

 

“I think 4 percent unemployment is dead-ahead, and we’ll probably go past that,” he said. 

 

Other measures of unemployment

Still, the jobs report produces several different measures of unemployment, and the broadest gauge might be most critical to watch Friday. This particular measure includes not only the officially unemployed but also part-time workers who would prefer full-time jobs and people who want a job but aren’t actively looking for one and so aren’t counted as unemployed.

 

Known as the “U-6” rate, this measure is one of the favorite metrics for Trump administration officials. The U-6 has plunged since January to 8.6 percent in April, a 0.8 point decline.

 

The decline in that measure is an encouraging sign that jobless people who had given up hope of working are now being hired. If that trend continued in May, a falling U-6 would point to a strengthening economy despite weak growth during the first three months of the year.

 

But the influx of job seekers can also inflict a drag on pay growth. As more people start seeking jobs, employers begin to have less incentive to raise pay. It’s only when employers face a shallow pool of job applicants that they tend to feel compelled to raise pay in hopes of hiring people who fit their needs.

 

Annual growth in average hourly earnings was a so-so 2.6 percent in April. And whatever meaningful pay raises that exist are going disproportionately to managers and supervisors. For workers who aren’t supervisors, average hourly pay has risen just 2.3 percent. In a healthy economy, average pay gains would typically grow roughly 3.5 percent a year.

 

The Trump administration has designated the pace of hiring for good-paying skilled jobs in construction, manufacturing and mining as among the key categories it monitors for economic health. Those three sectors were relatively weak in April.
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A jail in Chicago is serving some of the best Italian pizza in town. Inmates are making gourmet pizzas for their fellow prisoners. It’s part of a training program called Recipe for Change in which the inmates can acquire skills to get jobs after they are released. VOA’s Deborah Block has more.
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U.S. Treasury Secretary Steven Mnuchin said on Thursday he was confident that Congress would raise the federal debt limit  “before there’s an issue” with U.S. creditworthiness, and he pledged that the Trump administration’s tax reform plans would be paid for.

“We’re going to get it increased,” Mnuchin told Fox Business Network about the debt limit. “The credit of the United States is the utmost. I’ve said to Congress they should do it as quickly as they can. But we are very focused on working with them and I’m confident we’ll get there before there’s an issue.”

Mnuchin said last week that he wanted a “clean” debt ceiling increase before the start of Congress’ summer recess in early August.

Mnuchin said that it “makes no sense” to view the Trump administration’s tax reform plans through a “static” budget analysis that does not account for economic growth effects. He has previously pledged that increased economic growth would generate more revenue to offset lower tax rates.

“We’re about creating economic growth, we’re about broadening the base and we’re going to make sure that this is tax reform, not just tax cuts, and that they’re paid for,” Mnuchin said.
…

President Donald Trump is moving the United States out of the Paris climate agreement, signed by nearly 200 other nations.

Trump said Thursday that the Paris agreement hurts U.S. economic growth, costs millions of American jobs and puts U.S. firms at a disadvantage. However, his decision contrasted with the views of hundreds of American business leaders who urged him to continue participating in the climate agreement.

While the president said Washington would stop implementing the Paris accord immediately, he added that he would begin negotiations aimed at rejoining the Paris accord or a similar agreement on terms more advantageous to the United States.  

“We will see if we can make a deal that’s fair,” Trump said. An audience at the White House Rose Garden warmly applauded his announcement.

Among the many corporations that opposed the move to bow out of the Paris Agreement were Mars, Nike, Levi Strauss and Starbucks. Their top corporate officers signed a letter to Trump several months ago, arguing that failing to build a low-carbon economy would put U.S. “prosperity at risk.”

WATCH: Trump: US ‘Will Cease All Implementation’ of Paris Climate Accord

Trump: ‘Fortune’ at stake

Trump said the climate agreement, as presently written, would cost U.S. businesses “a vast fortune” and lead to the loss of 7 million jobs by 2025.

Tesla founder Elon Musk tried to persuade the president to stay in the accord and said Wednesday that he would quit the White House business advisory council if Washington left the Paris Agreement.

GE chief Jeff Immelt has written that customers, partners and countries are demanding technology that generates electric power while improving energy efficiency and cutting costs.

Oil companies like Chevron and ExxonMobil recently argued that the Paris Agreement gives their firms a more predictable future, and therefore more manageable one. The oil companies and some coal firms also say remaining part of the accord helps maintain U.S. influence over future talks.  

Earlier this week, more than 60 percent of Exxon shareholders voted to require that the firm do more analysis and disclosure of the likely impact of tougher climate policies on company revenue. Previous efforts to force such disclosures failed to get a majority of votes from shareholders.  

Some other business, Republican and conservative groups agreed with Trump’s action. The Heritage Foundation, for example, said the accord produces “devastating” economic costs and “zero” environmental benefits.
…

A Chinese company that makes shoes for Ivanka Trump and other brands denied allegations Thursday of excessive overtime and low wages made by three activists who have been arrested or disappeared.

The Associated Press reported Tuesday that Hua Haifeng, an investigator for China Labor Watch, a New York-based nonprofit, had been arrested on a charge of illegal surveillance while his two colleagues — Li Zhao and Su Heng — are missing and rights groups fear they have been detained. They were investigating Huajian Group factories in the southern Chinese cities of Ganzhou and Dongguan.

 

“We are shocked,” Long Shan, a spokeswoman for the Huajian Group, said in an email to The Associated Press. “As a renowned global media outlet, you have put out many untrue reports not based on facts and without our consent.”

 

China Labor Watch executive director Li Qiang said Thursday he still had not been able to confirm the status of the two men. Huajian was contacted before AP’s initial reports were published but issued no statement until Thursday.

 

Long said the company had stopped producing Ivanka Trump shoes months ago. She said that Hua Haifeng joined the group’s factory in Dongguan on May 20, but left after less than a week, and Su Heng began working at their Ganzhou factory on April 28, but also left after a short time. She said she did not know their current whereabouts.

 

“By coming to Huajian to work, they are Huajian employees. Huajian staff must comply with China’s laws and regulations and Huajian’s rules,” she said, adding that at least one of the men “used methods like taking photographs and video to obtain the company’s trade secrets, which is not in line with the company’s regulations. Our company has the right to hold him accountable.”

 

She said reports of managers verbally abusing workers, including insults and a crude reference in Chinese to female genitalia, were based on misunderstanding. “It is the local dialect being used as management language,” she said.

 

She said Huajian was looking into allegations of improper use of student interns.

 

Ivanka Trump’s brand declined to comment on the allegations or the arrest and disappearances. Marc Fisher, which produces shoes for Ivanka Trump and other brands, said it was looking into the allegations.

 

China Labor Watch has been exposing poor working conditions at suppliers to some of the world’s best-known companies for nearly two decades, but Li said his work has never before attracted this level of scrutiny from China’s state security apparatus.

 

The arrest and disappearances come amid a crackdown on perceived threats to the stability of China’s ruling Communist Party, particularly from sources with foreign ties such as China Labor Watch. Faced with rising labor unrest and a slowing economy, Beijing has taken a stern approach to activism in southern China’s manufacturing belt and to human rights advocates generally, sparking a wave of critical reports about disappearances, public confessions, forced repatriation and torture in custody.

 

 

 

 
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